ECONOMIC HISTORY OF NORTH KOREA
North Koreans were once known as the travelers and traders of Korea. In the 1950s, after the Korean War, the industrialized North Korea was richer than largely agricultural South Korea. By 2002, South Korea had a GDP or $505 billion while North Korea’s was only $15 billion.
Rich in natural resources, the North Korean economy performed quite well during the 1950s and 60s. In the 1960s, per capita income was higher in North Korea than South Korea. With Soviet assistance, the North Korean economy outperformed the economies of both South Korea and China.
In the 1970s North Korea exported locomotives to the Soviet Union, synthetics to China, machine tools to Europe, farm machinery and chemical fertilizers to Africa and Latin America. Much of the country's industry was centered around the Hamhung-Hungham industrial complex.
According to the Columbia Encyclopedia: North Korea has changed from a predominantly agricultural society (in 1946) to an industrial one. With abundant mineral resources and hydropower, 70 percent of its national product is now derived from mining, manufacturing, and services; about 30 percent still comes from agriculture. Development was impeded, however, by the rigid economic system, and the economy severely affected by a loss of trading partners after the collapse of East European Communism. The amount of resources devoted to the military, one of the world's largest, has been a burden on the economy as well. In 2002 the government instituted a series of limited economic reforms, including letting markets set prices of many goods and services and permitting private traders. [Source: Columbia Encyclopedia, 6th ed., The Columbia University Press]
North Korea’s centrally planned economy was smaller in 2012 than it was in 1992. The impoverished country suffers chronic food and power shortages and has not released economic data for decades. South Korea’s central bank estimates the North’s GDP was US$1,250 per person in 2011 compared with US$23,400 in South Korea.
North Korean Economy After World War II and the Korean War
The sudden withdrawal of the Japanese and the subsequent partition of the country created economic chaos. Severance of the complementary "agricultural" south from the "industrial" north and from Japan meant that North Korea's traditional markets for raw materials and semifinished goods--as well as its sources of food and manufactured goods--were cut off. Furthermore, the withdrawal of the entrepreneurial and engineering skills supplied mainly by Japanese personnel affected the economic base. Thus the task facing the communist regime in North Korea was to develop a viable economy, which it reoriented mainly toward other communist countries, while at the same time to rectify the "malformation" in the colonial industrial structure. Subsequently, the problem was compounded further by the devastation of industrial plants during the Korean War (1950-53). North Korea's economic development therefore did not tread a new path until after the Korean War. [Source: Andrea Matles Savada, Library of Congress, 1993]
According to “Countries and Their Cultures”: The Korean War (1950–1953) and the almost total destruction of the northern infrastructure by the allied bombing that flattened Pyongyang and napalmed the civilians paved the way for North Korea to emerge as a new, fresh, and truly heroic nation of Koreans. This was, according to North Korean officials, in contrast to South Korea, which was labeled a U.S. puppet regime. The destruction of economy was thorough, while the war casualties reached a phenomenal number and millions fled to the south as refugees. With Soviet and Chinese aid, reconstruction began immediately after the war. In the process of reconstructing the economy, the North Korean government collectivized agriculture, reinforced state and public ownership of heavy and light industries, and nationally unified education and the arts and sciences. By 1960, North Korea had a typical Soviet-style socialist economy and the party's hegemony had been consolidated. [Source: Countries and Their Cultures, The Gale Group Inc., 2001]
“In this process, a new form of leader-subject relations emerged, referred to in Korean as hyonjichido —on-the-spot teaching or guiding. Film footage and photographs from the post-Korean War economic reconstruction period show numerous scenes of Kim Il Sung visiting steel mills and factories. In the 1950s and 1960s, Kim visited the workplaces nationwide, encouraging people to participate more vigorously in production. Kim's presence carried weight and the people were impressed that the country's top man had visited their home-town; the visits boosted morale and enhanced national pride. As a result, the North Korean economy recovered at a remarkable speed.
“Following the three-year post-Korean War reconstruction, the North Korean government launched a five-year economic plan in 1956. Two years later, the socialist reform of production was declared complete and agriculture and industry became publicly owned and managed. Some key industries were placed under state ownership. In 1961, another economic plan was initiated; in November 1970, the party's Fifth Congress declared North Korea to be a socialist industrial state. These were the high times for the North Korean economy, and in April 1974, North Korea abolished all taxes. Until about 1976, North Korea's per capita gross national product (GNP) was higher than the equivalent figure in South Korea.
