Markets work because price increases send entrepreners strong signals of relative scarcity and potential profit opporunities (unless these price increases are caused by inflation). Entrepreneurs who pick up on these signals, then, have a strong incentive to move the desired resources from where they are valued less to where they are valued more.
A Chinese official in Jilin claims entrepreneurs in his province hear these signals loud and clear—and they respond the way humans have for thousands of years–they arbitrage:
The head of the grains bureau of Jilin, the Chinese province bordering North Korea, Zhu Yehui, says a drought in North Korea is very serious, and there is a lot of corn smuggling from China into North Korea.
He says the price in North Korea is more than 10 times the domestic price in China.
I am going to go out on a limb to suggest that these Chinese smugglers (entrepreneurs) are also delivering food more cheaply (on average) than the World Food Program, and I also am willing to wager that they have better access to “sensitive areas.”
Addendum: According to Yonhap North Korea’s grain crop last year reportedly amounted to 4 million tons. The U.N. Food and Agricultural Organization told U.S.-based Radio Free Asia last month that the North will harvest a half million tons less than last year.
Read the full article here:
China reports grain smuggling business active into North Korea
Australian Broadacsting Corporation
9/17/2008
