The Economy

The Economy

THE DEMOCRATIC PEOPLE'S REPUBLIC OF KOREA (DPRK, or North Korea) possesses extensive economic resources with which to build a modern economy. These include sizable deposits of coal, other minerals, and nonferrous metals. The river systems of the Yalu, Tumen, and Taedong, and lesser rivers supplement North Korea's coal reserves and form an abundant source of power. Although the mountainous terrain prohibits paddy rice cultivation except in the coastal lowlands, corn, wheat, and soybeans grow well on dry field plateaus. The country's hilly areas also provide for timber forests, livestock grazing, and orchards.

North Korea inherited the basic infrastructure of a modern economy at the end of the Japanese colonial era (1910-45) and achieved considerable success because of the ability of the communist regime to marshall unutilized resources and idle labor and to impose a low rate of consumption. Around the beginning of the 1960s, however, the economy had reached a stage where delays and bottlenecks began to emerge. Once growth could be achieved only by raising productivity through increased efficiency, an expanded resource base, and technological advances, slowdowns and setbacks occurred. Slow economic growth continued into the 1970s and 1980s. Based on chuch'e, the self-reliant economic policy emphasizes heavy industry. This policy, coupled with economic difficulties, has resulted in a poor record of exports, chronic trade deficits, and a sizable foreign debt, as well as foreign trade primarily oriented toward other communist countries. At the outset of the 1990s, North Korea's economy was in a deep slump and in great disarray, and was hopelessly behind its rival, the Republic of Korea (ROK, or South Korea), which has become a world-class economic powerhouse.

North Korea's economy remains one of the world's last centrally planned systems. The role of market allocation is sharply limited--mainly in the rural sector where peasants sell produce from small private plots. There are almost no small businesses. Although there have been scattered and limited attempts at decentralization, as of mid-1993, P'yongyang's basic adherence to a rigid command economy continues, as does its reliance on fundamentally non-pecuniary incentives. A North Korean decision to create Chinese-style special economic zones represents a major breakthrough in decentralizing the economy.

As the country faces the 1990s, great challenges lie ahead. The collapse of communist regimes, particularly North Korea's principal benefactor, the Soviet Union, have forced the already depressed North Korean economy to fundamentally realign its foreign economic relations. Economic exchanges with South Korea have even begun in earnest.

Country Studies main page | North korea Country Studies main page