Editing Economy of North Korea (section)

==Organization and management==
North Korea's economy has been unique in its historical suppression of [[market economy|markets]]. By the 1960s, market elements had been suppressed almost completely. Almost all items, from food to clothes, have traditionally been handed out through a public distribution system, with money only having a symbolic meaning. Ratios of food depend on [[hierarchy]] in the system, wherein the positions seem to be [[inheritance|semi-hereditary]]. Until the late 1980s, peasants were not allowed to cultivate private garden plots.<ref name="nbr.org">A. Lankov. ''The Natural Death of North Korean Stalinism''. p. 110. Available at {{cite web |url=http://www.nbr.org/publications/asia_policy/pdf/ap1-lankov.pdf |title=Archived copy |access-date=August 17, 2007 |url-status=dead |archive-url=https://web.archive.org/web/20070724031859/http://www.nbr.org/publications/asia_policy/pdf/ap1-lankov.pdf |archive-date=July 24, 2007  }}, accessed on August 16, 2009.</ref>

Since the government is the dominant force in the development and management of the economy, bureaus and departments have proliferated at all administrative levels. There are fifteen committees—such as the agricultural and state planning committees—one bureau, and twenty departments under the supervision of the Cabinet; of these, twelve committees—one bureau, and sixteen departments are involved in economic management. In the early 1990s, several vice premiers of the then State Administration Council supervised economic affairs. Organizations undergo frequent reorganization. Many of these agencies have their own separate branches at lower levels of government while others maintain control over subordinate sections in provincial and county administrative agencies.<ref name="Savada1994"/>

Around 1990, with the [[collapse of the Soviet Union]], restrictions on private sales, including grain, ceased to be enforced. It is estimated that in the early 2000s, the average North Korean family drew some 80% of its income from small businesses that were technically illegal (though unenforced) in North Korea. In 2002, and in 2010, private markets were progressively legalized.<ref name="atimes-20110923"/> As of 2013, urban and farmer markets were held every 10 days, and most urban residents lived within 2&nbsp;km of a market.<ref name="FAO-WFP-2013"/> However, in recent years the government policy shifted towards a more controlled commercial networks, by restricting local markets and pushing sales in State-Owned Stores.<ref name="rfa.org"/><ref name="North Korea Restricts Local Markets"/>

In 2014, North Korea announced the "May 30th measures". These planned to give more freedom to farmers, allowing them to keep around 30% of their produce. Also enterprise managers would be allowed to hire and fire workers within a specific framework, and decide whom they do business with and where they buy raw materials and spare parts.<ref>{{cite web |last1=Benjamin |first1=Katzeff Silberstein |title=The limits of agriculture reform in North Korea |url=https://www.nkeconwatch.com/2015/12/18/the-limits-of-agriculture-reform-in-north-korea/ |website=nkeconwatch.com |publisher=North Korean Economy Watch-38 NORTH |access-date=9 September 2024 |archive-url=https://web.archive.org/web/20240518203100/https://www.nkeconwatch.com/2015/12/18/the-limits-of-agriculture-reform-in-north-korea/ |archive-date=18 May 2024}}</ref><ref>name=WSJ>Kwaak, Jeyup S. and Gale, Alastair (December 2, 2014). "[https://blogs.wsj.com/korearealtime/2014/12/02/north-korea-expert-forecasts-new-economic-reform-push/ North Korea Expert Touts 'Revolutionary' Economic Plans]"{{webarchive|url=https://web.archive.org/web/20141213123113/https://blogs.wsj.com/korearealtime/2014/12/02/north-korea-expert-forecasts-new-economic-reform-push/ |date=December 13, 2014 }} ''The Wall Street Journal''. Retrieved January 15, 2015</ref><ref>{{cite news |title=North Korea 'to introduce farming reform' |work=BBC News |date=September 24, 2012 |url=https://www.bbc.com/news/world-asia-19697369 |access-date=9 September 2024 |archive-url=https://web.archive.org/web/20230624013742/https://www.bbc.com/news/world-asia-19697369 |archive-date=24 June 2023}}</ref> Some reports suggest that these measures would allow nominally state-run enterprises to be run on capitalist lines like those in China.<ref name=BBC>Evans, Stephen (January 14, 2015). "[https://www.bbc.co.uk/news/business-30812237 A quiet revolution in North Korea]". {{webarchive|url=https://web.archive.org/web/20150119015654/http://www.bbc.co.uk/news/business-30812237 |date=January 19, 2015 }} ''BBC News''. Retrieved January 15, 2015</ref> However, the [[8th Congress of the Workers' Party of Korea]] introduced new policies in 2021 which aim to strengthen the old command economy unified under the [[Economy of North Korea#State Planning Commission|State Planning Commission]].<ref name="38north"/><ref name="North Korea a hermit kingdom again"/><ref name="East Asia Forum"/>

