North Korea & China:
Democratic People's Republic of Korea (North Korea) and People’s Republic of China (China) both believe in Marxists’ theory, and are implementing socialist economic policies in order to realize the prosperity of the nations. With the similar political background after accepting the ideas of Marxism in mid-20th century, both countries have significant differences in population, land, and some elements of national identity that can bring influential impact to a nation’s economic and political state.
Back to both nations’ history, it is very noticeable that both countries have very similar background. China, as an origin and center of East Asian civilization, is the leader of economy, commerce, and technology throughout most of last four thousand years. The value of Confucianism originated from ancient China, and later was accepted by Korean people (CIA Web). The philosophy of Confucianism established many identical national characteristics for both nations. China, being a protector of Korea, possessed significant influence to almost every aspect of Korean society. Based on this particular interactive particular relationship, both nations were enjoying relative wealthy economy during most part of history.
The ideas of Confucianism emphasized pure theoretical argument rather than practical implementing. It gradually became the cause to discourage the technological research of natural science. After the Western Society underwent the metamorphosis of technological improvement, East Asian culture was still heavily depending on agricultural performance to determine the level of social wealth. Moreover, the arrogance and ignorance of Chinese rulers made the nation isolate from the outside world. As a fellow of China, Korean rulers set the same barrier to prevent the international exchange of culture and commerce. These policies detrimentally affected the development of both nations, and caused them to fall behind the western countries.
In the 19th century, the destiny of both countries changed after their doors were forcibly opened by western power. Shortly afterward, Korea was annexed by another Asian nation, Japan, which successfully transformed itself to western style after executing a series of steps of pro-western reform. China was resisting the invasion of foreign powers while domestic warlords were also competing against each other in order to control the leadership
The events of both nations’ officially change to communist country occurred after World War II. People’s Republic of China, under the leadership of Mao Zedong, was formed on October 1st, 1949. Democratic People’s Republic of Korea was formed by KIM Il-song under the assistance of Soviet Union shortly after World War II (CIA Web). Since the foundation of both nations, they began started their own understanding of building socialist society. Admittedly, both nations have numerous similarities during the era from 1950s to late 1970s (Scalapino and Lee 212). First of all, both are ruled by one-man-dictatorship for several decades.
Mao Zedong, who was undoubtedly a brilliant military strategist, was suspected due to his understanding of true Marxist theory of economics. Mao intentionally emphasized more about class struggle and revolution rather than correct central planning of the entire economy. Mao made much more effort in politics than economics. Lots of his policies were deviated the original ideas of Karl Marx (Glassman 17). For instance, Marx never advocated any restriction of free media system; but Mao’s communist party tightly controlled the mass media in order to deitify the rulers and extinguish the opponents. Economically, Mao made many wrong decisions to build national economy. He radically eradicated all private ownership and centralized almost all parts of industry and agriculture.
In addition, Mao was unable to see the unreality of Marxism; and ridiculously implemented collective cells called communes in 1958. Statistics reveals almost 98.2 percent of Chinese rural households belong to the communes (Cumings 54). Collectivism can sometimes increase output in short run by encouraging more labors to actively participate in production. However, communes would eventually fail since it was against human nature and limited by contemporary technological level. Without any incentive to stimulate the production, the peasants in communes simply lost interests to produce crops because they would not get anything after all. It led the entire nation to near-collapse shortage of all products during the period from 1958-1960 (Cumings 55).
Likewise, North Korean leaders executed a series of similar policies to build their own communist ideal. Even before the founding of P. R. China, North Korea started Land Reform Act to redistribute the land, and mostly publicized the land by the government. Being similar to 5-year-plan of China, North Korea announced its seven-year-plan in 1961 and six-year-plan in 1976. Agriculture had also been collectivized. Like their close Chinese colleagues, Korean leaders also believed both agricultural and industrial modernization and production could only be achieved through collectivist policies (Scalapino and Lee 1152).
Both nations implemented arbitrary planned economic policies for several decades when they were suffering severe poverty and productive inefficiency. The pain of China was not over until the death of Chairman Mao in 1976, which symbolized a new era to Chinese people. After Mao died in 1976, there was an interval period when Chinese top leaders were competing each other to take over the leadership. Fortunately, Deng Xiaoping successfully became the chair of the state; and he was the one who promoted the overall change (more in economics, some in politics though) of the entire nation.
Undoubtedly, China’s change of economic policy is not only of open door strategy. It combines the gradual transformation from planned economy to market economy under the continuous encouragement promoted by the government. After Deng took over power in late 1970s, he began to try reforming the economic policies of the nation by removing old ideology in people’s mind (Sun 65). He encouraged the liberalization of thoughts and change of the national primary task. He promoted that the class struggle was no longer the primary task socialist China was facing; Improving the living standard should became the target the nation had to achieve (Sun 64). By aiming on this target, a large number of new policies had been made.
There were structural reforms in agriculture and industry. Communes were no longer existent; instead of the old system, the government assigned each farmer a fixed number of obligatory lands. Farmers had to achieve a certain level of production to fulfill the their obligation. In addition, the farmers began to have their own lands in which case they were encouraged by the government to produce crops (Cumings 64-5). All these productions from free land could be freely sold on the market or be purchased by the government. As a matter of fact, these policies neither removed the market risk of over-production, nor distributed the income equally. However, the policies did provide enough incentives to the farmers to produce much more than they did for communes.