North Korea’s Command Economy
The North Korea's economy remains one of the world's most highly centralized and planned, even by communist standards. Complete "socialization" of the economy was accomplished by 1958, when private ownership of the means of production, land, and commercial enterprises was replaced by state or cooperative (collective) ownership and control. As a result, industrial firms were either state-owned or cooperatives, the former contributing more than 90 percent of total industrial output in the 1960s. [Source: Andrea Matles Savada, Library of Congress, 1993 *]
Unlike in industry, collectives are the predominant form of ownership and production in agriculture; the remaining rural enterprises are organized as state farms. The sole negligible exception to state and collective ownership in agriculture is the ownership of small garden plots and fruit trees, as well as the raising of poultry, pigs, bees, and the like, which are permitted both for personal consumption and sale at the peasant market. Private plots can be no more than roughly 160 square meters in area. State and cooperative ownership and control extends to foreign trade, as well as to all other sectors of the economy, including banking, transportation, and communications.*
In commerce nearly all goods are distributed through either state-operated or cooperative stores. Less than 1 percent of retail transactions are carried out at peasant markets, where surplus farm products are sold at free-market prices.*
As in other Soviet-type or "command" economies, all economic decisions concerning the selection of output, output targets, allocation of inputs, prices, distribution of national income, investment, and economic development are implemented through the economic plan devised at the center and are "blueprinted" by the State Planning Committee. In the face of the worldwide political and economic collapse of communist regimes in the early 1990s, North Korea defiantly continues to sing the praises of a command economy. Attempts to increase production through rigid central control and exhortations and other non-pecuniary incentives have not ceased, as exemplified by the campaign entitled "Speed of the 1990s." On-site industrial visits by President Kim Il Sung and his son and heir-apparent, Kim Jong Il, continue.*
Economic Development in North Korea
North Korea's reliance on a command economy has led to an inward-looking development strategy, demonstrated in policies on domestic industrial development, foreign trade, foreign capital, imported technology, and other forms of international economic cooperation. Priority is assigned to establishing a selfsufficient industrial base. Consumer goods are produced primarily to satisfy domestic demand, and private consumption is held to low levels. This approach is in sharp contrast to South Korea's outward-oriented strategy begun in the mid-1960s, which started with light industry in order to meet the demands of growing domestic and foreign markets and export expansion. [Source: Andrea Matles Savada, Library of Congress, 1993 *]
As a consequence of the government's policy of establishing economic self-sufficiency, the North Korean economy has become increasingly isolated from that of the rest of the world, and its industrial development and structure do not reflect its international competitiveness. Domestic firms are shielded from international as well as domestic competition; the result is chronic inefficiency, poor quality, limited product diversity, and underutilization of plants. This protectionism also limits the size of the market for North Korean producers, which, in turn, prevents them from taking advantage of economies of scale.*
Beginning in the mid-1980s, and particularly around the end of the decade, North Korea began slowly to modify its rigid selfreliant policy. The changes, popularly identified as the opendoor policy, included an increasing emphasis on foreign trade, a readiness to accept direct foreign investment by enacting a joint venture law, the decision to open the country to international tourism, and economic cooperation with South Korea.*
Difficulty Accessing North Korea’s Economic Performance
A lack of reliable data inhibits an accurate quantitative assessment of North Korea's economic performance. In mid-1993 North Korea remains one of the most secretive nations in the world, limiting the release of its economic data to the outside world and, for that matter, to its own population. Until about 1960, North Korea released economic data relatively more freely. Beginning in the 1960s, the publication of economic data began to dwindle dramatically; the withholding of information coincided with the beginning of the economy's slowdown. [Source: Andrea Matles Savada, Library of Congress, 1993 *]
The small amount of data that is published suffers from ambiguities and gaps and--more often than not--is in the form of percentages that do not provide base figures or explain the precise meaning of aggregated data. Moreover, North Korean macroeconomic aggregates such as national income, which is based on Marxist definitions, has to be modified in order to be comparable to customary Western standards. In the 1980s and early 1990s, only limited quantitative or qualitative information about the North Korean economy was available. Quantitative information on foreign trade is a welcome exception because the statistical returns from North Korea's trade partners are gathered by such international organizations as the United Nations (UN) and the International Monetary Fund (IMF), and South Korean organizations such as the National Unification Board.*
Estimating gross national product (GNP) is a difficult task because of the dearth of economic data, the national income accounting procedures based on the Marxist definition of production, and the problem of choosing an appropriate rate of exchange for the wn-- the nonconvertible North Korean currency. The South Korean government's estimate placed North Korea's GNP in 1991 at US$22.9 billion, or US$1,038 per capita. This estimate of economic accomplishment pales next to South Korea's GNP of US$237.9 billion with a per capita income of US$5,569 that same year. North Korea's GNP in 1991 showed a 5.2 percent decline over 1989, and preliminary indications were that the decline would continue. In contrast, South Korea's GNP grew by 9.3 percent and 8.4 percent, respectively, in 1990 and 1991.
