Yeah, North Korea’s problem is that it’s not socialist enough

As my boss U.S. envoy Stephen Bosworth arrives in Pyongyang, I think it’s worth noting that the North Korean government has not been endearing itself to its citizenry.  Hmmm… let me rephrase that — the DPRK government has been acting with even more disregard fo its citizens than usual. 

The nub of the problem has been a currency revaluation/reform in which North Korean citizens will be forced to trade in their old notes for new ones — and each citizen is limited in the amount they can exchange.  This move was designed to do two things:  lopping off a few zeroes of the North Korean won, and flushing out private traders along the Chinese border who are sitting on currency notes that will soon be worthless. 

It appears, according to AFP, that the DPRK regime has finally come up with a move that actually roils their population: 

Amid reports that some frustrated residents have been torching old bills, South Korean aid group Good Friends said authorities have threatened severe punishment for such an action.

Many residents would burn worthless old bills rather than surrender them to authorities, in order to avoid arousing suspicions about how they made the money, Good Friends said.

The banknotes carry portraits of founding president Kim Il-Sung and his successor and son Kim Jong-Il. Defacing their images is treated as a felony.

With nascent private markets for food collapsing because of the currency reform, citizens are finding it difficult to obtain basic staples. The U.N.’s Food and Agriculture Organization is already projecting another grain shortage for the country. 

Over at the U.S. Institute for Peace, John S. Park does a nice job of explaining the political economy effects of this currency move: 

As North Korean people in key market-active regions benefited from growing commercial interactions, low- to high-level DPRK officials figured out ways to get a cut of the money made. These officials used most of these bribes (viewed by traders as a "cost of doing business") to line their own pockets, but also used a portion of these for their respective organization’s operating budget. With less to skim from the markets due to this revaluation, these officials will have funding gaps to fill. Given that these officials also enjoyed a higher standard of living, the discontent of the North Korean people will be aligned with these "skimming" officials. New groups of losers from this revaluation may be more advanced and better organized than protesters during previous periods of government-initiated economic and currency reforms….

If the DPRK government had improved and restored the inconsistent Public Distribution System and other public services on a national basis (a massive undertaking), a revaluation may have triggered greater state control by minimizing the benefits from the non-formal market system and making the North Korean people dependent on the state again. It does not appear that the DPRK government has improved these national systems. In an apparent effort to restore discipline through this revaluation, the DPRK government may have initiated a period of economic, social, and political destabilization by undermining a widely used coping mechanism for the people, as well as a growing number of officials.

[So a buckling DPRK regime is a good thing, right?–ed.]  From a nonproliferation perspective, not so much, no.   

Any domestic instability in North Korea is bad for Bosworth, the Six-Party Talks, and nonproliferation efforts in general.   The June uprisings in Iran have led the Iranian regime to adopt a more hardline position on the nuclear issue, both to bolster the conservative base and engage in "rally round the flag" efforts.  I see no reason why this logic would not apply to North Korea as well — indeed, domestic instability is the likely explanation for Pyongyang’s bellicose behavior earlier this year.

Developing…. in a very disturbing way.    

UPDATE:  My FP colleague Tom Ricks has more.