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Scarcity does odd things to people. Back when the FTC restricted beer markets geographically, such was the allure of Coors beer beyond Colorado that I remember people driving back to Texas with cases of the yellow water in the trucks of their cars. For two generations of Americans it’s been Cuban cigars. And cigarettes have long played the role of medium of exchange and store of value in prisons and prison camps where inmates have no access to conventional currency.
Now we learn via the Daily Telegraph that a South Korean chocolate-covered marshmallow-filled has become an unofficial currency at the Kaesong Industrial Complex, and the mania that it has touched off is threatening productivity and unnerving the zone’s North Korean overlords.
Originally introduced as an afternoon snack for KIC workers, the mini-pies sell for 300 won in the South (roughly 26 cents). Workers, who would typically get around two per day, quickly discovered that the sweets were enormously popular and began selling them outside the complex, for as much as $10 according to the original Daily Telegraph report. Subsequent reporting by the Daily NK has questioned this, but all reports agree that the prices are high relative to either a kilo of rice (nearly as much) or the monthly wage ( a non-trivial share). No word whether the Orion ChocoPies fetch a premium over rival Lotte ChocoPies.
The market has infected KIC. The payment terms of Kaesong workers have long been controversial—South Korea pays North Korea in hard currency; the government keeps the lion’s share and then pays the workers a pittance in nearly worthless North Korean won. A survey we have done indicates that the vast majority of South Korean firms do not know how much money their employees actually receive. Now workers are demanding—and receiving-- payment in the superior currency—the ChocoPie—and firms have had to begin competing in ChocoPie wages, with some workers receiving as many as ten snacks a day.
Step back for a moment. Ten ChocoPies cost about $2.60 at retail, far less at wholesale.
The employers have responded by organizing a cartel, and on 10 November, the firms agreed on a set of guidelines for ChocoPie bonuses with the intent of restraining wages.
In this regard their action is supported by the North Korean government which is allegedly alarmed by the specter of cultural infiltration as South Korean junk food—the Coors beer of the 38th parallel—diffuses into the general population, prospectively undermining ideological indoctrination.