===Economic planning===
North Korea, one of the world's most centrally planned and isolated economies, faces desperate economic conditions.<ref>{{cite web|url=http://www.atimes.com/atimes/Korea/LG17Dg02.html |archive-url=https://web.archive.org/web/20100719110635/http://www.atimes.com/atimes/Korea/LG17Dg02.html |url-status=unfit |archive-date=July 19, 2010 |work=Asia Times Online|title= Korea News and Korean Business and Economy, Pyongyang News |date=July 17, 2010 |access-date=March 31, 2012}}</ref>  Industrial capital stock is nearly beyond repair as a result of years of underinvestment and shortages of spare parts. Industrial and power output have declined in parallel.
During what North Korea called the "peaceful construction" period before the Korean War, the fundamental task of the economy was to overtake the level of output and efficiency attained toward the end of the [[Korea under Japanese rule|Japanese occupation]]; to restructure and develop a viable economy reoriented toward the communist-bloc countries; and to begin the process of socializing the economy. Nationalization of key industrial enterprises and land reform, both of which were carried out in 1946, laid the groundwork for two successive one-year plans in 1947 and 1948, respectively, and the Two-Year Plan of 1949–50. It was during this period that the piece-rate wage system and the independent accounting system began to be applied and that the commercial network increasingly came under state and cooperative ownership.<ref name="Savada1994"/>

The basic goal of the Three-Year Plan, officially named "The Three-Year Post-war Reconstruction Plan of 1954–56",<!-- abbreviation in original name --> was to reconstruct an economy torn by the Korean War. The plan stressed more than merely regaining the prewar output levels. The Soviet Union, other East European countries and China provided reconstruction assistance. The highest priority was developing heavy industry, but an earnest effort to collectivize farming also was begun. At the end of 1957, output of most industrial commodities had returned to 1949 levels, except for a few items such as chemical fertilizers, carbides, and [[sulfuric acid]], whose recovery took longer.<ref name="Savada1994"/>

Having basically completed the task of reconstruction, the state planned to lay a solid foundation for industrialization while completing the socialization process and solving the basic problems of food and shelter during the Five-Year Plan of 1957–1960. The socialization process was completed by 1958 in all sectors of the economy, and the Ch'ŏllima Movement was introduced. Although growth rates reportedly were high, there were serious imbalances among the different economic sectors. Because rewards were given to individuals and enterprises that met [[production quota]]s, frantic efforts to fulfill plan targets in competition with other enterprises and industries caused disproportionate growth among various enterprises, between [[Industrial sector|industry]] and [[agriculture]] and between light and heavy industries. Because resources were limited and the transportation system suffered bottlenecks, resources were diverted to politically well-connected enterprises or those whose managers complained the loudest. An enterprise or industry that performed better than others often did so at the expense of others. Such disruptions intensified as the target year of the plan approached.<ref name="Savada1994"/>

