When Chung Ju-yung, the famed South Korean entrepreneur who founded the mighty Hyundai conglomerate, was seeking to enter the shipbuilding industry in the early 1970s, his sales pitch involved a 500 won banknote.
If the would-be buyer suggested that South Koreans had no experience in shipbuilding, Chung would brandish his bill, insisting that Koreans had been building advanced ships for centuries. The note was emblazoned with a“turtle ship” – a 16th-century man-of-war that Koreans believe was the first iron-clad vessel in history.
Chung’s chutzpah paid off. Today, Hyundai is the world’s largest shipbuilder. But that 500 won note won’t buy much today.
Everyone’s a millionaire
According to The Economist, when ramyeon instant noodles started to be produced in 1963, the average Kim, Park or Lee could buy 100 pots of the stuff for 1,000 won. Now, a single pot costs 1,200 won at retail prices.
Chung’s 500 won note has been demoted to a lowly coin. Today, the smallest denomination note is 1,000 won – which is not enough even for a single Seoul subway ticket, which is 1,450 won.
The won-to-US dollar rate is 1,130 – making the won a far tinier currency than equivalents, such as 6.7 Chinese yuan, 4.1 Malaysian ringgit, 42.17 Argentine pesos, 3.86 Brazilian real, 69.3 Indian rupees and 112 Japanese yen. Among OECD members, South Korea is the only nation which uses four digits in its currency.
Things are getting out of hand. The quadrillion – the mathematical unit north of a trillion – now appears in statistics. At the end of 2018, South Korea’s net assets and financial assets stood at 1.38 quadrillion won and 1.7 quadrillion won, respectively.
While this situation makes virtually every adult Korean a millionaire, the number of zeroes on the end of the currency causes calculating complications. Another issue, some say, is that these large numbers give the impression that South Korea is an economic “Bongo-Bongo Land.”
Clearly, the world’s 11th largest economy, which boasts world-class high-tech infrastructure and global brands like Samsung and Hyundai, is not that. Also, the situation is not the result of hyperinflation.
In fact, it tells the story of a nation that has, since the 1960s, soared from economic hero to economic zero. According to Bank of Korea data, South Korea’s GDP has expanded 4,870 times from 1962.
Naturally, as the economy soared from an agrarian backwater to an industrial powerhouse, prices rose in tandem. So is it time for a redenomination?
A redenomination would change the face value of the won to a lower and more manageable number – for example, changing 1,000 won to 1 won, or perhaps 10 won – while keeping its real value intact.
The issue is a long-time hobby horse for the currency’s official guardian, the Bank of Korea. The BOK raised the issue in 2004, but to no avail. Perhaps worried that currency deals no longer fit on the screens of his staff’s calculators, current BOK Governor Lee Ju-yeol has pushed for it again, raising the matter at the National Assembly on March 15.
“I think it is time to discuss the issue,” he said, in response to a question from Assemblyman Lee Won-wook. “We need to discuss it carefully as we follow the shortcomings as well as the merits.”
Assemblyman Lee, no relation, wants to raise redenomination again in May. But Lee may end up speaking to an empty chamber as few of his colleagues are interested.
“I understand that there is no party-level move to push public opinion forward on the issue yet,” a ruling party lawmaker told Asia Times. A party official explained why it might not be desirable to redenominate: “If prices soar after the redenomination, can we handle the aftermath?” he asked.
By that, he meant that if a 1,000 won item becomes one won after a redenomination, the price of a 995-won item would be 0.995. In that case, experts expect the price to soar to – well, one won. Hardly a massive spiral of inflation, but apparently a real policy risk.
Then there would be costs. ATMs would need to be rejigged, new bills and coins issued. While assemblymen quail, Finance Ministry officials are apparently too busy.
“There are many other things to do!” sniffed one ministry official who was contacted by Asia Times. ”No review on the redenomination policy has been made at all,” another admitted.
Since 2005, eight countries, including Romania, Turkey and Venezuela, have redenominated their currencies – mostly due to inflation, which is not an issue for South Korea. Seoul has, in fact, redenominated twice before, once in 1953, when the won was re-denominated by one-hundredth in response to inflation that resulted from increased currency issuance to finance the Korean War, and once in 1962, by one-tenth, in a response to underground “black money.”
But that is ancient history. Now, the battle lines are drawn up once more. Some say now is an ideal time to redenominate, given that most economic indicators are stable. Others argue that upgrading convenience in counting prices and burnishing a – possibly – backward image are just not worth the work, the cost and the risk.
And some simply suggest that change would be a headache.
“I remember when a pot of ramyon [instant noodles] was 5-10 won,” Seo Myong-ryul, a retired businessman reminisced to Asia Times. Yet the 81-year-old was not keen to change. “It would be too complicated,” he said. “I don’t see why it is needed.”