Question

What economic institutions were adopted In North Korea? What economic institutions were adopted In South Korea? Why do these contrasting economic institutions have such different outcomes? Explain your answer.

Answer 1

After the end of Korean War in 1953, both the countries took different routes to develop economically. On the one hand South Korea adopted a decentralized free market economy, on the other hand North Korea adopted a centrally planned economy where all the resources, including land are owned by the government.

Like other communist countries, North Korea adopted a socialist path to move forward. Its leaders believed in self-reliance. However, isolation from most parts of the world hasn't helped North Korean economy to any extent.

Today South Korea is one of the most advanced economies in the world whereas North Korea struggles to feed its population.

Economies that are isolated from the world, where there are multitudes of restrictions for businesses, these economies are almost impossible to develop as a modern industriualized economy because of lack of competition, of technological development etc. The failure of communism in Eastern Europe in 1990s and adoption of free market economy by a communist country such as China has shown the virtues of free market economy.