The DPRK Government declares that their country is a true paradise: everyone is happy, wealthy and confident in the future. But refugees from North Korea describe another reality, a country where they have to live beyond human capabilities, without a goal and the right to choose. The economy of North Korea has long been in crisis. The publication will present the features of the country's economic development.
Characteristic
There are three distinctive features in the North Korean economy. Firstly, it is such an order in which resources are centrally distributed. 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 a 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 shared economic statistics with other countries since the 1960s, one can only guess what is happening beyond its borders.
The country is not distinguished by the most favorable weather conditions, so there is a shortage of food products. According to experts, residents are beyond poverty, only in 2000, hunger ceased to be a problem on a national scale. As of 2011, the DPRK is in 197th place in the world in terms of purchasing power.
Due to the militarization and policies of the national-communist state ideology of Kim Il Sung, the economy has been in decline for a long time. It was only with the advent of Kim Jong-un that new market reforms began to be introduced and the standard of living increased, but first things first.
Post-war economy
In the second half of the 20s of the XX century, Korea began to develop mineral deposits in the north of the country, which caused an increase in the population. This ceased after the end of World War II. Korea was then conditionally divided into two parts: the south was transferred to the United States, and the north was under the control of the USSR. This division provoked an imbalance of natural and human resources. So, in the north was concentrated a powerful industrial potential, and in the south - the bulk of the workforce.
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 activity, and the card system came into use. It was impossible to trade crops 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 have been introduced into the heavy industry. The country began to supply minerals and oil to the world market. In 1979, the DPRK could already cover external debts. But in 1980, a default began in the country.
Two decades of crisis
The economy of North Korea, in short, has failed completely. Demand for products decreased significantly, and due to the oil crisis, the country was declared bankrupt. In 1986, the external debt of the Allied countries amounted to over 3 billion dollars, and by 2000 the debt exceeded 11 billion. The deviation of economic development towards heavy industry and military equipment, the isolation of the country and the lack of investment became the factors that impeded economic development.
To rectify the situation, in the 82nd year it was decided to create a new economy, the basis of which was to become the development of agriculture and infrastructure (especially power plants). After 2 years, the law on collective enterprises was adopted, which helped to attract foreign investment. The year 1991 was marked by the creation of a special economic zone. Though with difficulty, but investments flowed there.
Juche ideology
The Juche ideology had a special influence on the economic development of the state. This is a peculiar combination of the concepts of Marxism-Leninism and Maoism. Its main provisions that influenced the economy were as follows:
- revolution is a way to achieve independence;
- doing nothing means abandoning the revolution;
- to protect the state, it is necessary to arm the whole nation so that the country turns into a fortress;
- the correct view of the revolution comes from a sense of unlimited devotion to the leader.
In fact, this is what North Korea’s economy rests on. Most of the resources are directed to the development of the army, and the remaining funds are barely enough to save citizens from hunger. And in this state no one will rebel.
The crisis of the 90s
After the Cold War, the USSR stopped supporting North Korea. The country's economy stopped developing and fell into decay. China has ceased to support Korea, and in combination with natural disasters, this has led to a famine in the country. According to experts, starvation caused the death of 600 thousand people. The next balance plan has failed. Food shortages increased, an energy crisis erupted, resulting in the shutdown of many industrial enterprises.
21st Century Economy
When Kim Jong-il came to power, the country's economy was a little "invigorated." The government carried out new market reforms, the amount of Chinese investments increased ($ 200 million in 2004). Due to the crisis of the 90s, semi-illegal trade was widespread in the DPRK, but no matter how the authorities tried, even today there are “black markets” and smuggling of goods in the country.
In 2009, an attempt was made to carry out financial reform in order to strengthen the planned economy, but as a result the inflation rate sharply increased in the country, and some essential goods became scarce.
At the time of 2011, the DPRK balance of payments finally began to show a plus sign; foreign trade has a positive effect on the state treasury. So what is the economy in North Korea 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 solves the issues of production, import and export.
The command and administrative economy of North Korea aims to regulate the number 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 the planned indicators that are presented in the statistical reports. There is never an overabundance of goods in a country, since it is impractical 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 corruption along with them.
How is the treasury filled?
North Korea has only just begun to emerge from the crisis, ¼ part of the population is beyond poverty, there is an acute shortage of food products. And if you compare the economies of North and South Korea, which competes with Japan in the production of humanoid robots, the first 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;
- oil refining industry;
- established trade relations with China (90% of goods turnover);
- taxation of private business: for each completed transaction, the entrepreneur pays the state 50% of the profit;
- creation of shopping areas.
Keson - 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, and North has a good opportunity to replenish the state treasury.
Dandong City
Relations with China have been similarly established, only in this case the stronghold of trade is not the industrial zone, but the Chinese city of Dandong, where trade transactions are conducted. Now there are many North Korean trade missions open there. Not only organizations can sell goods, but also individual representatives.
Seafood is in special demand. In Dandong, there is the so-called fish mafia: to sell seafood, you need to pay a fairly high tax, but even so you get good profit. There are, of course, daredevils who import seafood illegally, but because of strict sanctions, they become smaller every year.
Interesting Facts
Today, North Korea is dependent on foreign trade, this is an indisputable fact. But there are several interesting points in the country's economy, some of which are inseparable from politics.
So, in the country there are 16 labor camps created on the basis of the Gulag. They fulfill two roles: punishing criminals and providing free labor. As the principle of “punishment of three generations” exists in the country, some families spend their whole lives in these camps.
During the period of economic decline, insurance fraud flourished in the country, and at the international level, for which the government has repeatedly filed a lawsuit demanding 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 after registering with a special foreign trade company.
During the crisis, the main currency was food; it could be exchanged for anything.
On April 1, 1974 taxes were abolished, but this did not apply to private entrepreneurs.
The economy of North Korea may take first place in the world in the degree of closeness to the outside world.
There are still many gaps in the country's economy, citizens are trying to migrate at any opportunity, and money replacing cards have not yet come out of use. To get to the territory of the state is almost impossible, and all the areas visible to tourists can be called indicative and exemplary territories. The world is at a loss as to what is really happening in North Korea, but the country's economy is rising and, perhaps, a decade later, the DPRK will be at the same level of economic development with its closest neighbors.