Though today the world is accustomed to seeing two Koreas, the Korean Peninsula was a unified nation for over a millennium until its division just over 114 years ago. By the late 19th century, the Joseon Dynasty faced severe socio-economic challenges, including ineffective institutions, natural disasters, and declining infrastructure. This resulted in an increased reliance on rice monoculture, which left the economy vulnerable and struggling to modernise in an era when industrialisation was rapidly transforming other nations. These internal weaknesses, combined with growing external pressures from imperial powers, particularly Japan, which sought to expand its empire across Asia, ultimately led to Korea’s annexation by Japan in 1910.
Following Japan’s defeat in World War II, Korea was liberated but soon divided along the 38th parallel due to the rising tension between two emerging superpowers: the United States and the Soviet Union. As the Cold War unfolded, the North aligned with Soviet communism and developed into a totalitarian state under the ideology of Juche, while the South embraced Western democratic ideals and capitalism, becoming one of the world’s most dynamic economies. Despite being divided for only about 80 years, the radically different political ideologies of the two Koreas have drastically shaped their development, resulting in stark contrasts in their economic, social, and political landscapes today.
Seoul on the day of Japanese Surrender. Source: https://www.awm.gov.au/collection/019266
In the present day, South Korea is a global leader in many aspects, boasting a strong economy and a highly educated workforce. It is a key player in international trade, with its cultural influences spanning the world through K-pop and cinema. Meanwhile, North Korea remains isolated with the globe, focusing heavily on militarisation and nuclearisation. Given its separation from global economic and political stages, the key question arising from this contrast is: what is the future of the Korean peninsula?
Initial endowments + conflicting ideologies
Following Japan’s defeat in World War II, the economic and industrial foundations laid during its occupation played a crucial role in shaping the early development of North and South Korea. Japan concentrated its industrial development in the northern region, building factories, mining operations, and power plants to extract coal and other valuable minerals that were vital to its wartime economy. In contrast, the southern region was predominantly used for agricultural purposes, especially rice cultivation, and had far fewer industrial assets and resources.
These endowments created a stark contrast between the two regions. North Korea inherited the bulk of the industrial infrastructure, giving it an initial economic advantage. Under Soviet guidance, the north focused on central planning, heavy industries, and military production. In contrast, South Korea, left with agricultural land and a weakened economy, relied on U.S. policies that emphasised infrastructure development, education, and nurturing nascent industries. This divergence set the stage for North Korea’s militarisation, and with Soviet backing, it launched its invasion of the south in 1950, confident in its industrial and military superiority.
Development under different superpowers
However, despite these early differences, U.S. support laid the groundwork for South Korea’s future industrialisation. The focus on infrastructure, education, and international trade enabled South Korea to transition into a market economy post-war. Meanwhile, Soviet-backed policies in the north created a militarised, state-controlled economy focused on heavy industry and set North Korea on a path toward isolationist, self-reliant development under Juche.
Post War Development
Ravished by the Korean War which left two million dead, and infrastructure demolished by systematic strategic bombing campaigns across the peninsula, North and South Korea’s current positions exemplify the impacts of their contracting political and economic positions.
Reconstruction (1940s to mid 1960s)
Representative of the advantages of the North’s command and control economy, following the conflict development was more swift. With an emphasis on “vast capital construction” in the 1954-56 three-year plan, North Korea capitalised on Sino-Soviet aid to rejuvenate industry previously decimated by the conflict with industrial output rising threefold. In contrast, early Southern development was plagued by political instability and corruption, with sustained growth minimal and irrational economic policy continuing throughout the 1950s. Despite receiving similarly substantial developmental aid from the US totalling $12.6 billion from 1946 to 1976 Korea was unable to replicate industrial growth comparable to the North instead falling into aid dependency.
Thus, the stability and decisiveness inherent to North Korea’s authoritarian system showed initial superiority over the South’s faltering democracy.
Economic Renaissance (1970s to Present)
Despite surging ahead during early industrialisation, North Korea’s focus on target industrial and political difficulties limited its long-term growth potential. Unable to maintain resilient political connections, the North faced insecurity following the Sino-Soviet split; it therefore allocated almost 30% of the state budget to defence. Further hampering growth, its focus on heavy industry led to underdevelopment in agricultural and consumer sectors, constricting its expansion ability and independence. As seen in the previous section, the underdevelopment of the agriculture sector, heavily reliant on energy imports for fertiliser production and employing techniques that degraded farmland would produce recurring famines which the North continues to struggle with.
