Welcome to economics class. Today we will compare a real-life example of a command economy with that of a market system. In the world today, there are only a few communist nations.
One of these countries is North Korea. Conversely, South Korea is a highly successful market economy. A case study of these economies illustrates the extreme differences in economic decisions that exist in the world. After World War II, two superpowers emerged, the United States and the Soviet Union. The U.S. was a capitalist nation and the Soviet Union was a communist nation.
Both superpowers tried to spread their economic systems to other parts of the world. Thus, at the end of World War II, the country of Korea was divided on the issue of whether they should be communist or capitalist. From 1950 to 1953, North and South Korea fought a war for control of the peninsula. In the end, the country was divided. North Korea continued with a communist system in which the government made all the economic decisions for its people.
South Korea developed a capitalist system. that allowed independence for companies and individuals. Let's take a look at some information about both countries.
As of 2016, North Korea had a population of 24 million people, while South Korea had a population of 49 million people. North Korea's GDP was $40 billion per year, while South Korea's GDP was $1.7 trillion per year. North Korea made $3.8 billion off of their exports, while South Korea made $572 billion off of theirs. North Korea imported $4.6 billion worth of goods, while South Korea imported $525 billion worth of goods. The life expectancy of a person in North Korea was just under 70 years.
while the life expectancy of a person in South Korea was just under 80 years. In North Korea, 1.7 million people had cell phones, while in South Korea, 54 million people had cell phones. In North Korea, there were four TV stations, while in South Korea, there were 57. In North Korea, internet usage wasn't allowed, while in South Korea, 3.4 million people had internet access.
Now let's take a look at each country individually. North Korea is an almost completely closed society, meaning it is very secretive and doesn't share a lot of information with the outside world. A lot of the facts and details the world thinks it knows about North Korea are often based on educated guesses.
The government makes all economic decisions for the people. It is a complete command economy where the leader decides who will work where and even how much food people are given. While people often live in poor conditions and lack basic supplies such as food, the government spends millions of dollars on its military, including possible nuclear weapons. In North Korea, people do not have many rights and freedoms, but based on rare interviews, they still seem to believe that their nation is the best and their leaders always take care of them. From an outside viewpoint, North Korea is seen as a repressive society that keeps people in hard labor camps as prisoners.
and even has public executions if they step out of line. Although there is some evidence that the economy is improving and there are some businesses, the extreme version of communism makes North Korea unique in the modern world. On the opposite end of the spectrum is the nation of South Korea. South Korea is a wealthy nation. It is the world's 11th largest economy.
They invest in education and have highly skilled workers. A lot of the market economy is dominated by Jables, which are large multinational businesses that are often controlled by a single family. Some of these companies include LG, Samsung, Hyundai, and Kia. Many successful South Korean companies produce technology that is purchased all over the world.
South Korea also leads the world in shipbuilding, the production of LCD screens, mobile phones, and computer chips. Much has been written comparing the two Koreas. In their article, Years After the Famine, by James Pearson and Daniel Tudor, the authors explain that North Korea was almost self-sufficient when it came to food production from 1940 until the 1990s.
For 50 years, North Koreans were fed by the public distribution system, in which farmers turned over the majority of their harvest to the government, and it was redistributed to the wider population. However, between 1994 and 1998, the country underwent a widespread famine. At that time, it is estimated that only 6% of the population was receiving their full food ration from the government. and that between 200,000 and 3 million people died during the famine.
In his article, Asia's Latest Miracle, Michael Schuman writes about South Korea's unprecedented economic growth in the 2000s. He notes that South Korea's innovation in technology has launched an economic miracle. Even during the economic downturn of 2009, when most countries'economies were experiencing negative growth, South Korea's GDP still grew by 0.2%. 2% And the next year, it grew by 6%. What began as one country became two.
These case studies provide an unparalleled side-by-side comparison of a command economy and a market economy.