For North Korean defectors, credit is an astonishing concept

Monday 8th October, 2012


North Korean defectors face many kinds of conceptual problems in the process of settling into a modern society. One of these, seemingly trivial at first glance, is the notion of offering payment after benefiting from a service or acquiring goods. In most nations, the notion of credit is taken for granted in some form or another: it may be short-term, as in ordering food at a restaurant and eating it before having to settle the bill; or long-term, as in the case of paying in installments for a household appliance. For a North Korean, such options are difficult to grasp, because they require one to be versed in a specific framework that allows for mutual confidence and trust.

As one defector describes: ‘In North Korea, you can purchase official goods or eat at a restaurant only after you have acquired the relevant coupons at the entrance to the establishment. You are given access to the goods or service only after producing the relevant coupon.’

However, it is not only in officially sanctioned shops that prepayment is the norm. In fact, the concept applies as strongly to spontaneous and unofficial transactions, where it is beyond the scope of imagination to ask for goods before paying for them first in full.

Prepayment was set as the default of the North Korean economic psyche after the ‘arduous march’, which is a euphemism for the famine of the 90s in which up to a tenth of the North Korean population died of starvation.

Yet the concept of prepayment did not arise out of such economic hardships, as one may expect. Instead, prepayment was intended as the primary method of acquiring goods and services so that the regime could retain control of the economy. Nevertheless, since the near collapse of the North Korean economy, prepayment has become synonymous with the concept of security: people are prevented from running off with goods they have not paid for.

In a classic modern example of credit – the credit card –  the seller and the buyer are bound by a framework in which particular expectations are set out and a type of enforcement for them exists. No such stability exists in North Korea, because there is a fundamental mismatch between what is enforced (loyalty to the regime must be the currency for acquiring goods) and the expectations of reality (cash is the better currency for acquiring goods).

For many years, defectors who knew only the concept of prepayment would offer prepayments to brokers of underground railways expecting them to secure safe passage for escaping relatives, but be left cheated. With the increasing availability of information, some defectors know better nowadays; but there are still cases that end in disaster due to the lack of a shared worldview.

In such cases, the seemingly trivial matter of North Korean defectors’ inability to grasp the concept of ‘credit’ leads to the tragedy of human lives becoming security for payment.

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