Until the 1960s, North Korea's economy grew much faster than South Korea's. Although North Korea was behind in total national output, it was ahead of South Korea in per capita national output, because of its smaller population relative to South Korea. For example, in 1960 North Korea's population was slightly over 10 million people, while South Korea's population was almost 25 million people. Annual economic growth rates of 30% and 21% during the Three-Year Plan of 1954–1956 and the Five-Year Plan of 1957–1960, respectively, were reported. After claiming early fulfillment of the Five-Year Plan in 1959, North Korea officially designated 1960 a "buffer year"—a year of adjustment to restore balances among sectors before the next plan became effective in 1961. Not surprisingly the same phenomenon recurred in subsequent plans. Because the Five-Year Plan was fulfilled early, it became a de facto four-year plan. Beginning in the early 1960s, however, North Korea's economic growth slowed until it was stagnant at the beginning of the 1990s.<ref name="Savada1994"/>

Various factors explain the very high rate of economic development of the country in the 1950s and the general slowdown since the 1960s. During the reconstruction period after the Korean War, there were opportunities for extensive economic growth—attainable through the communist regime's ability to marshall idle resources and labor and to impose a low rate of [[Consumption (economics)|consumption]]. This general pattern of initially high growth resulting in a high rate of capital formation was mirrored in other Soviet-type economies. Toward the end of the 1950s, as reconstruction work was completed and idle capacity began to diminish, the economy had to shift from the [[extensive stage|extensive]] to the [[intensive stage]], where the simple communist discipline of marshaling underutilized resources became less effective. In the new stage, inefficiency arising from emerging bottlenecks led to [[diminishing returns]]. Further growth would only be attained by increasing efficiency and technological progress.<ref name="Savada1994"/>

Beginning in the early 1960s, a series of serious bottlenecks began to impede development. Bottlenecks were pervasive and generally were created by the lack of arable land, skilled [[Labour (economics)|labor]], [[energy]], and [[transportation]], and deficiencies in the [[extractive industries]]. Moreover, both land and marine transportation lacked modern equipment and modes of transportation. The inability of the energy and extractive industries as well as of the transportation network to supply power and raw materials as rapidly as the manufacturing plants could absorb them began to slow industrial growth.<ref name="Savada1994"/>

The First Seven-Year Plan (initially 1961–1967) built on the groundwork of the earlier plans but changed the focus of [[industrialization]]. Heavy industry, with the machine tool industry as its linchpin, was given continuing priority. During the plan, however, the economy experienced widespread slowdowns and reverses for the first time, in sharp contrast to the rapid and uninterrupted growth during previous plans. Disappointing performance forced the planners to extend the plan three more years, until 1970. During the last part of the ''[[de facto]]'' ten-year plan, emphasis shifted to pursuing parallel development of the economy and of defense capabilities. This shift was prompted by concern over the military takeover in South Korea by General [[Park Chung Hee]] (1961–1979), escalation of the United States involvement in [[Vietnam]], and the widening [[Sino-Soviet split]]. It was thought that stimulating a technological revolution in the munitions industry was one means to achieve these parallel goals. In the end, the necessity to divert resources to defense became the official explanation for the plan's failure.<ref name="Savada1994"/>

The Six-Year Plan of 1971–1976 followed immediately in 1971. In the aftermath of the poor performance of the preceding plan, growth targets of the Six-Year Plan were scaled down substantially. Because some of the proposed targets in the First Seven-Year Plan had not been attained even by 1970, the Six-Year Plan did not deviate much from its predecessor in basic goals. The Six-Year Plan placed more emphasis on technological advance, self-sufficiency (''[[Juche]]'') in industrial raw materials, improving product quality, correcting imbalances among different sectors, and developing the power and extractive industries; the last of these had been deemed largely responsible for slowdowns during the First Seven-Year Plan. The plan called for attaining a self- sufficiency rate of 60–70% in all industrial sectors by substituting domestic raw materials wherever possible and by organizing and renovating technical processes to make the substitution feasible. Improving transport capacity was seen as one of the urgent tasks in accelerating economic development—it was one of the major bottlenecks of the Six-Year Plan.<ref name="Savada1994"/>

