Answer to Question #263928 in Economics for Nalyn

Question

How does the form of economic system of South Korea and North Korea affect their state of

economy?

Answer 1

In North Korea, due to the adopted ideology, there is a planned economy and, accordingly, there is no concept of private property, which means that there is only state property. Housekeeping under 100% control from above already in the last century clearly showed its disadvantages in the USSR. The disadvantages were expressed, first of all, in the shortages of necessary goods, insufficient provision of the regions, the impossibility of promptly taking measures in the event of unforeseen situations. All of this is suffering now, and for a long time, the North Korean economy. Since 1995, when there was a well-known flood, the state has not been able to provide food for its citizens. If in 2005 the North Korean government refused food aid, it is possible that the situation will repeat itself in the light of recent events. The fact is that in July 2012 there was another flood in the DPRK.

According to the UN, in North Korea, even without cataclysms, every third inhabitant of the country is malnourished, and due to damage to agricultural crops, we can again talk about a serious possibility of famine. Of course, one cannot be prepared for absolutely all manifestations of nature, but on the part of the leadership, it is unforgivable that they not only do not learn from the mistakes of the past but also aggravate them. But it's worth returning to the consideration of ownership. The fact is that there is no private property in the DPRK, but there is cooperative property. The transition from a planned economy began in the late 1990s and early 2000s. The so-called "system of unification and detailing" of planning, when everything was planned, was canceled. Both enterprises and agricultural cooperatives are already allowed to sell over-planned products on the free market. The cooperative is given a certain plan, which it must fulfill, and if it does something in excess of this plan, it can independently sell its products. And also, in 2012, the leader of North Korea, Kim Jong-un, announced that his country was ready to follow the path of Chinese reforms. We are talking about further steps towards weakening state control. Like the USSR during perestroika, the DPRK will have indicative planning and planning liberalization, as well as the abandonment of some stringent requirements.

There will be no complete cancellation of planning, otherwise, the entire industry would have stopped, so that, most likely, the changes will concern, first of all, civilian sectors of the economy. We are talking, perhaps, about some liberalization, about the introduction of some indicative elements, but not about some one-time and complete rejection of planning. Both the constitution and other laws do not allow this. But the DPRK wants to open access to foreign investors in the country, which after all, but says that private property should appear. This indicates a change and revision of some fundamental questions regarding property in the DPRK.

In 2011, South Korea ranked first in the list of countries for the level of development of information and communication technologies. The main focus of South Korea's science and technology policy is on applied research closely related to the production of high-tech goods. Korea's current spending on science is one of the highest and fastest-growing in the world. In absolute terms, in 2000-2008, they increased 2.5 times, reaching $ 27.5 billion. The share of GDP for science increased in 2000-2008 from 2.3 percent to 3.37 percent. According to this indicator, Korea is second only to Finland, Sweden, Israel, and Japan. More than two-thirds of the funds for science go to the business sector. Chaebols have many research units and laboratories. For example, Hyundai Heavy Industries has four research institutes working on shipbuilding technologies. In addition, chaebols are actively ordering R&D abroad, opening development centers there, and recruiting talented students. According to the US Patent Office, the number of US patents granted to Korean authors increased in 2000-2008 from 5,700 to 23,500, more only in Japan and Germany.

South Korea currently produces about half of all new ships in the world in terms of tonnage, leaving behind the leaders of previous years, such as Japan and the countries of Europe. Hyundai shipyard launches a new large vessel every four days. In addition, the Koreans bought up leading European shipyards. There they build the largest Oasis-class cruise ships in history. In the South Korean economy, Samsung is the leader in electronics production, overtaking HP, IBM, Nokia, and Microsoft in the world. But these are not all of his achievements, because the conglomerate's enterprises are active in a dozen other areas, from insurance to shipbuilding and construction. All this is only part of the Korean achievements, there is also the world's fifth automaker Hyundai-Kia, the world's second-largest steel giant POSCO in terms of revenue, LG's huge business, stretching from chemistry to telecommunications, powerful production of weapons and military equipment.