Was the North Korean economy in crisis in the 1950s?

Posted: 1 June 06

Kim Ha-yông

Originally published in Ta Hamkke 57, June 2005, translation by Owen Miller

I won’t deal with all the detailed facts in Han Kyu-han’s article, but limit myself to addressing the big picture: was North Korea’s economy doing well in the 1950s or was it in crisis?

To begin with the conclusion, the decade from 1950-1960 was one of renaissance that saw North Korea create a miracle from the ruins of the Korean War.

In the three-year plan implemented from 1953-1956 the economy recorded a massive average annual growth rate of 41.7 percent – almost world record level – and in the ten years after the Korean War, North Korea maintained an annual average growth rate of 25 percent.

To achieve this sort of growth in the very place that, after the Korean War, the US had boasted “would never recover, even if it took 100 years” was astonishing. During the war the majority of the North’s industrial facilities had been destroyed and one million people were killed, including some 400,000-480,000 civilians.

It is true that pursuing rapid economic growth in a small country with few resources and almost no aid produces massive contradictions. But during this period the trend of the North Korean economy was clearly upward.

The reason why I’m bringing up this problem is that I worry that comrade Han Kyu-han’s article almost gives the impression that North Korea is a society that has been in a permanent state of crisis from the 1950s right up until the present. This can be a major obstacle to understanding the character of North Korean society.

The impression that North Korea is a society that has fallen into a state of continuous stagnation is a typical and prevalent misunderstanding, and one that is clearly connected to the idea that the South Korean system is superior to the North Korean one.

However, the important fact that people have quickly forgotten as a result of the famine that North Korea is suffering today is that South Korea could not catch up with the North Korean economy at all until the 1970s. In 1982 the average food intake of North Koreans was higher than that of South Koreans.

It goes without saying that today the North Korean economy has fallen into a severe crisis, but you have to look at this alongside the fact that the country was able to achieve massive economic growth up until the 1970s.

If you don’t look at this contradictory development, it is easy to fall into the view that the North Korean system is fundamentally inefficient, irrational and different to the capitalist system.

However, far from displaying an inefficiency that makes it fundamentally different to capitalism, the trend of the North Korean economy followed the rise and decline of state capitalism in the world economy. In the 1950s the trend toward state capitalism remained marked in the world economy, and North Korea was just one country among a number that created an economic success story through the use of powerful state intervention.

In the 1970s, the trend toward “globalisation” became more influential in world capitalism than the state capitalist tendency, and those countries that stuck to the state capitalist road began to fall behind. North Korean economic growth had begun to slow down in the late 1960s and by the end of the 1970s it had dropped to 3-4 percent annually.

Contrary to what Han Kyu-han writes, it is difficult to view the August 1956 so-called ‘Factional Incident’ as something that arose as a result of a “severe crisis of capital accumulation.”

The clash over the correct line for economic development that reached its apex at the all-members meeting of the party central committee in August 1956 had already begun in 1953-1954, at the time when the North Korean economy was in its earliest stages of revival.

The conflict between different economic lines that was revealed in the clash between Kim Il-sung and the Soviet/Yenan factions did not particularly reflect the situation in North Korea but was actually symptomatic of the limitations of the Stalinist economic model which were revealed in the Soviet Union and Eastern Europe.

When Stalin died in 1953, the Soviet bureaucracy rushed into limited reforms aimed at solving the problems that had accumulated during Stalin’s rule. To borrow Tony Cliff’s expression, the Soviet bureaucracy felt the need to move from “the stage of primitive accumulation to mature state capitalism.”

In order to raise the productivity of the Soviet economy, whilst continuing to focus capital investment into industry that was already developed to a certain extent, they could no longer refuse to use a chunk of the remaining resources to raise the standard of living in the Soviet Union.

However, the situation in North Korea was different. All resources had to be focused on preparing a new industrial foundation. Even if it meant starving the peasants and squeezing the workers, it had to be done. There was no leeway for taking into account the living standards of the people.

The person who advocated this point of view was Kim Il-sung himself, while those that took the side of the post-Stalin Soviet bureaucracy were the Soviet and Yenan factions.

Kim Il-sung first began to talk about Juche ideology1 in 1955, reflecting the fact that the economic interests of the Soviet Union and North Korea had diverged from one another.

Once Kim Il-sung had emerged victorious from the central committee meeting of August 1956, he completely scrapped the existing five-year plan, which had partially reflected the call for an expansion of investment in the consumer sector. The heavy-industry-first line became all the more clear.

According the ordinance passed by the Supreme People’s Assembly for the first five-year plan, of the total sum to be invested in industry, 83 percent would go to heavy industry!

The North Korean bureaucracy was desperate to keep workers’ wages low while speeding up the rate of work. The bureaucracy organised mass meetings of employees and rallies of ‘zealots’ in every factory and enterprise, where workers resolved that they would complete the five-year plan a year and a half or more early.

In any case, the high production targets set in the state plan were gradually inflated by the party’s policy of expansion of production and the resolutions of workers to increase production.

The North Korean bureaucracy made good use of the deeply held desire for economic reconstruction among a people who had experienced colonialism and war and who were afraid of renewed war with American imperialism. The drive for growth also gave a considerable number of people the opportunity to improve their social status. The ‘Heroes of Labour’ who came to prominence in the drive to increase production became factory managers and members of the Supreme People’s Assembly.

On the other hand, the majority of workers could not climb the ladder of social mobility and had to endure the appalling conditions that were the other side of economic growth.

Although strict labour regulations were enforced, workers did not have the right to organise themselves to defend their conditions. The Labour Federations were organisations of the state that enforced “the duty of competition” rather than collective contracts.

However, it was difficult to ensure economic development beyond a certain level by forcing workers to accept low living standards and tiring work. To raise the productivity of labour, it was necessary to offer workers better consumer goods and holiday time.

The North Korean bureaucrats could not avoid encountering, somewhat later, the same problems that the Soviet bureaucracy had come up against after the death of Stalin. In 1966-67 Pak Kŭm-ch’ŏl, Yi Hyo-sun and others pointed out the problems of the extensive growth model and argued for the need to find a way of balancing economic growth and controlling the rate of growth.

This was the period when the seven-year plan failed to achieve its target within the allotted time and the three-year extension started to be used as a countermeasure. The critics insisted that defence spending should be reduced so that attention could be paid to the quality of goods produced rather than just economic output.

The year 1967 saw another round of purges within the North Korean bureaucracy. 2 Unlike the purges of 1956, this time they did originate in a conflict among the bureaucracy over how to deal with the economic crisis and this reflected the fact that the limitations of Kim Il-sung’s ‘more Stalinist than Stalin’ economic model were now revealing themselves.


1: The highly nationalistic and voluntaristic ‘philosophy’ espoused by Kim Il-sung from the late 1950s, which coincided with the DPRK’s turn away from the Soviet Union toward a more independent stance that began to play the USSR and the PRC off against one another.

2: This was the so-called ‘Kapsan Faction Purge’, in which Korean Workers’ Party deputy chairman Pak Kum-ch’ol was removed.