The Pathetic Economy Of North Korea

this is north korea the most closed off country on earth this asian nation is often the center of intense scrutiny for its aggressive displays of militarism its internationally condemned nuclear program and of course its oppressive government dictatorship a 2014 report by the united nations concluded that the gravity scale and nature of these human rights violations does not have any parallel in the contemporary world this is all pretty damning stuff but with the exception of the human rights these aggressive actions is actually not something that the north korean government is particularly ashamed of what they are ashamed of though is something that all of these media spectacles help to distract from and that is they're incredibly pathetic economy the economy of north korea has an estimated nominal gdp of 25 billion us dollars or a purchasing power parity gdp of 40 billion us dollars and this is actually an incredibly hard figure to calculate because of the extreme lack of reliable economic data for the country and because you need to appropriate the value of north korean one which is pretty much an internationally worthless currency with no foreign exchange market what this estimate does mean though is that north korea has a transactional economy smaller than beverly hills la of course instead of designer handbags and rodent-sized dogs north korea does channel a large portion of that income back into its military but it still puts the whole nation into context beyond the dramatic chest beating and despite all of the opportunities this country has been given it has dwindled into complete economic obscurity to truly understand this catastrophic disappointment though we have to start at the very beginning the korean war ended in july of 1953 after years of devastating back and forth conflict amongst the new political ideologies that would go on to shape the later part of the 20th century the korean peninsula was kind of right back where it started divided along the 38th parallel with the capitalist nation in the south and the new communist nation in the north north korea was actually able to get off to an extremely strong start after rebuilding from the horrors of the korean war with support from their communist neighbors china and the soviet union north korea was able to bounce back and start building a pretty impressive rate quickly pulling ahead of their similarly named neighbor to the south the north korean government was certainly a planned command economy meaning that all production investment and allocation of capital goods was controlled by the government this was again very similar to their communist allies china and the soviet union after the war the centrally planned economy would work off a series of five years plans that would be decided on by the supreme people's assembly of korea and then converted into a legally binding final plan at first these plans would target things like the building of ports and the increasing the crop yields formation of trade agreements and of course the growth of the military in the early days after the war north korea actually had a lot going for it it was starting at a pretty low point but it was able to trade its abundant natural resources with its communist partners and in exchange they would provide north korea with technical goods and industrial know-how to convert the country from a fledgling agricultural nation into an industrialized powerhouse this all started to slow down though in the mid 60s north korea was undertaking its fourth central plan this time it was actually a very ambitious seven plan aim at industrialization to increase living standards but for the first time since the plan started it was becoming clear that north korea was not going to be able to meet this optimistic target there was an overall reduction in soviet support during this time as north korea started to align more with china and while they were all communist nations and they were all friendly it was kind of a bit like picking which parent you liked more north korea was under a lot of pressure to increase its defense spending given the increased pressure of capitalist nations like the usa who were hell bent on stopping communist domino effect which was the idea that communism would spread from one nation to another like dominoes and then in 1965 for the first time and despite all of the advantages it had south korea exceeded the growth rate of north korea although for now it was still a smaller economy overall the small problem of slowing growth eventually turned into a full-on crisis in the late 70s at this point north korea was still able to raise money through government borrowing and it had sunk itself deeply into debt trying to maintain these ambitious plans this wouldn't have necessarily been a bad plan had the money actually been invested into productive infrastructure but by this time north korea was sinking as much as 25 of its budget into its military for comparison the usa a country that has an enormous military budget actually spends about 54 of its federal budget on military spending so north korea's spending doesn't actually sound too bad but there are two things that must be considered here one the united states also has state budgets which cover things like local police roads schooling and the like these state budgets and local budgets actually make up close to 50 of total government spending in the united states so the actual military expenditure is not as severe as it sounds realistically making up just under 30 percent of total government spending overall north korea does not have state budgets it has provinces but the whole economy works off a central national budget meaning that that 25 figure in the 70s was the whole story the other bigger consideration here is that the usa is not a centrally planned economy and federal government spending only accounts for about nine percent of the usa's total output this means that in 2018 the usa only had a military expenditure 3.2 percent of its total gdp in north korea a centrally planned economy the government's budget kind of is the economy and so in this period military expenditure was around 20 of their total economy all of this economic mismanagement and reckless military spending meant that in 1980 north korea defaulted on its debts which cut off its ability to borrow money to keep its head above water these financial problems were compounded by a large-scale drought that was plaguing the nation at this time and meant that by this point its neighbour to the south was easily able