Paper Example. North Korea Political Economics

Published: 2023-03-20
Paper Example. North Korea Political Economics
Type of paper:  Essay
Categories:  Politics Economics Data analysis Asia
Pages: 7
Wordcount: 1723 words
15 min read

Nations become popular due to their economic and political systems that allow people to transact freely. North Korea is a socialist economy characterized by a centrally planned system where the state controls the production and consumption to achieve specified objectives. Although the country continues to follow the principles of a command economy, the market allocation system has been increasing after Kim Jong-un took office in 2012 (Jacobs, 2012). However, North Korea's economic information is stated top secrete hence assessing their economic performance and liberalization is a significant problem. Countries economic freedom ranking conducted by the Heritage Foundation in 2019, North Korea is the least out of 180 nations with a freedom score of 5.9 (Heritage Organization, 2019). Although the command system is the major cause of underdevelopment, several factors are affecting the Korean economy and they include the monarchy leadership of the Kim family, sanction by the United Nations and Western Countries, and the Soviet Union disintegration. The state owns and controls most of the industry opening limited opportunities to foreign and corporate investment. The years 1989 to 1991 marked the end of foreign assistance after the distention of European bloc. The Soviet Union provided help with food and proper relations with other countries such as China and South Korea. Moreover, to respond to international sanctions, the statesmen introduced the concept of Juche. Although there are several improvements in the leadership of North Korea, the rate of development remains low due to the limitation of market allocation.

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Economic History

The Korean Peninsula was divided into two regions after the Second World War. The division caused significant imbalances of human and natural resources limiting the growth of the north and south regions. According to Shen and Xia (2012), approximately 80 percent of the economy was an industry in the year 1945. The industry was composed of 37 percent of agriculture, 31 percent of the light industry and 18 percent of trade (Shen and Xia, 2012). Another factor that destroyed the north and South Korea economies was the Korea War because their industries were all brought down. North Korea was able to mobilize its natural resources and labor force after the war to achieve economic growth. It benefited from the help of other communist economies such as the Soviet Union, 11 miles close to Korea was the primary sponsor of the socialist economy. China also became a North Korea trading partner to accelerate its growth after the war (Shen and Xia, 2012). According to a Joint Economic Committee headed by Paulsen (2018), the North dominated the Peninsula's industry, power generation, and mining, but the South surpassed it in the 1970s. The economy of North Korea continued to deteriorate after the Soviet Union disintegration in 1991. The North could not trade nor receive aid from the Asian countries. The Soviet was the major source of food for the Korean people and after the imports decline, more than 600,000 died of hunger in 1994 (Paulsen, 2018).

According to An and Yong-son (2004), North Korea shifted its resources from agricultural and industrial fields to the military because of the belief that domestic security is necessary for prosperity. Moreover, the country suffered from economic deficit due to the huge debts it had borrowed but failed to pay them. It heavily relied on China as a major source of assistance and trade partner in 2000 (Park, 2004). South Korea and America came to its rescue and supplied food and energy in cases of emergencies. North Korea agreed to boost the economy but for six decades, it has been concentrating on nuclear programs. Currently, it has developed long-distance ballistic missiles that may reach the United States and the United Kingdom. The country has been using the weapons to threaten the superpowers of missile attacks if they do not remove economic and political sanctions against it.

Political History

According to Paulsen (2018), stiff competition among the Soviet Union, China, and Japan has been a significant contributor to Korean history. Korea has been an independent country for decades, and a branch state of China, but this changed after the Japan influence. Japanese colonized Korea in 1910 after overpowering Russia in 1905. It introduced new methods of social change and industrialization, but Korea could not adopt the new approaches hence they served as the source of food for the Japanese (Paulsen, 2018). During the Second World War, the United States united with the Soviet Union to defeat Japan. Korea was divided into different provinces based on the 38th parallel, and a Stalinist method of government was established. Kim II-Sung became the leader of the Democratic People's Republic of Korea (DPRK) following Joseph Stalin's nomination. The south elected an official government in 1948 and was given the name Republic of Korea (ROK). However, in 1950, the North attacked the south, and the allied troops headed by the United States retaliated making the war more brutal. The attacks continued until the introduced a cease-fire agreement in 1953 (Park, 2004). Although the end of the war brought peace to the two countries, the South was ruled by dictators and Kim II Sung, a tyrant led the North. In 1961, Park Chung-Hee maintained a centrally planned economy but promoted economic growth by promoting industrialization, exportation, and protection of the basic industries from foreign competition. Although there were repeated military threats in the South and north nuclear programs the countries bean to focus on industrialization and economic growth. Unlike the North, South Korea reduced trade restrictions by allowing foreign and private investment.

