Korean Development: Institutional and Ideological Origins of the Divergent Economic Outcomes in the DPRK and ROK

Abstract

North and South Korea are both distinctive in their heterodox approaches to economic development, governed by institutions unique to Korean history and influenced by broader international, ideological forces. The Democratic People's Republic of Korea adopted a variation of the Soviet model of controlled and centralized industrial development while espousing but failing to achieve self sufficiency through the national Juche ideology. A command approach, focused on heavy manufacturing, was retained over the more pragmatic market reforms seen in China, leading the DPRK to follow a similar arc to the USSR, seeing explosive early growth followed by stagnation and decline. The development approach of the Republic of Korea included further development of Korean liberalism and the adoption of 19th century European industrial policies, embracing an adapted approach that mirrored the processes of Japanese development. The tiered promotion of agricultural independence followed by a focus on export surplus enabled rapid development and was a foundational pillar of achieving long term growth. From these particular cases we can determine that development of agricultural self-sufficiency followed by the implementation of export oriented industrialization policy is the most effective means to achieve long term growth rather than the horizontal development of heavy manufacturing at the expense of consumer goods. Liberal democracy emerged in the South as an outcome of the economic prosperity that the country was experiencing, but the North failed to liberalize, even at its most prosperous, with the authoritarian regime only becoming more entrenched as the economy declined. In spite of this history, it is not a foregone conclusion that market reforms might be successfully implemented in the future, should the Kim regime relinquish some legal and economic control in favor of liberalization.