North Korea: Falling Behind

Looking at the previous post on the country, a question arises: if North Korea was, in some respects, ahead of the South in the early 1970s, to the extent that, in 1970, the Black Panthers could look on it as a model of resistance, and Joan Robinson could speak of a (North) “Korean Miracle” in 1964, when, exactly, did it start to fall behind?

Surprisingly early.

It turns out that South Korea had always had a surprisingly high level of economic complexity of exports, being consistently among the top 25 countries in this measure -even as early as 1964 (click the link for PDF showing the development of South Korea and Peru’s export components). North Korea, meanwhile, remains middling in this regard, but this still means its economy is underrated, because other countries with similar economic complexity are, in every way, much richer.

According to the paper Assessing the economic performance of North Korea, 1954–1989: Estimates and growth accounting analysis., there was only one period in which North Korean per capita real GNP grew faster than South Korea’s: the period 1954-1960. From then on, North Korea, with the exception of the period 1980-1985, consistently had a per capita real GNP growth rate of below 3%, growing an average 1.9% per year from 1954 to 1989. This (except for the early 1980s boom claim) is consistent with the per capita electricity consumption figures, which show that while North Korean per capita electricity consumption from 1971 to 1989 grew at at a thoroughly unimpressive 2.14% per year, South Korean per capita electricity consumption grew at a stunning 11.5% per year during the same period. The energy consumption statistics are more consistent with the early 1980s boom claim. Interestingly, up until the 1990s, North Korean per capita electricity consumption was no different from Argentina’s, suggesting North Korea had a truly abysmal capital productivity, as Argentina had a per capita GDP (PPP) at least three times as high as that of North Korea. The North Korean country study seems to be consistent with the surprisingly early slowdown, describing the post-war three-year-plan and five-year plan of the 1950s as successes and the North Korean economic slowdown as beginning in the “buffer year” of 1960. On the other hand, the semi-socialistic outward-oriented South Korean economy boomed after the 1961 coup. Apparently, the South’s economic surpassing of the North in the 1960s is evident even from the statistics on the sectoral composition of the labor force.

There are some other indicators, all indicating severe zastoy had set in North Korea by the 1970s. Firstly, food rations, which were were stable from 1955, were cut in September 1973, and sugar rations were also eliminated in the early 1970s. Food rations were cut again in 1987.

However, from the 1950s to the 1970s, housing construction boomed while the rest of the economy slowed. Yet, even housing construction must have declined during the late 1970s, as there was a sharp slowdown in North Korean urbanization at the time.

In 2011, North Korea had about the same percentage of its labor force employed in agriculture as China. Yet, China is a much richer country than North Korea. China can definitely feed itself if need be. North Korea can’t.

So when Brad DeLong says he, too, thought Joan Robinson’s support for “absorbing the South into socialism” in 1977 was “loony”, we now know why.

The question remains why the North fell behind the South economically so early in the 1960s and continued doing so during the 1970s and 1980s, and why the North is so much poorer than even neighboring China. This is a question which must be explored in a later post.

Note: Pretty much all this post was written on April 12, 2015. Only the first link and this and the above paragraph have been added, as well as the note on the energy consumption statistics. It is only being published today due to A. Karlin’s response to R. Khan‘s brief post on Communism.

Author: pithom

An atheist with an interest in the history of the ancient Near East. Author of the Against Jebel al-Lawz Wordpress blog.

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