Effects of North Korea’s Economic System on its Relationships with Other Nations
Like any other system in the country, North Korea’s economic system is dominated by communism. This has largely affected all of North Korea’s foreign relationships with other countries. Most if not all, international allies that North Korea has have communist governments. For instance, North Korea has extensive trading relationships with China, Russia, and a few Eastern European countries. Besides, according to North Korea’s constitution, any foreign trade will be done by state organizations or enterprises. The communist government would be in charge of any transaction with foreign companies. Knowing that the goal of communist societies is essentially global communism, most nations tend not to associate themselves with North Korea.
Nevertheless, in the 1990s, North Korea faced multiple natural disasters, like floods and drought. These events forced the country to open up to form relationships with other countries, mostly the U.S. and Japan, in efforts to secure aid from them (Park 2004). However, this relationship between the U.S. Japan and North Korea did not last long; by 2006, there had been practically zero trade except for U.S. aid deliveries. According to Nanto et al. (2009), North Korea had cut off any trade activities with the U.S. and Japan, except for accepting the aid deliveries from the former. Additionally, the report states that at the time, in its international trade accounts, North Korea had been running an estimated one billion dollars, which it funded mainly through receipts of foreign assistance and foreign investment, through exports of arms and several problematic activities, creating bad credit for the country. Furthermore, being a country with an economic disaster, with a majority of its resources going towards weaponry, other countries are wary not to form any kind of association with North Korea.
Nonetheless, even though most of North Korea’s international relationships are uncertain and fleeting, two nations remain its main allies: China and the Soviet Union. This is chiefly because these two nations sent troops and resources to North Korea during its war with South Korea, and they all have communist countries.
Attributing a Country’s Problems to its Economic System
Most problems in the world arise from scarcity. For instance, scarcity of food leads to hunger, shortage of healthcare services leads to more fatalities, and absence of job opportunities leads to unemployment, homelessness, crimes, and substance use. Additional problems are a lack of pay to employees and a lack of stable law enforcement leads to gangs, militia groups, and other instabilities (Dixit 2008). The basic definition of economics is essentially seeking to solve issues of scarcity. On the other hand, scarcity means that the human wants for resources, goods, and services exceed the resources available.
Every country must decide how to allocate its resources; for instance, North Korea chooses to devote a majority of its resources to making weapons, particularly nuclear ones. Sadly, with a centrally planned economy, there are not enough resources for the country to spend on weapons and still take care of its people. This leads the nation to numerous problems; for instance, in 2020, during the pandemic, the country’s economy shrunk the most in a period of 20 years since its previous economic disaster in the 1990s. Besides, the government is known to have an industrial capital stock that is practically beyond repair due to years of underinvestment, shortages of spare parts, and poor maintenance. Moreover, since only 14% of its land is usable for farming, the land has become overused and destroyed by chemicals and fertilizers over the years due to poor maintenance and poor farming methods. Consequently, a large portion of the population suffers from prolonged malnutrition and poor living conditions.
In conclusion, good economic governance is vital to building a solid economy with numerous investment opportunities, a high employment rate, poverty reduction, and a fight against corruption. Therefore, to help reduce the problems a country faces, it is crucial that an effective and well-governed economic system is set up.
References
Cargill, T. F., & Parker, E. (2010). Economic reform and alternatives for North Korea (No. 10-008).
Clark, A. E., Frijters, P., & Shields, M. A. (2008). Relative income, happiness, and utility: An explanation for the Easterlin paradox and other puzzles. Journal of Economic Literature, 46(1), 95-144.