Reform also occurred in industry fields. Underemployment and under-production used to exist in planned system. It was waste of resource. The industrial change did not even occur until 1990s, when Premier Zhu advocated the self-reliance of state-owned firms. These public firms used to be less competent than private and international firms. Heavy industrial firms, such as steel, oil companies, did not make single penny for several decades. The government started allowing them to enter free market competition without any regulation on price and quantity. The management personnel were also changed from old loyal communists who knew little market strategy to high-educated elite people who knew how to run big firms.
There was no unemployment in the old age, but companies started decreasing number of labors in order to keep the cost as low as possible. Firms became more autonomous than they were before. In addition to the reform in agriculture and industry, fiscal regimes had been changed as well. There was a new fiscal contract between the government and subordinate levels. Mostly, the locality had to fulfill a specific amount to the central government regardless of its revenue. The government could use these funds to budget its own spending. However, there were several particular provinces and municipalities with special policies
For instance, Guang Dong province (in the southern part of China) had the privilege to keep its own revenue and reinvest in the province (Glassman 94). This was the fiscal policy which was accordant to the open door policy that resulted in the prosperity of coastal part of China. The most distinctive part of Chinese new policies was the one which promoted the open market to foreign investment by setting up several so-called Special Economic Zones. The success of the four tigers in East Asian economy stimulated the leaders in Beijing to think about the emulation of the four tigers. The first several zones were set up in the coastal areas of Guangdong and Fujian Provinces. According to Glassman, under the new policies, “the SEZs received very favorable taxation rates from the government, the allow-ability of profit reparation, and other provisions favorable to foreign investors”(96). After implanting the SEZs in the areas of the two provinces, there were more cities got same favorable policies from the government, such as Shanghai, Guangzhou, Tianjin, and Dalian. In the meanwhile,
North Korea was still insisting its own planned economy and hence suffered in poverty and famine. North Korea did achieve some heavy industrial goals in 1950s and 1960s, and was doing well in agriculture. However, it was under the great assistance offered by Soviet Union and China. Planned economy helped North Korea build its industry by maximizing the usage of human resources after the serious devastation left by Japanese. Soviet Union offered technological help as well as fund aids to North Korea in order to assist them to fight against South Korea. Mao was also ridiculously generous to North Korea since he tried to spread his influence to the third world. All these elements prevented the inner defects of North Korean system until the collapse of Soviet Union.
After the collapse of Soviet Union, there were no more aids to North Korea in which case all kinds of problems rose shortly later. The barriers that were set by North Korean authorities were used to prevent the free trade led the national economy near to death. It was the efforts to deceive the North Korean people that they were the most fortunate people on this planet. The deification of dictators was built upon the poverty and famine of the entire nation. The production level fell dramatically because of lack of resources. Famines occurred every year due to the mistakes made by the planners. In addition, huge military budget significantly drag down the development of the economy (CIA Web).
Compared to the misfortune brought by the North Korean dictators, Chinese people’s living standard improved dramatically during the past two decades. Beside the open economic policy, the authority also promoted the introduction of free enterprise into the country. Private ownership rose drastically though public firms were still the majority. There were also some decentralization occurred in the public firms (Glassman 94).
The free enterprises triggers the world to question the authenticity of socialism in China; and the issue still remains controversial. Government still owned key industries such as railroads, steel, etc. However, the other segments of the industry were liberalized. Many international trades were no longer arranged by the government; and participation in World Trade Organization was a symbol of the nation’s new target (Gregory and Stuart 260). According to the latest data provided by CIA under purchasing power method, the GDP per capita of China was $3,600 in year of 2000, and North Korean was only having $1,000 (CIA Web). North Korean number was believed to be overrated since it was the data released by North Korean authority that wanted to hide their insufficiency to the international society. Interestingly, North Korean authority announced recently they would open door to save their internal economy (CNN Web). The process is still obscure, but it can be a good start for North Korea’s reform.
In conclusion, both countries, China and North Korea, have implemented socialism for more than half century, but their destiny diverged after 1970s when China started to implement a market-oriented economy. The differences in the system proved the advantages of market economy though China is still not a full free market country. Being suffering with its old inefficient system, North Korean leaders have to start a reform to save the national economy; otherwise, the future for them will remain hopeless while their neighbor, China, is steadily moving toward modernization and prosperity.
Cumings, Bruce. China from Mao to Deng. London: Zed Press, 1983.
Gregory, Paul & Stuart, Robert. Comparative Economic Systems. Boston: Houghton Mifflin Company, 1999.
Glassman, Ronald. China in Trasition. New York: Praeger Publisher, 1991.
Scalapino, Robert & Lee, Chong-Sik. Communism in Korea. Los Angeles: University of California Press, 1972.
Sun, Yan. The Chinese Reassessment of Socialism, 1976-1992. Princeton: Princeton University Press, 1995.
CIA Web. “Korea, North” 10 April, 2002. <http://www.cia.gov/cia/publications/factbook/geos/kn.html> CIA Web. “China” 10 April, 2002. < http://www.cia.gov/cia/publications/factbook/geos/ch.html> CNN Web. “North Korea to Open Its Doors” 16 April, 2002 < http://www.cnn.com/2002/WORLD/asiapcf/east/03/27/nkorea.open/index.html>