The Autarkic Aspirations of North Korea"s Failing Economy

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BY TANISHQ TIWARI / JULY 3, 2021

North Korea has for long tried to achieve an independent image, only for their ambition to be the

reason for their fall.

n autarky is an economic system built on the idea of self-reliance and sufficiency. Autarkic ideologies are ones that limit trade and believe in establishing a closed economic system which can satisfy all its demands without dependence on international sources; subsequently cutting off that economic block from the rest of the world. These are highly regulated and controlled economies where participants have little to no freedom of choice and minimal competition; which is a reversal from the concept of a liberalised economy where all participants can practice trade with very few restrictions in place.

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Pictured : Kim Il Sung by yeowatzup via Commons

Attempts to establish such systems have been made throughout history, notable ones being England’s mercantile policies from the 16th to 18th century which enabled trade only between its colonies and the mother country. Autarkic formation was also a characteristic of Soviet Union policies, when under the leadership of Joseph Stalin, the USSR had entirely cut itself from external trade by the mid 1930s. Another example was Nazi Germany from 1933 to 1945, which solely permitted and promoted trade within its borders.

The most contemporary example of an autarky is the economic system of the Democratic People’s Republic of Korea (DPRK), or North Korea. Based on the ideology of Juche, roughly translated to “self-reliance”, North Korea hopes to achieve economic autonomy (also called charip). Inspired by Marxist-Leninist theories, Juche in application is quite different. Becoming the official state ideology of the country in 1975, it reflected the desire of North Korea to reconstruct itself and establish its own identity. Kim Il Sung, the founder and Premier of North Korea in his career-defining speech described Juche as, “holding fast to an independent position, rejecting dependence on others, using one’s own brains, believing in one’s own strength, displaying the revolutionary spirit of self-reliance, and thus solving one’s own problems for oneself on one’s own responsibility under all circumstances.”

Based on the ideology of Juche, roughly translated to self reliance”, North Korea hopes to achieve economic autonomy

also called charip.

Since its separation from South Korea in the 1950s, North Korea has had an incredibly regulated economy. It soon saw a boom in economic growth unparalleled to anywhere else in the world post the Korean War. In 1960, North Korea’s national income grew by 680%. This is because planned economies are known to work out well initially - during the reconstruction period of a region. It is on economic expansion that these stringent rules cease to work as economies become so complex, it is impossible for it to adhere to set steps without faltering. Therefore, by the end of the 1960s, the DPRK started seeing a negative growth rate.

It is also important to note that the foreign aid North Korea received for rehabilitation from the Communist Bloc at that time was a notable contributing factor to the abnormal boom in national income. This external aid was through an influx of new technology that led to a boom in production in the 50s. This could also be seen as a policy that mirrored the one practised by the Soviet Union right before it became an autarky in the 1930s and was dubbed as, “import of machinery to end all imports” where the USSR imported machinery to produce more goods which would satisfy local demand and quench the need for further imports. The initial boom made planners of DPRK’s economy credit the rise of output to the efficiency of their policies, not accounting for the foreign aid it received. Author and Economist Joseph Chung also mentions this miscalculation, “There was speculation that North Korean planners initially counted heavily on continued economic aid which led to miscalculated growth rates.” Other bureaucratic discrepancies such as poorly calculated statistical data, false reporting due to shame of failure further increased the hope of planners leading to their inability to factor in their next steps in policies.

Subsequently, achieving charip by establishing strong machine production, in-state food production and heavy investment in the military, was a course of action adopted by the country. The methodology of concentrating on machine production is called ‘heavy industry first development’ and has worked before for China, Japan and South Korea. While these countries invested the output from this development in avenues that only furthered it, North Korea invested their output in their military.

Pictured : North Korea: A threat in hibernation Illustration by Sarah Grillo via Axios

Over confidence in the state’s abilities to produce goods and radical nationalism pushed for Juche leading to all economic policies striving to achieve charip. This led to a decline in trade which was followed by a fall in national output such that by the end of 1979, the North Korean Gross National Product (GNP) was one-third that of South Korea’s GNP.

