The North Korean Economy

Kim II Sungism• Ideology arose from struggling against the

United States and competing with South Korea while trying to remain independent of the competing USSR and China.

• JUCHE, self-reliance

Kim II Sungism is Stalinism

- With elements of Maoism and Korean Confucianism.

- Classical Stalinism elements:- Strong central planning without

free markets or privatization- Heavy industry and

militarization- “socialism in one country”- Cult of Personality

• Maoist elements- “moral incentives”- “flying horse”

• Confucianist elements- Filial piety- Disdain of commerce- Hard work- Respect for education- Isolationism

• Juche elements

- Chaju (political independence)

- Charip (economic self-sustenance)

- Chawi (military self-defense)

Stages of North Korean Economy

Early economic success

• Political consolidation• Equalization• Mass mobilization• Moral incentives

Did NOT work in the long run

1946

“Sovietized” North Korean economy

1953-58Agriculture collectivized

Private industry nationalized

1946-1949

Two short-term plansTripling of industrial output40% agricultural

production

Performance of the Post-1953 North Korean Plans

PLANS NATIONAL INCOME INDUSTRIAL PRODUCTION

GRAIN PRODUCTION

YEARS TARGET ACTUAL TARGET ACTUAL TARGET ACTUAL

1953-56 20.5 30.1 37.5 41.8 10.8 7.1

1957-60 17.1 20.9 21.1 36.6 5.6 7.2

1961-70 15.2 7.5 18.1 12.8 8.2 2.7

1971-76 10.3 n.a. 14.0 16.3 5.8-7.0 8.2

1978-84 9.6 8.8 12.1 12.2 2.3 2.3

1987-93 7.9 - 1.8 n.a. n.a. n.a. n.a.

Performance of the Post-1953 North Korean Plans

1954-56• Reconstruction, successful• North Korea rapid growth stage

begins

1957-60 FIVE-YEAR PLAN• Completed in three years• Continued rapid growth• Socialization drive completed• Mass mobilization began

1961-70 FIRST SEVEN-YEAR PLAN• Extended due to difficulties from expanding juche

policy after the Soviets reduced aid• Heavy industrial development• Mechanization of agriculture• Military spending increased, maintained level, then

declined.

1971-76 SIX-YEAR PLAN• Technical advancement• Foreign debt crisis, DPRK cut-off from

easy access to Western technology

1977 Buffer year to delay announcing a new plan

1978-84 SECOND-SEVEN YEAR PLAN• Modernization and “scientification”• First attempt for LIGHT rather than heavy industry• Increase material incentives for workers• Energy extraction (coal)• Nature-remaking (massive land reclamation)

THREE YEAR INTERIM• No plan followed• To reform and decentralized• “North Koreas Joint Venture Law”

1987-93 THIRD SEVEN-YEAR PLAN• Modernization• Light industry• Collapse of socialism in USSR

created crisis

1996 “period of adjustment”

reemphasized heavy industry

Note: North Korea’s crisis is the crisis of the last and purest command socialist economy.

2013 Index of Economic Freedom• North Korea is largely

isolated and disengaged from the world’s economy. 

•  its economy the least free in the 2013 Index

• unreformed and essentially closed dictatorial state

• “military first” policy• Worker’s Party

Rule of Law

• Property rights are not guaranteed.

• Almost all property belongs to the state.

Government

• No effective tax system.

• Commands and dictates almost every part of the economy.

• State directs all significant economic activity

• Large military spending.

State control

• State regulates the economy heavily through central planning and control.

• State determines wages.

• Tightly controls the labor market and the movement of people

Market

• Formal trade is minimal.

• main trading partners: China and South Korea

• Inter-Korean trade remains constrained

• Limited foreign participation is allowed

• financial sector is firmly controlled by the state.

• The only significant source of light is the capital Pyongyang, and a few other dots that are probably military bases.

The Korean Peninsula on September 24, 2012. Image via NASA Earth Observatory