Seeking to replicate the ‘Miracle on the Rhine’ of post-WW2 West German growth, the early 1960s saw broad development of basic industries (ie power, cement iron) alongside social infrastructure (ie roads and ports). This enabled the expansion of diverse industries ranging from electronics to shipbuilding to explode throughout the 70s and beyond in what would become known as the ‘Miracle on the Han’. Unique to the Korean economy, Chaebols, large family-controlled firms increasingly drove later growth spurred by government subsidisation. These large conglomerates provided the command-and-control benefits of the North’s economy, deploying capital promptly, whilst also capturing the free market’s capital allocation efficiency. Internationally famous Chaebols including Samsung, Hyundai and LG continue to drive Korean growth into modern times, having become economically and politically engrained.
Further, the South’s relative liberalism has enabled trade and its entrance into new industries. Effectively isolated by its obsessive pursuit of nuclear weapons, North Korea’s partially self-imposed trade and cultural isolation has been largely complete. In contrast, South Korea has benefited greatly from trade, representing 44% of GDP. International cultural ties have also been deepened with Kpop and Korean dramas reaching international acclaim, strengthening the South’s soft power. This exemplifies the advantages of South Korea’s economic and political stance, entrenching its economic and international dominance over the North on the global stage.
So what’s currently happening in these countries?
Current Economic Status
Currently the economic status of the two countries, on a global scale it is seen that South Korea is far more developed than North Korea. South Korea, the 14th largest economy, boasts a GDP of 1.71 trillion USD, which soars in comparison to North Korea’s GDP of 29.75 billion USD. Whilst South Korea operates under an open market, as seen in many western nations including Australia, North Korea operates on a centralised economy. This means that the North Korean government controls all production and distribution of goods, which can ultimately hinder economic growth compared to an open economy.
Current Political Ties
Whilst North Korea’s political agenda and power structure remains relatively constant, not the same can be said for South Korea. Like many global nations, South Korea’s politics is dominated by two parties, the Democratic Party of Korea (DPK) and the People Power Party (PPP). These two parties often hold different values and ideologies in the domestic and international political agenda of South Korea. The PPP is very much the conservative party of Korea, in which they prioritise an anti-north message, aligning themselves with western nations. Alternatively DPK focuses more on liberalism, attempting to build connections with North Korea, but also neighbouring nations like China, rather than prioritising western nations. This continuing and dramatic difference in international alignment agendas has ultimately harmed the longevity of trade and reconnection between South and North Korea.
Whilst many assume North Korea to be entirely closed off from the rest of the world, trade continues between their historical allies of China and Russia, but also India, Japan and Thailand. Most surprisingly, the North has also engaged in trade agreements with South Korea. North Korea’s actions do not completely oppose any further connections with their Southern neighbour as well. For instance the Kaesong Industrial Complex was a joint venture between North and South Korea, in which South Korean companies would outsource their labour to North Korean workers, however closed 2013.
Handling of COVID-19
Upon the outbreak of COVID-19 in the region, differing approaches were taken leading to various outcomes. North Korea utilised its global disconnect to quickly stop people from entering the nation, and imposing strict quarantine restrictions to ensure that no cases were to spread. However this was not so easy for South Korea, whereby their international interconnectedness led to the virus being able to easily infiltrate and spread.
However the South Korean government was able to utilise their well developed medical system and medical technology to subdue the outbreak. This cannot confidently be said about North Korea, with the nation only reopening their border in August 2023, and still requiring quarantine restrictions. Highlighting the impact and importance on technology, innovation and development on a nation’s capacity to make informed decisions and to effectively implement correct policy.
Conclusion
Ultimately it is seen that the vastly different ideologies of North and South Korea, set each country of varying economic, political and social trajectories comparatively. Highlighting that whilst North Korea’s political agenda may have allowed them to grow quicker than South Korea in post Korean War times, South Korea’s values of opportunity and togetherness allowed innovation to flourish, resulting in rapid development leaving behind North Korea and becoming a global power.
Whilst there is still lots of separation and inequality between the two nations, steps in the past have been taken to connect the two nations in trade and political agreements. However individual countries’ political agendas often stand in the way of any substantial change occuring. Such the disparities in development between North and South Korea is expected to continue for the foreseeable future.
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