The North Korean Economy

The North Korean Economy By Nicholas Eberstadt. New Brunswick, New Jersey: Transactions Publishers, 2007, 329 pp, (cloth). ISBN: 978-0-7658-0360-3As the editor of North Korean Review, I know that there are two American economists with the knowledge and experience required to solve the puzzle of this secretive country's economy and the military implications of its economic policies: Marcus Noland of the Institute for International Economics and Nicholas Eberstadt of the American Enterprise Institute. Whether or not readers agree with this book's diagnoses and suggested remedies on North Korean economy, they can surely benefit from considering the clear and energetic presentations in Nicholas Eberstadt's book. In my opinion, anyone who has some interest in Northeast Asia (China, Japan, and Korea) should read The North Korean Economy.This book consists of ten chapters. Chapter i, "Reform, Muddling Through, or Collapse," concludes that numerous small attempts by state planners to liberalize the ailing economy have been completely inadequate to pull the economy out of its nosedive. Eberstadt insists that policy makers must be prepared for the possibility that North Korea will continue to strive to amass an ever-growing nuclear arsenal, even as it gives assurances to the contrary.Chapter 2, "Our Own Style of Statistics: Availability and Reliability of Official Quantitative Data," states that in an age of globalization, North Korean statistical authorities stand in virtually complete isolation from all international counterparts. Apparently, there is scant evidence of any improvement in North Korean statistical output over the years since September 1998, when Kim Jung Il formally assumed state power.Chapter 3, "International Trade in Capital Goods, 1970 to 1995," examines the North Korean international trade in "capital goods"; that is to say, machinery, equipment, the manufactured parts used as capital stock in the production process. Eberstadt thinks that the ratio of capital goods to gross domestic capital formation in the North Korean economy during the 1980s and 1990s may have been lowest in the world.Chapter 4, "Interlocking Crisis in Food, Energy, and Transport Equipment: Indications from Mirror Statistics," analyzes North Korea's trends in three sectors of strategic significance to the entire North Korean economy: food, energy, and transport. This chapter states that Pyongyang appears to be pursuing an "aid-based" solution to its food and energy crises, the same one that has been used by the country for half a century.Chapter 5, "Socioeconomic Development in Divided Korea: A Tale of Two Strategies," presents a comparative economic analysis of the two Koreas. Ever since the Korean War, the two rival governments have pursued two different strategies in their economic policies: a highly centralized economic system by North Korea and a government-directed capitalism by South Korea. Some fifty years after the Korean War, South Korea defeated North Korea economically. The only question remaining is whether victory will eventually eradicate North Korea or prompt it to reconstruct itself as a modern state compatible with the economic and strategic realities of Northeast Asia. …