It’s the centrally-planned economy, stupid

Clearly, the DPRK is a failed State.

The DPRK has failed, however, not because it is ran by a leadership obsessed with a cult of personality, nor because the one-party State is completely devoid of democracy, but because it subscribes to the failed concept of the soviet-inspired socialist command economy that requires a centrally planned system.

The issues that are constantly ascribed to the DPRK- food shortages, military spending, the guiding Juche philosophy and the military first doctrine- are all subordinate to the centrally planned State and an economy that has begun to collapse under the weight of its own contractions. As such industrial collapse, a failed agriculture policy famine and excessive military spending all takes place within a political context heightened in North Korea through the all-embracing nature of economic planning.

Any attempts make at economic reform, such as the introduction of marketization are doomed to fail whilst this command economy remains dominant. Enshrined in the philosophical mixture of Marxism-Leninism, Maoism and Juche cannot undertake any successful transformation without abandoning its core economic theory because it cannot reject this theory without admitting the failure of Juche. Given the personality cults built around Kim 1, 2 and 3 have been built on their infallibility and restricting of the economy to deal with the spiral of decline would strip the ruling elite of their legitimacy and the ‘mandate of heaven’.

A good example of this is the demise of the USSR. Neither Gorbachev, Stalin nor indeed the de-Stalinisation of the State was not the ultimate catalyst, but the failure of the command economy to deliver economic growth and prosperity to all citizens across the socio-economic spectrum. Indeed, in Eastern Europe and the Soviet Union the one justification that leaders used above all to rationalise and secure their position was that the working class would be elevated, and this simply did not happen in the USSR as the economic system was unable to deliver the promised growth.

State Owned Enterprises in a socialist State.

The economic model of the command economy, as developed and practised by the Soviet Union, emphasized investment over consumption, heavy industry over light industry and any industry over agriculture and farming. The DPRK opened its central planning office in 1947, but when its first seven year plan was extended by a year, it was clear that it was failing.

Indeed, the limitations of the Soviet planning system renders the system over costly both in terms of resources and input. Despite the belief that Juche would lead to the DPRK attaining economic and industrial parity with the West the cost of equipment and energy capacity lagged behind plant purchasing.

First Soviet economists, then the Chinese, and today DPRK have claimed that economic planning was a rational, indeed scientific, form of economic management. However, even in a mid-sized economy the component parts of machinery would require millions of variants in terms of size and shape, and the capacity to produce these would be beyond all but the largest of States.

Steel, for example, is the DPRKs largest industry, producing over six million tonnes a year, yet the centrally planned economy doesn’t allow for this steel to be used for the most productive means, for value-added potential nor indeed for movement within the domestic system itself.

Indeed, local enterprises cannot re-route steel, even if it does not meet there requirements, squandering materials and wasting time, resources and money. It also means that any machinery made will soon lose its usefulness though otherwise simple thing such as a lack of useful and standardised spare parts.

Another aspect to the centrally planned economy is the lack of any importing and exporting opportunities for even the most basic of products. Domestic companies are expressly prohibited from engaging in trade, so if the right steel, rubber, or other raw material is required, it cannot be used.

But the main reason for the failure of the centrally planned economy is the complete lack of space for private enterprise to develop.

In the DPRK, local enterprises cannot buy or exchange directly from each other. Instead, they must trade though Government agencies. As well as the obvious time and administrational complexities of this the further difficulty is that Government agencies allocate resources in response to the central plan, leading to local enterprises stock piling resources for a time when they may not be able to acquire them.

This, again, leads to huge wastage and under-utilisation of capital though the maldistribution of resources.

The nature, therefore, of the centrally planned economy of the DPRK means that many State-owned local enterprises are in the position of having to not only maintain a production line of a specific product, but also in maintaining the assembly line of production- conveyer belts, machinery and tools required for even minimal operation.

The highly planned nature of the DPRK economy makes any reform difficult, but something has to change.

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