In all my encounters with data connected to economics, I have found only two guarantees of national minimum RGDP per capita: distance from the equator and economic complexity of exports. North Korea has solid marks in both for a country of its standing.
The fact that the North Korean economy is all too often underrated is obvious. From an outside glance, North Korea does not look or act like a country that has the per capita income of Kenya or the Ivory Coast, but like one that has the per capita income of Honduras. Indeed, despite the lack of consumer electric lights, North Korea’s electricity consumption per capita really is almost the same as that of much-better-lit Honduras.
Compare the real North Korea with the North Korea of Africa: Eritrea. Do you really think they have the same growth potential or even similar actual RGDP (PPP) per capita? I certainly don’t. Over 97% of Eritrea’s exports are products of primary industry. At the very best (which is extremely unlikely), Eritrea’s future is little better than that of Nicaragua. Despite the local dictator’s pretenses of supporting national independence and aidless growth, Eritrea is a country mired in economic stagnation, poverty, government debt, and a surprising amount of neocolonial dependence on its former colonizer. Like those of Somalia and Libya, Eritrea’s future looks grim, violent, and anarchic. Though Erik Reinert heaps numerous accolades and statements of hope upon Africa’s North Korea:
, they are best reserved for the real North Korea: Eritrea has little to offer to the world except a steady stream of illegal migrants to its former colonizer.
Nor does Cuba have anything like the economic base of North Korea, and neither does its economic future look much brighter than that of the Dominican Republic. Though it has a well-educated population and a solid medical system, it looks like it never exited its past of naive comparative advantage in primary industry and inherently related “neocolonial dependency”.
In contrast, if North Korea is dependent on any country, it is on China, on which the rest of the world is understandably dependent as well (though, considering geographic distance and their own development, to a much lesser extent). An economic collapse in China would cause economic privations in North Korea, but no substantial change in its economic complexity which, despite the terrible shocks of the 1990s, is between that of Mauritius and Greece -both of which went great economic distances in the twentieth century.
Now, considering the level of malnutrition in the real North Korea, and the fact only a small percentage of the population has regular access to electricity, I wouldn’t be surprised if it turned out that the CIA RGDP per capita estimate is, in fact, a reasonable one. Physically, North Korea looks like a lower-middle income country with unusual gaps in its development fabric; the primary variables missing are consumer sovereignty and any distraction from the constant emphasis on military preparedness at any cost. There’s no point in building up any civilian consumer electricity network, after all, if the assumption is that the West and the Capitalist Occupation Regime could blow it up at any time or that it would quickly need to be dismantled for use of national protection. Indeed, even in the U.S., which never saw any battlefield action on its own soil for decades, civilian consumer electricity was rationed during the Second World War. Indeed, North Korea basically looks like an Asian version of the U.S. if it had never exited the Second World War. The country has a deserved reputation very much like that of Sparta. Kenya and the Ivory Coast could never acquire a nuclear weapon. North Korea could, and did. And, as with the actual post-WW II U.S., a post-Juche boom (after a sharp and brief recession) is perfectly possible in North Korea, even in the framework of a centrally-directed economy. Were it to turn to free-market capitalism, or even implement a more consumer-friendly version of its present economic system, North Korea’s RGDP per capita would quickly rise to the level of Honduras, and, over the next few decades, continue ascending to the level of Mauritius. There is absolutely nothing but royal ideology preventing North Korea from achieving the RGDP per capita of the 1980s Soviet Russia within the next four decades. If the real Soviet Russia could achieve post-1980 Mexican per capita RGDP by the early 1980s, so can North Korea by a simple redirection of resources from military to civilian purposes. The Korean people are generally more intelligent than the Russian, so by letting Korean genius shine, North Korea could rise to middle-income levels even within the rubric of a totally government-controlled economy.
In short, there is a good empirical case behind Scott Sumner’s contention that the fastest-growing economy of the 21st century will most likely be North Korea. North Korea, being an unusually economically-complex, yet, unusually poor country, is very much like Japan in the mid-19th century-just waiting for its opening to the West to shine.
Note: While a totally planned economy can be great at getting a country from lower-middle-income to upper-middle-income, it has never been shown to get one from third world to first. For that, some capitalist framework is required in order to encourage Hayek’s use of knowledge in society and the selective pruning and planting of Mises’s economic calculation. But neither of these is really necessary for a “poor” country of intelligent people to achieve Mexican living standards.