IMPACT OF

POLITICAL
SYSTEMS ON
ECONOMIC
INEQUALITY
Created by:
Swadha Satapathy (0623004)
BA History (Hons)
 Course: Basic Development Economics
Presented to: Prof. Sushmitha Naidu
Topic: Impact of Political Systems on Economic
Inequality (case study on North Korea)

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Abstract
In this presentation we aim to examine
how different political systems, i.e.
Democracy, Communism and
Autocracy play a role in influencing
economic inequality and what
consequences does it lead to.

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 Introduction
 The country of North Korea, officially
known as DPRK, was established after
division of the Korean peninsula between
the US and Soviet Union during WWII.
 It has an isolated and tightly controlled
command economic system wherein the
state decides what is to be consumed,
produced and exchanged.
 The political system is based on socialist
self reliance or juche, wherein a state can
only prosper when it gains independence
in all spheres.
 It emphasizes one nation state and
national sovereignty as quintessential.
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How Does Communism
Work in North Korea?
Two additional economies exist within
North Korea, in addition to the official
communist command economy.

First, is the jangmadang market ground

economy, where every day North Korean
citizens buy and sell commodities in the
many markets scattered across the
country.

It has produced a generation that has

grown more capitalist in nature and less
dependent on the state. 6
 The second is an elite economy, in
which political & military elites
compete for access to state resources
in order to run quasi-private
enterprises in pursuit of hard currency.

 Both of these parallel economies are

distinctly capitalist in nature

 This undermines not only the regime’s

façade of communism, but also the
ability of it that does still remain to
recover from the effects of the famine.

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Effect of Communism
• North Korea provides each of its citizens
with a monthly salary but it is nowhere near
sufficient; livings made through black
market.

• North Korea’s policy of “self-reliance” has

contributed to its chronic food shortages; its
rugged land and relatively harsh climate are
not conducive to productive farming.

• The estimated Gini coefficients range from

0.63 in 1998 to 0.86 (2002-03).

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• Most GDP spent on government elites &
military, which greatly diminishes amount
available to rest of the population, making
common North Koreans among the very
poorest in the world.

• This also makes North Korean population

highly susceptible to starvation.

• A 2002 nutrition study found that 39

percent of North Koreans were stunted
(low height for age), an indicator of
chronic malnutrition.

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ECONOMIC INEQUALITY
A study states that per capita GDP is between
$700 - $2000, which would make DPRK an
extremely poor country.

It describes how both formal and informal

institutions entrench inequality and subvert
communist principles of uplifting the masses.

 Songbun is an official caste system based on the

positions of families during the Korean war,
favoring party members & military veterans.

Benefits such as preferential access to education

and material wealth are given to preferred castes.

Finally, Pyongyang is the seat of power, and access

to it is severely limited. 7
Conclusion
To conclude, restrictive systems like
autocracy and communism lead to
massive debt along with poor
development. Democracy on the
either hand is best suited for
fostering well rounded development
of the nation without dependency on
foreign institutions.
THANK
YOU
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