Hello and welcome to another episode of Military TV. In this video I want to
invite you to see the economy overview between South Korea and North Korea.
South Korea and North Korea took dramatically different paths following the end of fighting
in the Korean War in 1953. When it comes to their economies and living standards, they could hardly
be more different. The two Koreas are separated by the demilitarized zone, a four-kilometer wide
strip running along the 38th parallel which splits the Korean peninsula roughly in half.
To the south of the DMZ, South Korea operates one of the world's most advanced economies,
while to the north its neighbor is a military dictatorship that keeps a tight fist on the
economy. The North continues to face challenges in food and nutrition among other difficulties.
To be clear. First, let's take a look at the North Korean Economy.
The country of North Korea, officially known as the Democratic People’s Republic of Korea,
has an isolated and tightly controlled command economy. A command economy is a standard component
of any communist country. In a command economy, the economy is centrally planned and coordinated
by the government. The government of North Korea determines what goods should be produced,
how much should be produced, and the price at which the goods are offered for sale.
The first phase of North Korea’s economic development, following the division of the
formerly unified kingdom, was dominated by industrialization. This was a difficult task,
considering the damage the infrastructure of the country weathered during the Korean War.
North Korea assumed the Soviet model of governance and centrally planned,
socialist economics, as well as the ideology of juche (self-reliance). This model emphasized the
development of heavy industry and investments in the iron, steel, cement, and machine tool sectors.
Many experts believe that these policies of the North Korean government, beginning in
the aftermath of the Korean War, have been an obstacle to the country’s economic development.
The shortcomings of these policies were accentuated by the regime’s focus on songun, known
as (a style of military-first politics), which has worsened North Korea's chronic economic problems.
In the decades following the Korean War, there has been consistent stagnation in
the region's industrial and power output. The North Korean economy entered one of its
worst phases of stagnation and almost collapsed in the 1990s. The disintegration of the Soviet Union,
followed by a food crisis in the aftermath of a series of natural disasters hail storms in 1994,
flooding from 1995 to 1996, and droughts in 1997 pushed North Korea into an economic crisis.
Between 1990 and 1998, the country experienced an average annual growth rate of -4.1%.
The country became the recipient of international food and humanitarian
aid beginning in the mid-1990s, the aid continues even today.
In the 2000s, North Korea expanded its tactics for recovering its economy.
In 2002, it eased some restrictions in order to allow semi-private markets and launched a
series of economic reforms that it referred to as Economic Management Improvement Measures.
Some of these measures included an increase in both prices and wages, a shift in the price-fixing
mechanism, changes in the distribution system, decentralization of national planning,
an increase in the autonomy of enterprise management, the opening of the distribution
market for production methods, differentiated distribution, and social security system reform.
Economic growth picked up for a few years, and this period was considered an improvement
over the previous decade. From 2000 to 2005, North Korea grew at an average rate of 2.2%.
The gross domestic product of North Korea is estimated to be $40 billion in 2015,
according to the CIA's World Factbook, which has not given any updated GDP information
since that date. In terms of GDP per capita, North Korea had a per capita GDP of $1,700.
Agriculture accounts for 22.5% of GDP, industry accounts for 47.6% and services account for 29.6%.
The country still makes significant investments into its military,
and some analysts claim that this expense may come at the cost of its economic development.
In 2016, the last year for which estimates were available, North Korea spent an estimated $4
billion, or approximately 24% of it gross domestic product, on defense spending.
North Korea is known to be secretive, and it does not release economic data.
The region has not published any official indicators or statistics on its macroeconomic
conditions since 1965. The few sources for basic statistics on the North Korean economy
include The Bank of Korea and the Ministry of Unification and Korea Trade-Investment Promotion
Agency for trade information specifically. Today, China is North Korea’s main trading
partner. North Korea relies on China for both economic and diplomatic assistance.
In 2017, close to 86% of the region's exports from North Korea were directed to China.
The country's main exports are metallurgical products, minerals,
manufactured products, textiles, and agricultural and fishery products.
The main import items for North Korea are petroleum, cooking coal, machinery, equipment,
textiles, and grain. More than 90% of the region's total imports came from China in 2017.
In remarks released last month, Kim blamed international sanctions as well as unanticipated
crises including the coronavirus pandemic and natural disasters, for preventing the government
from improving people’s lives, while criticizing officials for mistakes that needed to be fixed.
He proposed becoming less dependent on imports, growing nearly every industry,
and reforming the way officials work. However, the new plan is unlikely to turn around the growing
decay of the North Korean economy, making it difficult for Kim to deliver on his lofty
promises and potentially cutting the resources available for treasured military projects.
Much different from North Korea, South Korea's economic transformation since
the Korean War has been dubbed the "Miracle on the Han River." Once wracked by poverty and political
chaos, South Korea has joined the "trillion-dollar club" of the world's leading economies and
enjoys membership in the Group of 20. South Korea has achieved rapid growth in
a short period. The country has displayed global competitiveness in various fields such as mobile
phones, semiconductors, automobiles, chemicals, and steelmaking. In recent years, its cultural
content, including music, gaming, and webtoons, is emerging as an essential industry in itself,
taking the lead in the Korean economy. The Constitution of South Korea stipulates that
“the right of property of all citizens shall be guaranteed.”
In other words, South Korea is based on a market economy, and thus it allows individuals and
businesses to freely conduct economic activities and guarantees their profits and properties.
In addition, The Republic of Korea has achieved remarkable success in combining
rapid economic growth with significant poverty reduction. The government of Korea’s policies
resulted in real gross domestic product growth averaging 7.3% annually between 1960 and 2019.
This strong performance was fueled by annual export growth of 16.0%
on average from 1961–2019, while savings and investment rose to 34.7% and 29.8%
of GDP respectively. Furthermore, South Korea is a key development partner of the World Bank
Group and an important contributor (since 1977) to the International Development Association,
the World Bank’s fund that supports the world’s poorest countries.
In the late 20th century, however, economic growth slowed, and in 1997 South Korea was
forced to accept a $57 billion bailout from the International Monetary Fund
then the largest such rescue in IMF history. The country also wrestled with reforming the chaebŏl
and liberalizing its economy. Nevertheless, its economy enjoyed a recovery in subsequent years,
and the country entered the 21st century on a relatively firm economic footing.
South Korea now has Ranking 10th among the world's largest economic powers and 4th in
Asia in 2021, South Korea is famous for its spectacular rise from one of the
poorest countries in the world to a developed, high-income country in just one generation.
Thanks for watching and we hope you enjoy the video.