North Korea, is a country known for its brutality and its obsession with military advancement at the cost of its economic well-being. The majority of people identify it because of the frequent nuclear attack threats from its supreme leader, Kim Jong-un to Donald Trump. Others might know it from the infamous brutal stories that the North Korean escapists share or from the mention of North Korea in Korean dramas like Crash Landing on You, Snowdrop, etc. North Korea is also officially known as the Democratic People’s Republic of Korea or DPRK. It has an alienated and strictly controlled command economy. According to Investopedia,
“A command economy is the standard component of any communist country. In a command economy, the economy is centrally planned and coordinated by the government only.”
Since DPRK is a centrally planned economy, the government of North Korea determines what type of goods should be produced, how much quantity should be produced, and at what price the goods should be offered for sale.
LIMITATION OF ECONOMIC DATA
The government is also very secretive about the release of its data like the economic data. It has not published any official document on its macroeconomic conditions since 1965. The few sources for studying statistics on the North Korean economy are available from either The Bank of Korea (South Korea) or the Ministry of Unification and Korea Trade-Investment Promotion Agency (KOTRA, which only has trade-related information). To understand the economy of North Korea, the knowledge of its history is important. For example, one of the most defining moments in the history of North Korea was the Korean war that took place between June 25, 1950, and July 27, 1953.
The Korean War began with the North Korean People’s Army pouring across the 38th
parallel, the boundary between the Democratic People’s Republic of Korea and the Republic of Korea. This invasion from the 38th parallel was the first military action of the Cold War. By July, American soldiers had joined the war on South Korea’s behalf. For the American officials, it was a war against the forces of international communism as DPRK was backed by the Soviet Union. The fighting eventually stalled at the 38th parallel. Meanwhile, American officials worked anxiously and tried to form a truce with the North Koreans. They feared, otherwise, they would have to face a wider war with Russia and China, or even another World War.
Syngman Rhee who was an anti-communist dictator in South Korea enjoyed the support of the American government. While the communist dictator Kim Il Sung in North Korea enjoyed the support of the Soviets. Neither dictator was content with his side of the 38th parallel, and hence, the war kept going till 1953. Finally, the Korean War came to an end in June, 1953. Millions of soldiers and civilians lost their lives. The U.S. referred to the Korean War as the “The Forgotten War” for the lack of attention it received as compared to more well-known conflicts like the Vietnam War. The Korean peninsula remains divided even today. In the North lies North Korea while in the South lies South Korea.
The first phase of North Korea’s economic development, following the division of the unified kingdom of Korea, was characterized by industrialization. Considering the damage, the infrastructure of the country weathered during the Korean War, hence industrialization became a difficult step. North Korea had accepted the Soviet model of governance and centrally planned, socialist economics, as well as the ideology of self-reliance (Juche). The model was focused on the development of heavy industry and investments in the iron, steel, cement, and machine tool sectors.
Experts believed that the policies of the North Korean government, following the aftermath of the Korean War, acted as an obstacle to the economic development of the country. The major shortcomings of these policies were caused due to the regime’s focus on Songun (a style of military-first politics). This ideology only worsened North Korea’s economic problems. The North Korean government tried to transform their agrarian economy into a modern industrial hub. It was believed that the country only partially succeeded in fulfilling its goal. Even though the economic goals were linked to the ideals of self-reliance, the government was not successful in achieving them. North Korea kept importing essential commodities such as fuels, machinery, and grains.
It shunned foreign investment and accepted considerable aid from the Soviet Union and its satellite eastern European Union as well as China. The aid came in multiple forms such as labor, materials and goods, reconstruction and building plants, civil construction work, technology transfers, and the education of specialists and students. This aid played a vital role in North Korea’s economic recovery. The 1990s was one of the worst phases of the North Korean economy as it entered into stagnation and almost collapsed. In the early 1990s, with the collapse of the Soviet Union, the communist regimes of its eastern European Union had fallen, followed by a food crisis in the aftermath of a series of natural disasters–hail storms in 1994, flooding from 1995 to 1996, and droughts in 1997–pushed North Korea into an economic crisis.
Between 1990 and 1998, the country experienced an average annual growth rate of -4.1%. The country also became the recipient of international food and humanitarian aid beginning in the mid-1990s. In 1992, China began to demand cash payments in place of grants-in-aid. Towards the end of the 1990s, the situation prevailing in North Korea changed. This happened due to the massive infusion of international food assistance.
The economic history of North Korea includes significant periods of stagnation, food crisis, and a series of natural disasters. It is also characterized by alternative phases of recovery and economic growth. The government’s priority to make North Korea a defense economy has impacted the development, food production, living standards, and human rights. North Korea is also facing the problem of human trafficking of many men, women, and children. They were forced into labor work and sex trafficking.
North Korea is a primary source of labor for foreign governments like Russia and China. North Koreans do not have a choice in a lot of aspects of their life. For example, the work the government assigns them is final, they cannot change jobs and can even face punishment from the government if they try to escape their forced labor. They live a life where they have to follow absurd amounts of rules with no logica.
The North Korean Economy has performed poorly in the past, but it can improve itself in the future. By putting their mineral wealth to the right uses and by simultaneously improving the people’s standard of living and employment. North Korea can reverse its damage. But as believed, a team is as good as its leader, which suits North Korea perfectly. The future is unpredictable, and with a possible change of leaders North Korea can ascertain what it always wished for.