Economic Planning in North Korea in the 1940s and 50s
During what North Korea called the "peaceful construction" period before the Korean War, the fundamental task of the economy was to overtake the level of output and efficiency attained toward the end of the Japanese occupation; to restructure and develop a viable economy reoriented toward the communist-bloc countries; and to begin the process of socializing the economy. Nationalization of key industrial enterprises and land reform, both of which were carried out in 1946, laid the groundwork for two successive one-year plans in 1947 and 1948, respectively, and the Two-Year Plan of 1949-50. It was during this period that the piece-rate wage system and the independent accounting system began to be applied and that the commercial network increasingly came under state and cooperative ownership. [Source: Andrea Matles Savada, Library of Congress, 1993 *]
The basic goal of the Three-Year Plan, officially named the Three-Year Post-war Reconstruction Plan of 1954-56, was to reconstruct an economy torn by the Korean War. The plan stressed more than merely regaining the prewar output levels. The Soviet Union, China, and East European countries provided reconstruction assistance. The highest priority was developing heavy industry, but an earnest effort to collectivize farming also was begun. At the end of 1957, output of most industrial commodities had returned to 1949 levels, except for a few items such as chemical fertilizers, carbides, and sulfuric acid, whose recovery took longer.*
Having basically completed the task of reconstruction, the state planned to lay a solid foundation for industrialization while completing the socialization process and solving the basic problems of food and shelter during the Five-Year Plan of 1957- 60. The socialization process was completed by 1958 in all sectors of the economy, and the Ch'llima Movement (see Glossary) was introduced. Although growth rates reportedly were high, there were serious imbalances among the different economic sectors. Because rewards were given to individuals and enterprises that met production quotas, frantic efforts to fulfill plan targets in competition with other enterprises and industries caused disproportionate growth among various enterprises, between industry and agriculture and between light and heavy industries. Because resources were limited and the transportation system suffered bottlenecks, resources were diverted to politically well-connected enterprises or those whose managers complained the loudest. An enterprise or industry that performed better than others often did so at the expense of others. Such disruptions intensified as the target year of the plan approached.*
Economic Growth in North Korea in the 1950s and 60s
Until the 1960s, North Korea's economy grew much faster than South Korea's. Although Pyongyang was behind in total national output, it was ahead of Seoul in per capita national output, because of its smaller population relative to South Korea. For example, in 1960 North Korea's population was slightly over 10 million persons, while South Korea's population was almost 25 million persons. Phenomenal annual economic growth rates of 30 percent and 21 percent during the Three-Year Plan of 1954-56 and the Five-Year Plan of 1957-60, respectively, were reported. After claiming early fulfillment of the Five-Year Plan in 1959, North Korea officially designated 1960 a "buffer year"--a year of adjustment to restore balances among sectors before the next plan became effective in 1961. Not surprisingly the same phenomenon recurred in subsequent plans. Because the Five-Year Plan was fulfilled early, it became a de facto four-year plan. Beginning in the early 1960s, however, Pyongyang's economic growth slowed until it was stagnant at the beginning of the 1990s. [Source: Andrea Matles Savada, Library of Congress, 1993 *]
