THE DIFFERENCE BETWEEN AMERICA AND NORTH KOREA

WHAT are the obvious differences between countries such as North Korea and the United States of America ?

Some might say they vary in terms of ethnicity, values or culture, but an economist would say that their most important difference lies in their TYPE OF ECONOMY.

How are they different in terms of economy? 

Well, for starters North Korea implements a highly  CENTRALIZED COMMAND ECONOMY  and is almost entirely a government planned, or state owned economy. 

It is an economy system in which the government decides WHAT goods shall be produced, HOW much goods shall be produced ,THE PRICE in which the goods would be sold and for WHOM it is produced for. 


North Korea being a nation that implements a command economy policy is governed by the DEMOCRATIC PEOPLE'S REPUBLIC OF KOREA which was formerly dictated by Kim Jong Il. Thus, all economical decisions were made or approved by Kim Jong Il without taking in account the thoughts or opinions of citizens.  

The pros in using a command economy is the equal distribution of wealth, low unemployment, low inflation rate and a high level of government resources and funds.  

The cons of implementing a command economy is there is a lack of innovation, creativity and freedom in the market sector to develop the economy according to the demands of citizens. 

A COMMAND ECONOMY is one of the key characteristics of a communist country. 

Other countries that implements or formerly uses a command economy includes : 

CHINA 

CUBA

Russia

On the other hand, countries like the United States of America implements a mixed economy system.

A mixed economy has both characteristics of the command economy AND the free-market economy. 

In America's mixed economy system, consumers and business owner control most of the economy, HOWEVER there are still aspects controlled and regulated by the government. 

FOR EXAMPLE :

Food products have to be first approved by the Food and Drug Administration(FDA) before being marketed to the 

public. 

They set standards and make sure that products are tested safe and non-toxic to consumers before allowing them to be sold to the general public.

From peanut butter,

to medicine 

everything is monitored and screened periodically by the FDA.

This is a form of government control and regulation, and therefore makes the U.S. not entirely a free-market economy. .

A free-market economy in short is an economy purely controlled by the market and has no government influence whatsoever. 

There are no existing real examples of a pure free-market economy as ALL economies DO REQUIRE some form of government intervention.


There are pros and cons in the mixed economy system as well.

The pros are that government influence can help to stabilize resources, and regulate products produced. It also reduces mismanagement of funds.

The cons are that there is a limited growth for large companies as entrepreneurial restraints are incurred to some degree.  

And thus ends my short coverage on the differences between the U.S.A and North Korea in terms of economy !!

Written by : Chang Wei Liang (0315329)