Is North Korea a Communist Economy?

In North Korea, gender inequality is a key barrier to opportunity. Although male and female participation in basic education and lower-rung economic employment is about equal, women have a distinct disadvantage because of the country’s enduring patriarchal tradition. As a result, female employment is highly concentrated in the lowest-paying sectors. This is partly because women are considered to have “female” characteristics, which are appropriate for certain jobs.

North Korea’s one-party rule

In a communist economy, one party rules the country. The government in North Korea does not tolerate pluralism and prohibits independent media, civil society organizations, and trade unions. It also restricts basic freedoms and rights. It uses the threat of collective punishment to suppress dissent. People who are perceived to be opponents of the government are sent to political prison camps, where they face torture by guards, starvation rations, and forced labor. There are many at-risk groups in North Korea, and its one-party rule is not enough to protect their rights.

North Korea’s one-party rule has a number of problems, including a highly segmented bureaucracy and low horizontal communication. Kim Jong-un serves as the sole coordinator of the party, government, and military. The party is the most powerful institution, but the leader’s personal court and party serve as a guarantee for these priorities. The result is an economy that lacks a coherent national economic policy.

Corruption is widespread in North Korea’s economy. It is systemic up the bureaucratic ladder and down the bureaucratic red tape. Smaller investors are forced to operate in a “shadow” economy, where they must pay bribes to party officials in order to obtain business licenses. Corruption is a major cause for concern in North Korea, and the regime is keen to combat it.

While the North Korean economy used to function on a planned model, it has evolved into a mixed model based on party-state dominance, rent distribution, and commercially operated state firms. In the process, the regime has co-opted the growing market as a source of revenue and ensured privileges for its loyalist groups. Corruption has also become widespread, and it plays a dual role in the country’s economy: supporting the illegal commercial activities of elites and redistributing profits to regime-friendly entities.

Its centrist distribution policies

Until the mid-2000s, most retail activity in North Korea was state-run under the People’s Services Committee (PSC). Although many consumer goods were of poor quality, they were still available on ration. The state-run retail sector included state-owned stores and direct factory outlets. There were also special shops that sold luxuries, but they were reserved for the elite. Some state-run stores were operated in partnership with pro-Pyongyang Koreans in Japan. In addition, some hard-currency stores were established in large cities.

In North Korea, the economic system is organized into three tiers. The formal economy is controlled by the state, while the military/industrial sector produces goods for the army. The third tier is the court economy, which procures special goods for the elites.

The collapse of the Soviet Union in 1991 severely impacted North Korea’s formal economy. Its GNP (gross national product) fell by half from 1991 to 1999. In addition, the country experienced a devastating famine in 1996, causing 600,000 people to starve to death. The famine also resulted in an explosion of the informal economy, where women sold food, sold goods, and even offered prostitution services.

To sustain its economy, the North Korean government relies on forced labor. This labor includes women, children, and state-owned enterprises, as well as foreign workers. In addition, North Koreans are incarcerated in long-term ordinary prison camps and political prisons.

Its banking system

North Korea’s de facto marketization has increased the income gap between citizens, resulting in a growing regional divide. This gap is visible in the availability of different types of food and housing. As a result, people do not feel comfortable disclosing their incomes.

The economic structure of the North Korean regime is highly segmented, with minimal horizontal communication. Kim Jong-un serves as the sole coordinator of the party, government, and military, but there are dozens of subordinate bureaucratic units that make their own policy proposals and receive approval from their respective leaders. This system results in little coordination between different aspects of the economy and no effective national economic policy. Instead, bureaucratic and regional segments compete with one another for access to capital and property.

The judicial system in North Korea consists of a Central Court, Provincial Courts, and City People’s Courts. There are also Special Courts that handle military, railroad, and logistics matters. North Korean judges are elected by their peers and are closely controlled by the Korean Workers’ Party.

There is no real democracy in North Korea. Rather, the leadership presumes to act on behalf of the people. This means that there are no independent civil organizations or democratic institutions. Even the occasional dissent is highly dangerous. It is therefore necessary for senior and mid-level cadres to remain extremely careful and to consistently transgress official policies. While they might privately wish for more efficient arrangements, they do not publicly express such thoughts.

Its environmental degradation

North Korea’s economy is no longer based on a planned system, but rather on a mix of party-state dominance, rent distribution, and commercially operated state firms. These elements have been co-opted by the regime to generate revenue and to guarantee privileges for loyal groups. As a result, corruption has become widespread in North Korea, playing a double role: supporting illegal commercial activities and redistributing profits to regime-friendly entities.

North Korea’s environmental degradation has many causes. One of these causes is its high defense spending, which represents 25 percent of its GDP. Another culprit is bad governance. Overexploitation of the country’s water resources has caused the degradation of ocean and freshwater resources. Toxic runoff and siltation are also contributing to the environmental degradation.

Its pro-market policies

The famine in the early 1990s weakened many of the Stalinist economic institutions, so the North Korean government pursued the Kim Jong-il policy of songun, which consists of deploying the military to control production and infrastructure projects. This policy has caused the North Korean economy to become increasingly isolated from the rest of the world. As a result, North Korean industrial development has not kept pace with international development, and domestic firms are shielded from foreign competition and suffer from chronic inefficiency. The high level of protectionism also limits the size of the market for North Korean products, meaning they are unable to leverage economies of scale.

The North Korean economy is divided into three tiers. The formal economy is controlled by the state, the military/industrial economy is dedicated to making goods for the army, and the court economy procures goods for elites. All of these tiers of the economy are closely controlled by the government.

China, South Korea, and Japan are North Korea’s major trading partners. These countries account for more than a third of North Korea’s foreign trade. The other major trading partners include India and Thailand. The former accounts for less than a third of North Korea’s foreign trade, while the latter accounts for 16 percent of it. The South Korean policy of economic engagement with the North is fueled by Seoul’s desire to stabilize the North Korean economy.

Economic reforms in North Korea have been cyclical in nature. In the early part of the decade, Kim restricted economic reforms. This led to a decline in the country’s GDP. In fact, the country’s GDP is one-third of the GDP of South Korea, which means that its growth is mediocre. This lack of economic growth is attributed to the government’s heavy reliance on the military.