North Korea mainly conducted its limited trade with countries in the Communist Bloc as they aligned with its political ideology. It traded mostly with the Soviet Union and China. The USSR readily supported countries of the Communist Bloc as a part of their Cold War against capitalist countries. This was by making fuel available to North Korea at two-thirds of the global price alongside providing them with 230 million USD in foreign aid. Therefore, in the 80s, North Korea conducted trade solely with the USSR, Japan and China, thus creating a 3-country trade dependency. Due to this, the collapse of the Soviet Union in 1991 posed to be a huge blow to the Russia-dependent economy of North Korea as all external aid and assistance faded. To make matters worse, North Korea soon faced one of its worst droughts which the country could not prepare for due to lack of aid that was available to them, causing the average annual growth rate between 1990 and 1998 to fall as low as -4.1%.

Pictured: Illustration by Mark Weaver via The Studio of Mark Weaver

Since 2004, North Korea has actively traded with 6 countries, namely, China, South Korea, Thailand, Japan, Russia and India. In 2012, various economic reforms imposed by Kim Jong Un led to loosening of trade norms which were marginal, giving minimal output. Post Juche, North Korea’s trade forms only 10% of the GNP which is far less than most countries. As of 2017, 90% of its trade was with China and under 2% with India. We saw the potential threat of having as few as 6 trade partners who hold a huge percentage of trade in an economy as in 2019, North Korea suffered a huge blow when China pulled back from trading. This two-way trade plunged from 90% to 80% of total trade in North Korea, further harming its already shrinking economy.

North Korean GDP currently stands at 35.28 trillion KRW with a growth rate of 0.4%. For a better understanding via comparison, South Korea's growth rate is fifty-four times that of North Korea. This lag can be traced back to this very policy of self-dependence which has affected North Korea since its conception. Inspite of learning from past mistakes, North Korea still practices Juche. Adding to the pandemic, North Korea also witnessed mass destruction from floods between June and September 2020 which demolished farms and lowered agricultural output. They have since refused foreign aid from South Korea and the United Nations.

Post Juche, North Korea's trade forms only 10% of the GNP which is far less than most countries. As of 2017, 90% of its trade was with China and under 2% with India.

Echos of Juche can be seen in India too. One can say that to call campaigns and policies of Atma Nirbhar Bharat an autarkic propaganda may be a stretch, but to ignore the fact that in the era of globalization, autarkic ideals are fueled by radical nationalism which is an ideology currently rampant in India’s political climate. Given that we are active trade partners with North Korea, do our political leaders identify with their sentiment? If so could this have the potential to affect our liberalised economy?

Trade is a very important factor for economic growth. Not only does it initiate global interaction, but also countries can find themselves making deals where they are in a position of absolute or comparative advantage - for instance, importing a good becomes advantageous because it is cheaper than producing it in the country itself. Dismissing this for propagandistic self-reliance only hurts the economic bloc in question. Through North Korea’s history we can see how if external aid was important for the country that needed to rebuild itself, healthy trade relations would be important for them to continue developing. A World Bank report mentions how global trade can be a solution to poverty, thus establishing its importance in economies. Frequent trading and establishing better international relations will only help North Korea get out of their state of destitution.

A World Bank report mentions how global trade can be a solution to poverty, thus establishing its importance in economies.

20 Symbolic Images That Reflect The Reality In The World.jpg

Unknown credits via indiatimes.com

North Korea’s autarkic dreams and inflated pride proved to be a big blow to its ability in establishing a strong economy. Even when the economy started off well, but like Icarus, they flew too close to the sun. Forming an autarky out of irrational fear and demonisation of capitalistic ideology in a country where 2.6 million people are inducted into slavery and by extention labour exploitation, seems ironic. Their stubbornness along with a multitude of other bureaucratic inefficiencies, has caused immense damage to their economy which is showing no signs of improvement.

Keywords

Autarky, Juche, charip, communist bloc, radical nationalism, economic block, USSR, nationalism

References

Choe, S., Cho, H., & Kwon, S. (2006). North Korea's Foreign Trade: An Indicator of Political Dynamics. North Korean Review, 2(1), 27-37. Retrieved June 2, 2021, from http://www.jstor.org/stable/43908675

Chung, J. (1972). North Korea's "Seven Year Plan" (1961-70): Economic Performance and Reforms. Asian Survey, 12(6), 527-545. doi:10.2307/2643049

Lee, G. The Political Philosophy of Juche (2003). Time. https://www.time.com/wp-content/uploads/2014/12/korea1.pdf

Dohan, M. (1976). The Economic Origins of Soviet Autarky 1927/28-1934. Slavic Review, 35(4), 603-635. doi:10.2307/2495654. https://www.jstor.org/stable/2495654

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