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Thayer Watkins
Silicon Valley
& Tornado Alley
USA

The Economy and Economic History
of North Korea

The Kim dynasty regime in North Korea will go down in human history as one of the most monstrous. Kim Il Sung's regime took a relatively industrialized region and drove into the dark ages. With totalitarian centralized control it destroyed individual incentive and any rational decision making and it diverted an enormous share of production into the military and monument building. The Soviet Union collapsed when the share of industrial output going to the military-industrial complex went above 70 percent. When Mao Zedong diverted the resources of China away from food production into such useless projects as the backyard blast furnaces during the Great Leap Forward period he created the worst famine in human history, one that resulted in 30 million deaths. The Great Leap Forward lasted only three years. The diversion of resources into useless military and monument building in North Korea has gone on for more than fifty years and famine conditions in the provinces away from the capital continue. There has been massive food aid of several hundreds of millions of dollars from the U.S., South Korea, Japan and Europe to try to avert mass starvation, all the while the regime continued to maintain one of the biggest armies in the world. It is estimated that the famine death in North Korea have totaled about two million; that is about ten percent of the population. Proportionally this is a greater catastrophe than the Great Leap Forward. It is comparable to the devastation wrought by the khmer Rouge in Cambodia.

For all the evils that Mao Zedong imposed upon China the one thing that he did not do was perpetrate a dynasty of his progeny upon China.

Some comparisons of area, population and economic production put the situation in perspective. North Korea has about two-thirds of the area of that of North Dakota or one-third that of Montana. It located in a climate and terrain comparable to Montana with a population about equal to that of Texas. In terms of international comparisons North Korea has an area about the same as that of Nicaragua with a population density over three times as high. North Korea has just about the same population as Ghana with half of its land area. Other countries with about the same population as North Korea are Malaysia, Romania, Sri Lanka and Nepal.

The estimated GDP of North Korea is $20 billion but that is likely to be an overestimate just as the GDP of the Soviet Union was overestimated for decades because no one could believe the Soviet situation was as bad as subsequent relevations showed it to be. In any case since so much of the GDP goes for completely useless military expenditures the relevant statistic is the amount of output in North Korea that goes for consumption. On a percapita basis this figure is likely to be the lowest in the world.

However, a country whose GDP is about the same as the estimated GDP of North Korea is Luxembourg. The Gross State Product of Montana is also about equal to that of the estimated GDP of North Korea. Montana is economically a very small state.

So this is the picture. North Korea has the population of Texas living in a land area about one third the size of Montana and with a climate and level of production about the same a Montana. Or internationally North Korea has the population of Romania living in a land area equal to that of Nicaragua in climate comparable to Belarus with a level of production equal to Luxembourg. Now consider the size of the military in North Korea compared to the larger economies of the world.

CountryArmed Forces
Personnel 1997
millions
Military
Expenditures
% of GDP
United States1.53.3
China2.62.2
India1.32.8
Russia1.35.8
North Korea1.127.5
South Korea0.73.4
France0.53.0
Taiwan0.44.6
Germany0.31.6
Japan0.251.0
United Kingdom0.22.7
Source: Statistical Abstract of the U.S., 2000

It would be hard enough to feed 22 million in the climate and terrain of Montana with about the same total income as the 800 thousand Montanans without simultaneously supporting an army of one million and engaging in a program of trying to build nuclear weapons. A regime that tries to do that has to be insane and the economy has to be in a hideous state, a facade on the verge of collapse. No wonder the regime is trying desperately during the Iraq crisis to extort economic aid out the U.S. in return for moderating tensions.

The elite of the regime maintains a lifestyle of imported luxuries. It is not easy for that elite to get the hard currencies necessary to import those luxuries. Blackmailing other countries was one strategy used. In more recent years the regime has resorted to drug dealing and counterfeiting. The North Korean counterfeit $100 U.S. bills were detected only because they were of better quality than the real ones.

In North Korea even the elite are subject to the oppressive totalitarian rule of the regime. Here is an example of that oppressive rule. Sporadically the regime turns off the electricity and then the police search people's apartments to see whether any politically forbidden video tapes have been captured in VCR's as a result of the electricity being turned off.

Population Density by Province 1987

A Solution to the North Korea Problem.


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