Posted by: adoseofliberty | December 21, 2009

Equality, North Korean Style

Earlier this month, reports came out that North Korea was re-denominating its currency, the won.  Dr. Steve Sjuggerud, an investment guru, writes a short, clear analysis of the move by Kim Jong-il and his ilk:

Twelve citizens were recently executed by the government in North Korea…

They were protesting against a new government regulation that would have made everyone “more equal.”

North Korea had asked everyone to turn in all their money. The government was creating new bills, lopping two zeros off the old bills. But it was the final part that drove citizens crazy…

The North Korean government said it would only give out a maximum of $40 worth of new money per citizen. That would effectively wipe out the savings of everyone in the nation.

The goal of this new regulation was to “clamp down on a growing free-market economy and reassert the government’s control.”

After the announcement, riots started in the markets. They ultimately led to the 12 executions.

This week, the government backtracked… a bit. It has raised the limit you can get to about $200.

The government also just announced citizens can eventually deposit all of their old bills in North Korean government banks… provided they can legitimately explain how they got them.

But if you live in North Korea, you don’t typically put your money into banks because of two very real fears: 1) that government investigations into your dealings could lead to arrest and 2) that the banks will lock you out of or confiscate your deposits (as has happened in the past).

North Korea didn’t have to end up here. North and South Korea started from the same point a half-century ago.

South Korea became a free-market economy. It opened itself to trade and investment. And it went from nothing to the 13th largest economy in the world today.

North Korea is a government-controlled economy. The people are repressed and dirt poor. The North Korean government used its power to make everyone equal – it made them all equally dirt poor.

If in your dreams you believe giving the government power is the best way to improve things… and if you believe a government with a goal of making everyone equal is doing noble work… then think long and hard about North Korea.

The lesson is obvious… freedom and markets create wealth, not the government.

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