Various factors explain the very high rate of economic development of the country in the 1950s and the general slowdown since the 1960s. During the reconstruction period after the Korean War, there were opportunities for extensive economic growth--attainable through the communist regime's ability to marshall idle resources and labor and to impose a low rate of consumption. This general pattern of initially high growth resulting in a high rate of capital formation was mirrored in other Soviet-type economies. Toward the end of the 1950s, as reconstruction work was completed and idle capacity began to diminish, the economy had to shift from the extensive to the intensive stage, where the simple communist discipline of marshalling underutilized resources became less effective. In the new stage, inefficiency arising from emerging bottlenecks led to diminishing returns. Further growth would only be attained by increasing efficiency and technological progress.*
Beginning in the early 1960s, a series of serious bottlenecks began to impede development. Bottlenecks were pervasive and generally were created by the lack of arable land, skilled labor, energy, and transportation, and deficiencies in the extractive industries. Moreover, both land and marine transportation lacked modern equipment and modes of transportation. The inability of the energy and extractive industries as well as of the transportation network to supply power and raw materials as rapidly as the manufacturing plants could absorb them began to slow industrial growth.*
First Seven-Year Plan
The First Seven-Year Plan (initially 1961-67) built on the groundwork of the earlier plans but changed the focus of industrialization. Heavy industry, with the machine tool industry as its linchpin, was given continuing priority. During the plan, however, the economy experienced widespread slowdowns and reverses for the first time, in sharp contrast to the rapid and uninterrupted growth during previous plans. Disappointing performance forced the planners to extend the plan three more years, until 1970. During the last part of the de facto ten-year plan, emphasis shifted to pursuing parallel development of the economy and of defense capabilities. This shift was prompted by concern over the military takeover in South Korea by General Park Chung Hee (1961-79), escalation of the United States involvement in Vietnam, and the widening Sino-Soviet split. It was thought that stimulating a technological revolution in the munitions industry was one means to achieve these parallel goals. In the end, the necessity to divert resources to defense became the official explanation for the plan's failure. [Source: Andrea Matles Savada, Library of Congress, 1993 *]
The Six-Year Plan of 1971-76 followed immediately in 1971. In the aftermath of the poor performance of the preceding plan, growth targets of the Six-Year Plan were scaled down substantially. Because some of the proposed targets in the First Seven-Year Plan had not been attained even by 1970, the Six-Year Plan did not deviate much from its predecessor in basic goals. The Six-Year Plan placed more emphasis on technological advance, self-sufficiency in industrial raw materials, improving product quality, correcting imbalances among different sectors, and developing the power and extractive industries; the last of these had been deemed largely responsible for slowdowns during the First Seven-Year Plan. The plan called for attaining a self- sufficiency rate of 60 to 70 percent in all industrial sectors by substituting domestic raw materials wherever possible and by organizing and renovating technical processes to make the substitution feasible. Improving transport capacity was seen as one of the urgent tasks in accelerating economic development-- understandable since it was one of the major bottlenecks of the Six-Year Plan.*
North Korea claimed to have fulfilled the Six-Year Plan by the end of August 1975, a full year and four months ahead of schedule. Under the circumstances, it was expected that the next plan would start without delay in 1976, a year early, as was the case when the First Seven-Year Plan was instituted in 1961. Even if the Six-Year Plan had been completed on schedule, the next plan should have started in 1977. However, it was not until nearly two years and four months later that the long-awaited plan was unveiled--1977 had become a "buffer year."
