North Korea’s Private Finance: No Banks but Lots of Loans

WSJ ^ | Aug. 4, 2015 | Jeyup S. Kwaak

[TigerLikesRooster]

North Korea’s Private Finance: No Banks but Lots of Loans

Unauthorized market activity boosts incomes and leads to unregulated lending for profit

By Jeyup S. Kwaak

Aug. 4, 2015 3:30 p.m. ET

SEOUL—For decades after North Korea’s founding in the 1950s, financial security wasn’t a major concern for its citizens. A communist system provided most daily needs, and for many years living standards outstripped those of South Korea.

Then a devastating famine in the 1990s and a subsequent economic collapse crippled the public distribution system and forced citizens to fend for themselves.

The semimarket economy that emerged has expanded rapidly in recent years, providing a living for up to three-fourths of the country, according to observers, defectors and those with contacts in a state that is largely closed off from the rest of the world. As unauthorized private commerce has bolstered North Koreans’ incomes, an unregulated system of lending and currency exchange has also emerged, they said.

[TigerLikesRooster]

The state and the market are in conflict. Under NK political system, a hereditary personal cult, the state has total control over economy, including the market. However, the market has a tendency to outgrow the state control. In time, the money gets to control the power. It will eclipse the system built on an omnipotent personality cult.

[TigerLikesRooster]

P!

[Teacher317]

North Korea wasn’t in trouble in the 80s? Really? That’s not what I recall.

[Farmer Dean]

They can’t even get the lights on today.I gotta call BS on this story.

[RightGeek]

for many years living standards outstripped those of South Korea

What?

[TigerLikesRooster]

NK lived on generous foreign aids from Soviets and Chinese, until Soviet Union collapsed. On top of that, Japanese left some industrial infrastructure in NK. SK was mostly farm land at the time.

[wastedyears]

So...... why was the Korean War fought?

[Larry Lucido]

For decades after North Korea’s founding in the 1950s,

Silly me, I thought North Korea was established in the 40s. But what do I know? I'm no "journalist."

[Larry Lucido]

“What?”

Exactly.

[TigerLikesRooster]

1948 to be exact. He got the basic fact wrong.

[AdmSmith]

They have interest, but do they have a working tax system? In theory they have it http://www.asiatradehub.com/n.korea/tax1.asp but is it implemented?

(From 208) In North Korea, April 1st is commemorated as “Tax Abolition Day.” Ever since the law, “On Completely Abolishing Taxes,” was ratified through the Supreme People's Assembly on March 21, 1974, North Korea has claimed both within and without to be the only country in the world that does not collect taxes.

http://www.dailynk.com/english/read.php?cataId=nk02900&num=6203

Do you know how it is today?

[TigerLikesRooster]

I suspect there is no change. Their government at all levels exact some kind of payments from people. There are bribes. Hard currency earning enterprises regularly pay off superiors to stay in business. This kind of bribes is a sort of unofficial corporate taxes.

Then there are extra production quota. For example, they are asked to collect a certain amount of scrap metals and hand them to the authorities. People are frequently serving as conscripted laborers to do things other than making their living, without anything in return.

[Eric in the Ozarks]

Ridiculous.

[AdmSmith]

Like the life in Soviet.