The Post-War Economy
North Korea has a socialist command economy. Beginning with the Three-Year Plan (1954-56) at the end of the Korean War and the shortened Five-Year Plan (1957-60) that succeeded it, reconstruction and the priority development of heavy industry has been stressed, with consumer goods a low priority. This strategy of industrialization, biased toward heavy industry, pushed the economy forward at record growth rates in the 1950s and 1960s. The First Seven-Year Plan (1961-70--extended for three years because of Soviet aid stoppages in the early 1960s caused by North Korea's support for China in the Sino-Soviet dispute)--also projected a higher than average growth rate.
By the early 1970s, North Korea had clearly exhausted extensive development of its industries based on its own, prewar Japanese, or new Soviet technologies, and therefore turned to the West and Japan to purchase turnkey plants. These purchases ultimately caused North Korea's problems with servicing its external debt-- estimated at between US$2 billion and US$3 billion for the years 1972-79. Later seven- and ten-year plans failed to reach projected growth rates; still, a study published by the United States Central Intelligence Agency in 1978 estimated that North Korea's per capita gross national product (GNP) equaled South Korea's as late as 1976. Since that time, however, it has fallen behind South Korea, and transportation bottlenecks and fuel resource problems have plagued the economy.
Agriculture was collectivized after the Korean War, in stages that went from mutual aid teams to second-stage cooperatives, but stopped short of building the huge state farms found in the Soviet Union or the communes of China. Relying mostly on cooperative farms corresponding to the old natural villages and using material incentives (there was apparently little ideological bias against using such incentives), North Korea pushed agricultural production ahead, and its general agricultural success was acknowledged. The United States government estimated in 1978 that grain production had grown more rapidly in North Korea than in South Korea and that living standards in North Korea's rural areas had probably improved more quickly than those in South Korea. Nevertheless, production has fallen behind and North Korea has failed to reach projected targets, for example, the production of 10 million tons of grain by 1986.
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