North Korea claimed to have fulfilled the Six-Year Plan by the end of August 1975, a full year and four months ahead of schedule. Under the circumstances, it was expected that the next plan would start without delay in 1976, a year early, as was the case when the First Seven-Year Plan was instituted in 1961. Even if the Six-Year Plan had been completed on schedule, the next plan should have started in 1977. However, it was not until nearly two years and four months later that the long-awaited plan was unveiled—1977 had become a "buffer year".<ref name="Savada1994"/>

The inability of the planners to continuously formulate and institute economic plans reveals as much about the inefficacy of planning itself as the extent of the economic difficulties and administrative disruptions facing the country. For example, targets for successive plans have to be based on the accomplishments of preceding plans. If these targets are underfulfilled, all targets of the next plan—initially based on satisfaction of the plan—have to be reformulated and adjusted. Aside from underfulfillment of the targets, widespread disruptions and imbalances among various sectors of the economy further complicate plan formulation.<ref name="Savada1994"/>

The basic thrust of the Second Seven-Year Plan (1978–1984) was to achieve the three-pronged goals of self-reliance, modernization, and "scientification". Although the emphasis on self-reliance was not new, it had not previously been the explicit focus of an economic plan. This new emphasis might have been a reaction to mounting foreign debt originating from large-scale imports of Western machinery and equipment in the mid-1970s. Through modernization North Korea hoped to increase mechanization and automation in all sectors of the economy. "Scientification" means the adoption of up-to-date production and management techniques. The specific objectives of the economic plan were to strengthen the fuel, energy, and resource bases of industry through priority development of the energy and extractive industries; to modernize industry; to substitute domestic resources for certain imported raw materials; to expand freight-carrying capacity in railroad, road, and marine transportation systems; to centralize and containerize the transportation system; and to accelerate a technical revolution in agriculture.<ref name="Savada1994"/>

In order to meet the manpower and technology requirements of an expanding economy, the education sector also was targeted for improvements. The quality of the comprehensive eleven-year compulsory education system was to be enhanced to train more technicians and specialists, and to expand the training of specialists, particularly in the fields of fuel, mechanical, electronic, and [[automation engineering]].<ref name="Savada1994"/>

Successful fulfillment of the so-called nature-remaking projects also was part of the Second Seven-Year Plan. These projects referred to the five-point program for nature transformation unveiled by Kim Il Sung in 1976: completing the irrigation of non-paddy fields; reclaiming 1,000 square kilometres of new land; building 1,500 to 2,000&nbsp;km{{sup|2}} of terraced fields; carrying out afforestation and water conservation work; and reclaiming tidal land.<ref name="Savada1994"/>

From all indications, the Second Seven-Year Plan was not successful. North Korea generally downplayed the accomplishments of the plan, and no other plan received less official fanfare. It was officially claimed that the economy had grown at an annual rate of 8.8% during the plan, somewhat below the planned rate of 9.6%. The reliability of this aggregate measure, however, is questionable. During the plan, the target annual output of 10 million tons of [[Food grain|grains]] (cereals and pulses) was attained. However, by official admission, the targets of only five other commodities were fulfilled. Judging from the growth rates announced for some twelve industrial products, it is highly unlikely that the total industrial output increased at an average rate of 12.2% as claimed. After the plan concluded, there was no new economic plan for two years, indications of both the plan's failure and the severity of the economic and planning problems confronting the economy in the mid-1980s.<ref name="Savada1994"/> From 1998 to 2003, the government implemented a plan for scientific and technical development, which focused on the nation's IT and electronic industry.<ref>Schwekendiek, Daniel, ''A socioeconomic history of North Korea'', Jefferson and London: McFarland Publishers, 2011, p.122</ref>

===Corruption===
{{Main|Corruption in North Korea}}
In 2019, North Korea was ranked 172nd in the [[Transparency International]] [[Corruption Perceptions Index]] with a score of 17 out of 100.<ref>{{Cite web|url=https://www.transparency.org/cpi2019|title=2019 – Cpi|access-date=February 17, 2024|archive-date=March 27, 2020|archive-url=https://web.archive.org/web/20200327160133/https://www.transparency.org/cpi2019|url-status=dead}}</ref>