The economy of North Korea: description and interesting facts

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:53

The government of the DPRK declares that their country is a real paradise: everyone is happy, secure and confident in the future. But refugees from North Korea describe a different reality, a country where they have to live beyond human capabilities, without a goal and the right to choose. The North Korean economy has been in crisis for a long time. The publication will present the features of the country's economic development.

Characteristic

There are three distinctive features in the North Korean economy. First, it represents an order in which resources are distributed centrally. This type of economy is called planned. Secondly, resources are used to counter possible threats that can destroy the integrity of the country. This use is called the mobilization economy. And thirdly, they are guided by the principles of socialism, that is, justice and equality.

From this it turns out that the economy of North Korea is a planned mobilization economy of a socialist country. This state is considered the most closed on the planet, and since the DPRK has not been divided since the 60seconomic statistics with other countries, one can only guess what happens beyond its borders.

The country has not the most favorable weather conditions, so there is a shortage of food products. According to experts, the residents are below the poverty line, and only in 2000 did hunger cease to be a national problem. As of 2011, North Korea ranks 197th in the world in terms of purchasing power.

Due to the militarization and policies of Kim Il Sung's national communist state ideology, the economy has been in decline for a long time. Only with the advent of Kim Jong-un, new market reforms began to be introduced and the standard of living increased, but first things first.

Economy of the post-war period

In the second half of the 1920s, Korea began to develop mineral deposits in the north of the country, which caused an increase in population. This stopped after the end of World War II. Korea was then conditionally divided into two parts: the south went to the United States, and the north was under the rule of the USSR. This division provoked an imbalance of natural and human resources. Thus, a powerful industrial potential was concentrated in the north, and the main part of the labor force was concentrated in the south.

After the formation of the DPRK and the end of the Korean War (1950-1953), the economy of North Korea began to change. It was forbidden to engage in entrepreneurial activities, and the card system came into use. It was impossible to trade graincrops in the markets, and the markets themselves were rarely used.

In the 70s, the authorities began to pursue a policy of economic modernization. New technologies were introduced into heavy industry. The country began to supply minerals and oil to the world market. In 1979, the DPRK could already cover its foreign debts. But in 1980 the country went into default.

Two decades of crisis

The North Korean economy has, in short, been a complete fiasco. Demand for products dropped significantly, and because of the oil crisis, the country was declared bankrupt. In 1986, the external debt to the allied countries amounted to over 3 billion dollars, and by 2000 the debt exceeded 11 billion. The bias of economic development towards heavy industry and military equipment, the isolation of the country and the lack of investment were the factors that hindered economic development.

To rectify the situation, in 1982 it was decided to create a new economy, the basis of which was to be the development of agriculture and infrastructure (especially power plants). After 2 years, a law on collective enterprises was adopted, which helped to attract foreign investment. 1991 was marked by the creation of a special economic zone. Albeit with difficulty, but investments flowed there.

Juche ideology

The Juche ideology had a special impact on the economic development of the state. This is a kind of combination of the concepts of Marxism-Leninism and Maoism. Its main provisions, which influencedeconomy were as follows:

• revolution is a way to achieve independence;
• doing nothing means giving up the revolution;
• to protect the state, it is necessary to arm all the people so that the country turns into a fortress;
• the correct view of the revolution comes from a feeling of boundless devotion to the leader.

In fact, this is what keeps the economy of North Korea. The main part of the resources is directed to the development of the army, and the remaining funds are barely enough to save the citizens from hunger. And in this state, no one will rebel.

Crisis of the 90s

After the Cold War, the USSR stopped supporting North Korea. The country's economy stopped developing and fell into decline. China also stopped supporting Korea, and, combined with natural disasters, this led to the fact that famine set in the country. According to experts, the famine caused the death of 600 thousand people. Another plan to establish a balance failed. Food shortages increased, an energy crisis broke out, resulting in the shutdown of many industrial enterprises.

