In 1950, each newly cleaved half of Korea was about as rich as the other. Data published by the Organization of Economic Cooperation and Development estimates that the per-capita gross domestic product — the annual economic production divided by the number of citizens — was the same in both nations.
There was good reason for that: North and South Korea were, in most ways that mattered, the same. South Korea wasn’t ethnically, linguistically or geographically different from North Korea. If anything, the North had a bit more of an industrial base. But after the split, South Korea evolved — slowly, haltingly — toward a market-based democracy. North Korea began to spiral into a corrupt and unusually insane form of totalitarianism.
Today, the per-capita GDP in South Korea is $30,000. In North Korea, it’s $1,800. The average South Korean is more than 15 times wealthier than the average North Korean. In fact, the average North Korean is one of the poorest people on the planet. That’s why South Korea is lighted at night and North Korea isn’t.
“It was almost like an experiment,” MIT economist Daron Acemoglu says. “You have this forced, imposed separation. It’s not as if one part of the country said, ‘We prefer to try something else.’ ”
The divergent fortunes of the North and South figure into Acemoglu’s forthcoming book, “Why Nations Fail: The Origins of Power, Prosperity and Poverty.” In it, Acemoglu and his co-author, James Robinson, argue against deterministic theories of why some nations succeed and others falter.
“At the root of many people’s thinking about why some countries do well and why some don’t is the idea that there are these immutable characteristics that are really damaging countries,” Acemoglu says. “They mention national cultures and ethnic characteristics and geographic features. But in order to really understand why some nations are prosperous and others are poor, you have to understand the incentives created by man-made institutions.”
But Acemoglu and Robinson’s thesis also poses a puzzle: If all nations can do well, why don’t they?
One answer is that they simply don’t know how. In “Why Nations Fail,” this is “the ignorance hypothesis,” and the authors mostly dismiss it. The truer and more worrying answer, they say, is that policies that are bad for nations are not always bad for the small band of oligarchs or generals or monarchs who run the nation.
“Economists know policy matters, but we often see it as an engineering problem,” Acemoglu says. “We think we just need to give the right advice on monetary policy and then nations will grow. But in many cases, bad policies are about political power. The inefficient institutions are good for the people in charge. In North Korea, for instance, power is in the hands of the military, and the elites in the military do quite well.”
That, Acemoglu argues, is why even well-run nations should fear excessive inequality: If too much power and money flow to the few, they will become invested in keeping power and sustaining their lifestyle. Neither incentive is truly compatible with long-run economic growth.
This is the problem that now faces North Korea. Even if Kim Jong Il’s successor, his son Kim Jong Eun, wants to move his country toward markets and democracy, the upper echelons of the North Korean power structure are stocked with elites whose lavish lifestyles are dependent on the status quo. Many of those elites are in the military. And few rulers want to pick a fight with their own military.
That’s not to say that failing nations can’t right themselves. As Acemoglu notes, it’s happened many times before. South Korea, for instance, began as a military dictatorship. The transition to a liberal democracy was wrenching and, at times, bloody, as the generals sought to keep their hold on power. But it succeeded. At this point, no one can yet say whether North Korea will even attempt such a transition, much less manage it skillfully.
What we can say is that long after human beings discovered light, and long after they learned how to successfully manage their economies, Kim Jong Il kept his 24 million citizens poor and trapped in darkness. And, for a long time to come, that awful legacy will continue to be visible every night.