The inability of the planners to continuously formulate and institute economic plans reveals as much about the inefficacy of planning itself as the extent of the economic difficulties and administrative disruptions facing the country. For example, targets for successive plans have to be based on the accomplishments of preceding plans. If these targets are underfulfilled, all targets of the next plan--initially based on satisfaction of the plan--have to be reformulated and adjusted. Aside from underfulfillment of the targets, widespread disruptions and imbalances among various sectors of the economy further complicate plan formulation.*
Second Seven-Year Plan (1978-84)
The basic thrust of the Second Seven-Year Plan (1978-84) was to achieve the three-pronged goals of self-reliance, modernization, and "scientification." Although the emphasis on self-reliance was not new, it had not previously been the explicit focus of an economic plan. This new emphasis might have been a reaction to mounting foreign debt originating from large- scale imports of Western machinery and equipment in the mid- 1970s. Through modernization North Korea hoped to increase mechanization and automation in all sectors of the economy. "Scientification" is a buzzword for the adoption of up-to-date production and management techniques. The specific objectives of the economic plan were to strengthen the fuel, energy, and resource bases of industry through priority development of the energy and extractive industries; to modernize industry; to substitute domestic resources for certain imported raw materials; to expand freight-carrying capacity in railroad, road, and marine transportation systems; to centralize and containerize the transportation system; and to accelerate a technical revolution in agriculture. [Source: Andrea Matles Savada, Library of Congress, 1993 *]
In order to meet the manpower and technology requirements of an expanding economy, the education sector also was targeted for improvements. The quality of the comprehensive eleven-year compulsory education system was to be enhanced to train more technicians and specialists, and to expand the training of specialists, particularly in the fields of fuel, mechanical, electronic, and automation engineering.*
Successful fulfillment of the so-called nature-remaking projects also was part of the Second Seven-Year Plan. These projects referred to the five-point program for nature transformation unveiled by Kim Il Sung in 1976: completing the irrigation of non-paddy fields; reclaiming 100,000 hectares of new land; building 150,000 hectares to 200,000 hectares of terraced fields; carrying out afforestation and water conservation work; and reclaiming tidal land.*
From all indications, the Second Seven-Year Plan was not successful. North Korea generally downplayed the accomplishments of the plan, and no other plan received less official fanfare. It was officially claimed that the economy had grown at an annual rate of 8.8 percent during the plan, somewhat below the planned rate of 9.6 percent. The reliability of this aggregate measure, however, is questionable. During the plan, the target annual output of 10 million tons of grains (cereals and pulses) was attained. However, by official admission, the targets of only five other commodities were fulfilled. Judging from the growth rates announced for some twelve industrial products, it is highly unlikely that the total industrial output increased at an average rate of 12.2 percent as claimed. After the plan concluded, there was no new economic plan for two years, indications of both the plan's failure and the severity of the economic and planning problems confronting the economy in the mid-1980s.*
Third Seven-Year Plan of 1987-93
The main targets of the Third Seven-Year Plan of 1987-93 are to achieve the so-called "Ten Long-Range Major Goals of the 1980s for the Construction of the Socialist Economy". These goals, conceived in 1980, are to be fulfilled by the end of the decade. The fact that these targets are rolled over to the end of the Third Seven-Year Plan is another indication of the disappointing economic performance during the Second Seven-Year Plan. The three policy goals of self-reliance, modernization, and "scientification" were repeated. Economic growth was set at 7.9 percent annually, lower than the previous plan. Although achieving the ten major goals of the 1980s is the main thrust of the Third Seven-Year Plan, some substantial changes have been made in specific quantitative targets. For example, the target for the annual output of steel has been drastically reduced from 15 million tons to 10 millon tons. This reduction will have serious negative secondary effects on heavy industry. The output targets of cement and non-ferrous metals-- two major export items--have been increased significantly. The June 1989 introduction of the Three-Year Plan for Light Industry as part of the Third Seven-Year Plan is intended to boost the standard of living by addressing consumer needs. [Source: Andrea Matles Savada, Library of Congress, 1993 *]
The Third Seven-Year Plan gives a great deal of attention to developing foreign trade and joint ventures, the first time a plan has addressed these issues. By the end of 1991, however, two years before the termination of the plan, no quantitative plan targets had been made public, an indication that the plan has not fared well. The diversion of resources to build highways, theaters, hotels, airports, and other facilities in order to host the Thirteenth World Festival of Youth and Students in July 1989, must have had a negative impact on industrial and agricultural development, although the expansion and improvement of social infrastructure have resulted in some long-term economic benefits.*
The shortage of foreign exchange because of a chronic trade deficit, a large foreign debt, and dwindling foreign aid has constrained economic development. In addition, North Korea has been diverting scarce resources from developmental projects to defense; it spent more than 20 percent of GNP on defense toward the end of the 1980s, a proportion among the highest in the world. These negative factors, compounded by the declining efficiency of the central planning system and the failure to modernize the economy, have slowed the pace of growth since the 1960s. The demise of the communist regimes in the Soviet Union and East European countries--North Korea's traditional trade partners and benefactors--has compounded the economic difficulties in the early 1990s.*
