The DPRK economy is mainly characterized by the concepts of “plannedness” and “mobilization”. A distinctive feature of the economic system is a high degree of militarization. At the same time, the Democratic People's Republic of Korea is one of the most closed states. Any information, including economic indicators, is not available to the international community. Therefore, external expert assessments cannot determine with great accuracy how developed the DPRK economy is.
Of course, the breakdown of ties with the whole world, combined with adverse natural resources, make the country one of the least developed in financial terms. Although the modern leader of the DPRK is carrying out specific reforms, the population is experiencing food shortages. The politics of Juche and the economy of this state will be discussed in this article.
Colony development
Why did the command-administrative system affect the DPRK? What country is capable of such a step? The reason for the development of today's situation goes down in history, or rather, in the first half of the twentieth century. At this time, the territory was a Japanese colony. Actual rulers have made multiple efforts to establish the business sector. A sufficiently diverse industry could provide natural resources, which were slightly larger than in the southern part of the peninsula. Against this background, migration flows within the country.
But World War II broke the idyll. The peninsula was divided into two parts, one of which belonged to the Soviet Union, and the second to the United States. This led to the fact that everyone could go to the sector to which they were more sympathetic. But the advantage was on the side of the southern part. The situation is unchanged to this day. This is clearly seen in the population, which is twice as large in the Republic of Korea.
The DPRK economy experienced an imbalance, as natural and human resources were divided unevenly. The bulk of the workforce was concentrated in the south of the peninsula, but the Democratic People's Republic of Korea possessed the best potential, resource base and prospects. DPRK factories mainly specialized in heavy industry products.
Communist Parish
Significant changes in the country occurred along with the assertion of the power of the Communists. This has had a big impact on the financial sector. Any form of private property was now prohibited. Commerce was preserved only in the form of markets, but was rare. The introduced card system in two years has become total.
Seventies
The economy of the DPRK in the seventies underwent significant reforms, which were due to the modernization of production in the manner of Western technology. The government pushed for such a step the deplorable state of the financial sector. The reason for the default was a drop in demand for Korean goods abroad, which suspended the flow of currency. The second factor was the oil crisis.
The North Korean won has greatly depreciated by the end of the decade. The country was simply not able to pay off all its debts. These obligations hung over the DPRK, making the state a beggar. Japan at about the same time period defaulted on its former colony. Over the next twenty years, North Korea’s foreign debt increased by twenty billion dollars.
Late twentieth century
The end of the second millennium was marked for the state by negative dynamics in all economic indicators. North Korea’s GDP was so low that it was three times less than the Republic of Korea.
The direction taken by the government towards the development of the economy was obviously losing. The reasons for this result are as follows:
- a greater contribution to the development of heavy industry (while completely ignoring other sectors of the national economy);
- huge debt obligations;
- policy of closure and centralization;
- poor conditions for attracting investment.
The then ruler, Kim Il Sung, decided to develop the financial sector. In his plan, much attention was paid specifically to agriculture. Kim Il Sung decided to improve the potential of this industry by building the appropriate infrastructure and carrying out restoration and enrichment work for the land. A separate place was occupied by projects related to the transport network and the electric power industry.
Attraction of foreign capital
To ensure the flow of currency and increase the DPRK's GDP, the authorities decided to introduce changes in the regulatory framework. In the eighty-fourth year, a corresponding law was passed, which provided the opportunity to create joint ventures and implement joint projects.
The second step towards attracting foreign capital and technology was the organization of the Special Economic Zone, which was located in the north-east of the country. But this idea did not bring much success, since there was not enough infrastructure development. Obstacles were also created by local officials and the lack of guarantees for the security of investments.
Crisis phenomena
DPRK - which country in terms of economic development? In the nineties, it was safe to say that the one who experienced hunger. For such a civilized time, it's just wild. The reason for this terrible phenomenon was the contraction of the economy. The financial crisis worsened the already deplorable state, but the cessation of material support from the Soviet Union and China was a double blow. According to various estimates, about six hundred thousand inhabitants of the Democratic People's Republic of Korea became victims of food shortages.
Such a crisis helped soften the position of the government and liberalize foreign partners. The DPRK industry has become an object of close attention and study. To overcome hunger, the government again allocated funds for the development of the agricultural sector. Then the reforms affected light industry. The plan of the authorities was to harmoniously allocate resources and at the same time improve indicators in various areas of the national economy.
Many of the ideas of the government did not bring results - they turned out to be inexpedient or insufficiently effective. Food shortages only worsened. This was primarily due to the lack of crops. The catalytic factor of the crisis was the problems in the energy sector, which suspended the work of many industrial facilities.
Twenty first century
At the beginning of the third millennium, the North Korean won strengthened its position. This is due to the correct policies of the new leader Kim Jong Il. By his order, an entire industrial region was organized. As a result of market transformations, innovations appeared at industrial facilities. Some began to attempt to introduce economic accounting. This helped to attract additional investment. The contribution to the economy of the Democratic People's Republic of Korea from China has increased two-fold over the year.
The conducted monetary reform yielded mixed results. On the one hand, it was called upon to strengthen the position of a planned economic system. According to those responsible for this project, these changes should have led to a decrease in market influence. But in fact, this reform has led to increased inflationary processes and a shortage of essential goods. For such unfavorable moments, the person responsible for this innovation was planted, and then shot.
At the moment, in the DPRK, the balance of foreign trade operations has a positive trend and the balance of payments account is equal to the number with a plus sign.
commercial activity
The weak development of trade among the population has a historical background. Even in Confucianism, this work was considered less prestigious, and the corresponding sections of the population were engaged in it. To some extent, precisely because of this, the inhabitants of the DPRK were in no hurry to develop the trade industry until the nineties of the twentieth century. The totality of the card system also played a role.
But the famine that occurred during this period of time forced many Koreans to go into this area. Moreover, most often they carried out their activities not quite legal methods. The authorities tried to fight a similar phenomenon. However, this had bad consequences in the form of another formed process - corruption. The prohibited products of the Republic of Korea were smuggled into the territory of the DPRK. Before that, she traveled through China, but nothing stopped people. These actions were practically not stopped, punishments for private merchants became less severe. This has led to the fact that the illegal market for Chinese goods is still functioning perfectly.
Russia and North Korea
For many years, it was Russia that occupied the lion's share of the total volume of trade with the DPRK. Now in this regard, the Russian Federation takes fifth place, supplying strategically important materials and resources.
To a large extent, the Russian Federation imports into the state raw materials such as coal and oil. A significant share is occupied by engineering products, as well as chemical products.
One of the problems of developing cooperation in other areas, as well as building partnerships, is the outstanding debt obligations of the DPRK to the Russian Federation. Basically, all planned projects between countries concern the energy sector.
North Korea, the currency against the ruble at the moment of which is equal to the ratio of 1000 to 51.39, is far behind in development from many states. The ratio of won to the dollar is $ 1 to 900.
Heavy industry
DPRK exports are mainly characterized by heavy industry goods. The main place in the state economy is occupied by the extractive sector. The country is provided independently in almost all types of mineral raw materials.
Thanks to a good raw material base, such industries as metallurgy and mechanical engineering have developed. North Korea surpasses many developed countries in iron ore reserves, and non-ferrous metallurgy in general is the most promising industry.