to surpass it economically and continue to grow into what it is today north korea struggled its way through the rest of the 80s relying heavily on china and the soviet union to feed its people and keep its infrastructure afloat these countries were actually pretty happy to help out in exchange for more of north korea's natural resources and also in a desperate attempt to prove to the world that communism was the way of the future and that central planning was definitely legit and did not lead to widespread starvation if it couldn't get any worse for north korea it did in 1991 the soviet union collapsed and when it did north korea lost its biggest lifeline north korea had to drastically adapt and two years later it announced another budget plan this time a three-year plan focusing on agriculture light industry and foreign trade this all sounded great but it kind of went the same way as all of the previous economic plans did north korea no longer had access to sufficient stores of fertilizer that was previously supplied by the soviet union its trade agreements flopped because of its crippling foreign debt and also because it did not produce enough goods to actually trade with which compounded by making investments into infrastructure all but useless because they were not able to produce the machinery needed in north korea because of a lack of technical expertise and they were not able to import machinery because of the lack of anybody that wanted to do business with them a lack of trade for a small economy like north korea is all but a death sentence in today's world at this point north korea was desperate to try anything to get their economy to do something even if it meant resorting to the thing that it hated the most in a desperate attempt to modernize its economy the north korean government was playing with the idea of private enterprise but it was doing it in a very north korean way experimentation into small-scale entrepreneurship took place from 2009 to 2013 and although there continue to be legal uncertainties this has developed into a significant sector by 2016 economic liberalization had progressed to the extent that both locally responsible and state industrial enterprises gave the state between 20 and 50 of their total output selling the remainder to buy raw materials at market-based prices akin to a normal free market in 2014 the enterprise act was amended to allow state-owned enterprise managers to engage in foreign trade and joint ventures and to accept investments from non-government domestic sources under the new rules enterprise directors became more akin to western chief executive officers and chief engineers previously a government job had an operational role more like a western chief operating officer these individuals could even personally benefit from running these operations efficiently as of 2019 though is unclear as to whether these semi-government semi-private institutions are still in operation today north korea finds itself going nowhere its economy has actually started shrinking and its increased militaristic chess beating has meant that more and more sanctions have been placed on it further suffocating an already struggling economy for reference south korea which started in the same place as north korea after the war of 1953 was not blessed with the same kind of natural resources as north korea it did not have the land connection to a powerful ally like north korea has with china it did not get offered countless extensions on foreign aid and debt relief programs like north korea did but south korea's economy today is over 60 times larger than north korea's because it facilitated private enterprise and it invested into infrastructure to support the massive industries it has today to further credit the difference between the two system south korea also achieved this growth while growing up with a terrible neighbor that constantly threatened to nuke them so what does the future hold for north korea well it really is difficult to say the government of north korea seems to be stuck in a cycle of ramping up military aggression as a weird way to turn around and beg for more foreign aid in exchange for calming down a bit it is literally the screaming child in the middle of a supermarket that gets a lollipop just to calm them down while this keeps on working it is likely that the government of north korea will keep on doing it and in the meantime the world can only look on and hope that the whole system will implode peacefully and good governance can take its place hi guys i hope you enjoyed the latest video if you did please consider liking and subscribing uh beyond that i wanted to shamelessly plug our new discord server once again uh it's been really really fantastic to watch that grow and we've been having some fantastic discussions over there as always i do my very best to reply to all comments in the comments section uh but it is getting to a point where there are too many to keep up with uh so if you didn't want to reach me that discord server is probably the best place to go thanks guys

Channel: Economics Explained

Views: 2,060,247

Rating: 4.8234606 out of 5

Keywords: the economics of north korea, kim jong-un, kim jong un, north korea economics, north korea economics explained, north korea's economy, north korea economy explained, the economy of north korea explained, the economics of north korea explained, dictatorship dilemma, the economics of north korea, what is the main difference between the economics of china and north korea, pyongyang, kim jon un economic policies explained, north korea economics policies, economics explained

Id: 5-fYte8dE2M

Length: 11min 57sec (717 seconds)

Published: Thu Oct 03 2019

Reddit Comments

[u/UncleSpoons]

North Korea practices Juche economics, it's doesn't make a whole lot of sense to gauge it's success from the perspective of capitalism, which is a different economic principle with different goals.

Juche's goal is to create a self sustaining country, period. A nation that can support itself entirely on it's own; just in case, I don't know, the entire world sanctions your tiny kingdom. Where capitalism might create enough bicycles to fulfill local demand, then look elsewhere in the world to feed a never ending cycle of increasing production, Juche would stop when local demand is quenched, then prioritize the next need.

North Korea has A LOT of problems, but this post is like making a video titled "The pathetic economy of America", then listing all the ways America would struggle to self sustain when cut off from the rest of the world.