Concomitant with the socialization of the economy and the growth in the total magnitude of national output has been a dramatic and revealing change in the relative share of output, indicating that the economy has been transformed from being primarily agricultural to primarily industrial. Whereas in 1946, industrial and agricultural outputs were 16.8 percent and 63.5 percent, respectively, of total national output, the relative position has reversed fundamentally since then so that the respective shares in 1970 were 57.3 percent and 21.5 percent. Judging from the agricultural share of 24 percent in 1981, there were slight reverses in the relative composition in the 1970s.*
Growth and changes in the structure and ownership pattern of the economy also have changed the labor force. By 1958 individual private farmers, who once constituted more than 70 percent of the labor force, had been transformed into or replaced by state or collective farmers. Private artisans, merchants, and entrepreneurs had joined state or cooperative enterprises. In the industrial sector in 1963, the last year for which such data are available, there were 2,295 state enterprises and 642 cooperative enterprises. The size and importance of the state enterprises can be surmised by the fact that state enterprises, which constituted 78.1 percent of the total number of industrial enterprises, contributed 91.2 percent of total industrial output.*
Reforms of the North Korean Economy in the 1980s
However, there have been some minor efforts toward relaxing central control of the economy in the 1980s that involve industrial enterprises. Encouraged by Kim Jong Il's call to strengthen the implementation of the independent accounting system (tongnip ch'aesangje) of enterprises in March 1984, interest in enterprise management and the independent accounting system has increased, as evidenced by increasing coverage of the topic in various North Korean journals. Under the system, factory managers still are assigned output targets but are given more discretion in making decisions about labor, equipment, materials, and funds. [Source: Andrea Matles Savada, Library of Congress, 1993 *]
In addition to fixed capital, each enterprise is allocated a minimum of working capital from the state through the Central Bank and is required to meet various operating expenses with the proceeds from sales of its output. Up to 50 percent of the "profit" is taxed, the remaining half being kept by the enterprise for purchase of equipment, introduction of new technology, welfare benefits, and bonuses. As such, the system provides some built-in incentives and some degree of micro-level autonomy, unlike the budget allocation system, under which any surplus is turned over to the government in its entirety.*
Another innovation, the August Third People's Consumer Goods Production Movement, is centered on consumer goods production. This measure was so named after Kim Jong Il made an inspection tour of an exhibition of light industrial products held in Pyongyang on August 3, 1984. The movement charges workers to use locally available resources and production facilities to produce needed consumer goods. On the surface, the movement does not appear to differ much from the local industry programs in existence since the 1960s, although some degree of local autonomy is allowed. However, a major departure places output, pricing, and purchases outside central planning. In addition, direct sales stores have been established to distribute goods produced under the movement directly to consumers. The movement is characterized as a third sector in the production of consumer goods, alongside centrally controlled light industry and locally controlled traditional light industry. Moreover, there were some reports in the mid-1980s of increasing encouragement of small-scale private handicrafts and farm markets. As of 1992, however, no move was reported to expand the size of private garden plots.*
All these measures appear to be minor stop-gap measures to alleviate severe shortages of consumer goods by infusing some degree of incentives. In mid-1993 no significant moves signaling a fundamental deviation from the existing system had occurred. The reluctance to initiate reform appears to be largely political. It is, perhaps, the linkage between economic reform and political liberalization that worries the leadership. This concern is based on the belief that economic reform will produce new interests that will demand political expression, and that demands for the institutionalization of such pluralism eventually will lead to political liberalization. There clearly exists a catch-22 situation for Kim Il Sung and, particularly, for Kim Jong Il. In order to legitimize his power base, the younger Kim needs an economic base. However, his economic reforms challenge his position as the advancer of juche and may eventually undo the regime.*
In the mid-1980s, the speculation that North Korea would emulate China in establishing Chinese-style special economic zones was flatly denied by then deputy chairman of the Economic Policy Commission Yun Ki-pok (Yun became chairman as of June 1989). China's special economic zones typically are coastal areas established to promote economic development and the introduction of advanced technology through foreign investment. Investors are offered preferential tax terms and facilities. The zones, which allow greater reliance on market forces, have more decisionmaking power in economic activities than do provincial-level units. Over the years, China has tried to convince the North Korean leadership of the advantages of these zones by giving tours of the various zones and explaining their values to visiting high-level officials.*
In December 1991, North Korea established a "zone of free economy and trade" to include the northeastern port cities of Unggi, Chongjin, and Najin. The establishment of this zone also had ramifications on the questions of how far North Korea would go in opening its economy to the West and to South Korea, the future of the development scheme for the Tumen River area, and, more important, how much North Korea would reform its economic system.*
End of the Soviet Union and Decline of North Korean Economy
North Korea was dependent on the Soviets and Chinese to feed its people and supply them with fuel. In 1991, the Soviets suddenly withdrew their largess. China took up slack but to a large degree. Even so the North Korean economy began to go into a tailspin. North Korea found itself aline facing hunger, cold and darkness and noting to fall back on in the case of emergencies.