21st century economy

When Kim Jong Il came to power, the country's economy "cheered up" a little. The government carried out new market reforms and increased the amount of Chinese investment ($200 million in 2004). Due to the crisis of the 90s, semi-legal trade became widespread in the DPRK, but no matter how hard the authorities try, even today there are “blackmarkets" and smuggling of goods.

In 2009, an attempt was made to implement financial reform to strengthen the planned economy, but as a result, the country's inflation rate skyrocketed and some basic commodities became scarce.

At the time of 2011, the balance of payments of the DPRK finally began to show a figure with a plus sign, foreign trade has a positive effect on the state treasury. So how is North Korea's economy today?

Planned economy

The fact that all resources are at the disposal of the government is called a command economy. North Korea is one of the socialist countries where everything belongs to the state. It is it that solves the issues of production, import and export.

North Korea's command economy is designed to regulate the quantity of manufactured products and pricing policy. At the same time, the government makes decisions not based on the real needs of the population, but guided by planned indicators, which are presented in statistical reports. There is never an oversupply of goods in the country, since this is inexpedient and economically unprofitable, which the government cannot allow. But very often you can find a shortage of essential goods, in connection with this, illegal markets flourish, and with them corruption.

How is the treasury filled?

North Korea has only recently begun to emerge from the crisis, beyond the poverty linethere is ¼ of the population, there is an acute shortage of food products. And if we compare the economy of North and South Korea, which competes with Japan in the production of humanoid robots, then the former is definitely lagging behind in development. Nevertheless, the state has found ways to fill the treasury:

• export of minerals, weapons, textiles, agricultural products, coking coal, equipment, crops;
• refining industry;
• established trade relations with China (90% of trade turnover);
• taxation of private business: for each completed transaction, the entrepreneur pays the state 50% of the profits;
• creation of trading zones.

Kaesong Commercial and Industrial Park

Together with the Republic of Korea, the so-called industrial park was created, where 15 companies are located. More than 50 thousand North Koreans work in this zone, their wages are almost 2 times higher than in the territory of their native state. The industrial park is beneficial for both parties: finished products are exported to South Korea, while North Korea has a good opportunity to replenish the state treasury.

Dandong City

Relations with China are established in a similar way, only in this case the stronghold of trade is not the industrial zone, but the Chinese city of Dandong, where trade transactions are carried out. Now there are many North Korean trade missions open there. Not only organizations, but also individual representatives can sell goods.

Seafood is in high demand. In Dandongthere is a so-called fish mafia: in order to sell seafood, you need to pay a fairly high tax, but even so you get a good profit. There are, of course, daredevils who import seafood illegally, but due to strict sanctions, there are fewer of them every year.

Interesting facts

Today, North Korea is dependent on foreign trade, this is an indisputable fact. But there are a few other interesting things in the country's economy, some of which are inseparable from politics.

Thus, there are 16 labor camps in the country, created on the basis of the Gulag. They perform two roles: punishing criminals and providing free labor. Since there is a principle of "punishment of three generations" in the country, some families spend their whole lives in these camps.

During the economic decline, insurance fraud flourished in the country, and at the international level, for which the government was repeatedly sued for the return of insurance payments.

In the late 70s, the state monopoly on foreign trade was abolished. In this regard, anyone could enter the international market, having previously registered with a special foreign trade company.

During the crisis, food was the main currency, it could be exchanged for anything.

April 1, 1974, taxes were abolished, but this did not apply to private entrepreneurs.

North Korea's economy first place in the world cantake on the degree of closeness from the outside world.

There are still many gaps in the country's economy, citizens are trying to migrate at any opportunity, and cards that replace money have not yet gone out of use. It is almost impossible to enter the territory of the state, and all areas visible to tourists can be called exemplary and exemplary territories. The world is at a loss as to what is really going on in North Korea, but the country's economy is booming and perhaps in a decade, the DPRK will be on the same level of economic development as its closest neighbors.