South China Morning Post
July 29, 2010
After US Secretary of State Hillary Rodham Clinton's announcement that new economic sanctions would be placed on North Korea, one headline read: "US tightens the screws on North Korea's economy." Yet, Pyongyang has already tightened the screws on its own economy.
The chaos created by last year's currency "reform" and by the crackdown on market activities is evident in food shortages, spiraling prices and discontent.
Small traders had taken advantage of opportunities for profitable exchange following a relaxation of economic controls after the famine of the mid-1990s. Private markets developed and cross-border trade grew. The existence of private markets along with the "sunshine" policy of the South brought new opportunities, as workers moved into the non-state sector and consumers could purchase goods outside the state distribution system.
Not surprisingly, the communist elite feared the market. Moreover, the South, under domestic and US pressure, departed from a policy of engagement. By 2005, Pyongyang had begun to restrict small traders. The currency reform — and an end to the use of foreign currencies in the informal, dual economy — was a signal that further liberalization was anathema.
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