The high-ranking defector Hwang Jang-yop, attributed the decline of North Korea's to three sources: 1) heavy investment in the military at the expense of the private sector; 2) the difficulty of obtaining raw material since the collapse of the Soviet Union and 3) money wasted on the erection of monuments and statues of Kim Il Sung and Kim Jong Il.
The economy in North Korea has shrunk an average of 41 percent a year since 1990. By the mid 1990s North Korean factories were believed to be operating between 15 and 50 percent of their capacity if they were running at all from a lack of fuel and materials.
Power shortages in North Korea in the 1990s caused the country's largest steel and chemical plants to close down for weeks at a time. A huge Soviet-build oil refinery constructed to process oil from Siberia is closed down. Garment factories are not functioning. In April, 1996, North Korea closed down the last furnace at its huge steel mill.
See Industry and Famine
Decline of North Korea During the 1990s Famine
Philip Gourevitch wrote in the Observer: Defectors from North Korea in the late 1990s and early 2000s, “described the North Korea that foreigners never saw as a wasteland, its factories shuttered, its tractors and trucks running on wood-burning steam engines, its once-efficient food-rationing system defunct, whole villages standing empty - mass graves here, bodies lying uncollected there, and scavenging bands of skeletal orphans roving everywhere, gnawing on bark and leaves. Those who made it to China tended to come in tattered clothing, with their feet wrapped in rags; few had much flesh on their bones, and their hair was often blanched by malnutrition. [Source: Philip Gourevitch, Observer Magazine, The Guardian, November 2, 2003]
“It is estimated that starvation has killed between 2 million and 3 million North Koreans in the past decade - a 10th of the population. When foreign governments and international organisations demanded greater transparency in exchange for food, Kim Jong Il warned that 'Imperialist aid is a noose of plunder and subjugation, aimed at robbing 10 and even 100 things for one thing that is given.' Many megatons of food aid did get through and lives were saved. But by all accounts the bulk of it was hijacked by the state to keep the party elite, and especially the military, fed and faithful.
“As more factories fell idle and were stripped down and carted off in their entirety, or as scrap, to be traded for food in China, Kim Jong Il cranked up the only non-military machinery he had left - ideology, propaganda, the engines of Juche. True revolutionaries, the party newspaper explained, 'sacrifice themselves on the glorious road of revolution with a clean revolutionary conscience, because they also firmly believe that the revolutionary cause led by their Leader is most just'. But the passion North Koreans felt for Kim Il Sung, which was genuine, however misplaced and deluded, does not appear to have been transferred to Kim Jong Il, who is remote and secretive and lacks his father's populist touch. He has only once spoken before the general public, at a military parade in 1992, when he was heard to blurt out: 'Glory to the heroic Korean People's Army.'”
Image Sources: Wikimedia Commons.
Text Sources: UNESCO, Wikipedia, Library of Congress, CIA World Factbook, World Bank, New York Times, Washington Post, Los Angeles Times, National Geographic, Smithsonian magazine, The New Yorker, “Culture and Customs of Korea” by Donald N. Clark, Chunghee Sarah Soh in “Countries and Their Cultures”, “Columbia Encyclopedia”, Korea Times, Korea Herald, The Hankyoreh, JoongAng Daily, Radio Free Asia, Bloomberg, Reuters, Associated Press, Daily NK, NK News, BBC, AFP, The Atlantic, Yomiuri Shimbun, The Guardian and various books and other publications.
Updated in July 2021