Following on the theme of economic systems and North Korea, below is a documentary from the BBC Panorama programme. John Sweeney goes undercover in North Korea and finds out what life is really like. The documentary shows: State ownership, State control, price controls and extreme government failure in poor quality goods and services, massive shortages, and crippling unemployment. He does venture over the border to South Korea where the experience is in stark contrast. Good video to finish off the market systems topic.
A HT to Kanchan Bandyopadhyay for this piece from the Associated Press. Petrol prices in North Korea since February have risen by approximately 14% as it contends with the tougher international sanctions over its nuclear programme which is potentially putting a brake on the emerging market economy. However it is difficult to say what is exactly happening as officials in North Korea don’t discuss issues like this openly
What about supply and demand?
It might be a simple matter of the market. With more vehicles on the road there is more derived demand for petrol putting the price up. It is also possible that more fuel is being used for military purposes or for government construction or development projects. Most of the supply of petrol comes from China and the impact of sanctions is limiting the supplyThe fear that prices will rise further has consumers stock piling petrol coupons. In North Korea customers usually buy coupons for the equivalent amount of fuel that they wish to purchase. To purchase 15 kilograms (petrol is sold by the kilogram in North Korea) it about $12 in Pyongyang which equates to a 20% increase in price. As with most planned economies the supply of petrol is controlled by the state and it decides on who gets what – military and public transportation such as street c
ars and buses are still kings of the road.
Black market currency
Strangely enough North Koreans usually pay for their fuel in US dollars or euros. One kilogram of gas is currently about 80 North Korean won but no one actually pays that.
80 won = 80 U.S. cents under the official exchange rate, but only about eight-tenths of a cent under the unofficial exchange rate most North Koreans use when buying and selling things among themselves – the “real economy,” in other words.
The number of passenger cars has grown rapidly and rather than the typical black limousines or blue Mercedes sedans driven by communist party officials, they are middle of the range cars imported from China.
The growth in traffic in the capital is a visible indicator of economic activity the North generally prefers to keep under wraps. Many vehicles these days are clearly being used in an entrepreneurial style, moving people and goods around for a fee.
Higher gas prices could put a damper on such activities, or at least cut into their profits. The rise of automobiles is focused on the capital, which remains a very special place. Most North Koreans don’t have cars, or even access to cars. In the countryside, major highways are still not very well traveled and often not even paved. And gas, when it’s available, is usually more expensive.
A hat tip to Mike Stewart from the History Dept for these photos of North Korea. They were perfect for finishing off the Economic Systems topic of the AS Level course. They depict the old USSR with formal parades to display their military power – below is a procession to celebrate the 65th anniversary of the communist nation’s ruling Workers’ Party. Click here to go to many more photographs that show a communist system.