North Korean Economy

According to Yong (2016) comparisons between the North Korea National Accounts economic indicators, for example, the per capita income, industrial structure, growth rate, and economic size is not reliable. The estimates are based on value-added ratios and South Korean prices. Frank (2016) also questions the reliability of information released by the North Korean government because of numbers manipulation. The government also treats information as state secrets, and the market mechanism does not apply. The national economic size is determined by the North Korea Bank, which also examines the best exchange rates because North Korea has a non-convertible currency. Yong (2016) examined the information released by the bank and found that the estimated Gross Net Product was $22.9 billion in 1991 and a per capita income of $1.038. South Korea posted a per capita income of $5,569 and Gross Net Product of #237.9 billion. Compared to 1989, the GNP of North Korea fell by 5.2%, and the predictions showed that it would continue to decline due to the increased military spending at the expense of public investment. Contrarily the GNP of South Korea increased from 1989 to 1991 by 9.3 percent and 8.4 percent (Yong, 2016). The GNP is also estimated to have reduced by half between 1990 and 1999. The budget reports show that the per capita income tripled in the years 2000 and 2014. In 2010, external trade was back on to 1990 levels. Compared to a capitalist economy like South Korea, it can be noted that their growth was higher because the GNP increased by 1.4 % per year between 2003 and 2013. The bank approximated that the real GDP of North Korea in 2015 was 30,805 billion (Yong, 2016).

Frank (2016) is an analyst who observes that the Bank of Korea may be releasing manipulated information to show the world that the country is developing. He notes that the rate of growth rate is approximately 3-4% but the government reported an annual increase between five percent and ten percent. The government reported that capital expenditure on public houses and infrastructure has been increasing from 4.3% in 2014, 8.7% in 2015, to 13.7 percent in 2016 (Frank, 2016). Professor Ri Gi Song declared that a 3.7 growth rate in 2017, increasing the GDP to $29.6 billion (Kyodo News, 2018). The economist estimated that the rate of growth was greater than developed capitalist economies such as Australia that grew with 1.3 % and North Korea with -3.5%.

When the growth rate of each industry in North Korea is analyzed the numbers indicate that it is still underdeveloped despite the measure developed to promote production and trade. The agriculture, forestry and fishing sector decreased from 1.2% in 2014 to -0.8% in 2015. Although the fisheries and livestock production increased relatively, farm produce (rice and corn) reduced exposing the country to a food shortage (Yong, 2016). In 2014, the mining sector had a growth rate of 1.6% but fell tremendously (-2.6) in 2015 because of inadequate mineral productions. The sanctions imposed of North Korea prohibit any country from selling metallic products hence limiting their ability to reach deeply hidden resources. According to Yong (2016), the manufacturing sector decreased from 0.8% in 2014 to -3.4% in 2015 as a result of low production chemicals, texts shoes and clothing products.

Nuclear Weapons and sanctions

According to Frank (2006), the nuclear program in North Korea started around the 1950s during the Kim Jong II era. Kim Jong-Un, his son has been progressing in what his predecessors started with the goal of achieving domestic security. The country has conducted five tests with nuclear missiles, and it is planning to launch another test. North Korea signed the Nuclear Nonproliferation Treaty in 1985 and declared that it would stop producing these weapons but it has defiled it. In 2003, North Korea withdrew from the United Nations Council (Albert, 2019). During the Obama era, America was acting tough on nuclear production, but few actions were being taken to control it. However, he introduced sanctions and urged China to intervene as it is best suited to solve the situation (Delury, 2017). The United Nations, U.S, and China have been imposing sanctions on North Korea since it has been testing nuclear missiles from 2006. However, these sanctions have not deterred Kim Jong-Un to stop the production of nuclear weapons despite their adverse effects on the economy. China has been receiving threats from the international community and the United States, but it continues to trade with North Korea because it has a huge investment in the mining and transportation sectors (Paulsen, 2018). Currently, North Korea is still threatening to send missiles to US and European countries if sanctions imposed against it are not removed (United States Institute for Peace, 2019). The program is hindering trade because the US and Europe are no longer trading with China and North Korea because China decided to stay neutral on the issue. China is the most competitive country in the world exporting products such as electronics, smartphones, and food items. The United States claims that China does not want to stop the production of nuclear weapons because it could affect its economy. The production of nuclear weapons is the current significant threat to globalization between North Korea and other nations. Countries such as Malaysia, the United States, and Russia have stopped other states from trading with North Korea (United States Institute for Peace, 2019).

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