COUNTRY COMPARISONS     

 


Can Guns Kill ‘Tigers’? 

A Comparative Analysis
of North Korea and Taiwan

by Timothy Batten, April 2002

 

 

 

 

Part 1

   North Korea and Taiwan, two similar countries(population: 22million, size: similar to Mississippi), are distinctly different in economic structure and economic ambition. Why?  Why has Taiwan become a ‘tiger’ while North Korea still lays in poverty?  Why has Taiwan’s agricultural dependence moved to foreign shores, while North Korea still relies primarily on international food aid to feed its population?  And what does the causes of these distinctions mean for the future: why is Taiwan becoming a ‘world player’ while North Korea is stockpiling weapons and attempting to become a ‘world threat’?  The answer to these questions lay in the economic and political development the countries have underwent throughout their history.  This paper will focus primarily on the countries development since the end of World War II.  During the 1950’s Korea gathered itself from the effects of the Korean War, and continued stock piling weapons demanding world recognition; Taiwan was silenced by the massacre of Chiang Kia-sheck, and contently served as an agricultural country.  North Korea continues to emphasize military importance, while its malnourished population can only hope to enjoy the agricultural state Taiwan once found itself in.  Conversely, Taiwan has allowed its agricultural sector to dwindle, as it has opted for the high profits of silicon wafers, rather than the ‘penny’ profits of rice.  North Korea’s bureaucratic socialism economy continues to be retroactive, as it continually faces the fact: its self-reliant/self sufficient economy is not sufficient at all.  Taiwan’s capitalist economy continues to learn about and enjoy the benefits of industrialization.  The analysis of these two countries can best be describe by an old masons’ proverb, (as the author of this paper is a mason by trade) “you can’t build a house with poor mortar and no bricks”; or again “a house is only as strong as its foundation”.  North Korea and Taiwan will be compared, contrasted, and ‘stacked up’ to determine why one country’s ‘mortar’ is building factories for new technology and consumption goods, while the others is building tanks.

Part 2: 

   The mentioning of North Korea is loaded with notions of the Korean War, communism and the prominent name, Kim Il-sung, (the former president). The mention of North Korea, instills the memory of the Korean War which ended in July 1953.  Communism and North Korea are synonymous largely due to Japan’s occupation of Korea from 1904 through World War II along with the Soviet Union’s occupation of Korea after/during World War II.[1]  Approaching the end of World War II, the United States agreed with the Soviet Union, an agreement was reached between the United States and the Soviet Union: “the Soviets would occupy South Korea only as far as the 38th parallel”.[2]  The United States, however, was very unprepared to handle the Koreans, whose main beliefs centered around independence and unification.  In 1948, South Korea’s conservative parties joined together to elect Syngman Rhee President of independent South Korea.  Korea, now was clearly divided; the Soviets placed Kim II Sung as the President of the North.[3]  A key turning point came on January 5, 1950, when Secretary of State Dean Acheson, announced the countries that the US would defend with heavy force: Japan, the Rykus islands, and the Philippine Islands; Korea being left out was all the incentive Kim needed to plot a unification of the country by force.  Stalin and Mao trusted Kim’s judgment, and with the backing by the Soviets and Chinese, an attempt to unify the country by force began with it began the Korean War.[4]

Establishing the causes of North Korea’s world ‘trademark’, the importance now shifts to attempting to fully understand the consequences of both the Korean War and Kim Il Sung.  The most fundamental question of all wars may be the most complex regarding this war: Who won the war?  Both the United States and Korea believe they won the war, however, more importantly than who won, is the effects the war had on the countries.  North Korea firmly holds that they won the Korean War, proclaiming that the war’s end came from a surrendering by the United States.[5]  The noticeable effects that came from North Korea’s proposed wining of the Korean War, was that they were immediately viewed as a threat, a force that could demand defeat from a superpower.  North Korea gained political strength and for a while was viewed as a more prominent player on the world stage.[6]  The effects of the war spilled over into the Soviet Union and Western Europe.  One of the most ostensible effects of the War was that, “military build-up and the arms race became the norm from the 1950s to the 1990s”.[7]  Kim Il-sung’s involvement in the Korean War, made him a prominent figure, and communist influenced economic policies were prevalent in North Korea’s economic structure; as will be show later in this paper.  Clearly, the Korean War represents the separation of ties between North and South Korea.  Only recently have Kim Chong-Il’s attempts to reformulate ties with South Korea and the United States begun to show promise.[8]      

“Made in Taiwan ®”, is the United States most common recognition of Taiwan.  The country is synonymous with high-technology goods, Taiwan Semiconductors, and Sony PlayStations.  For the Taiwanese people, however, they are not defined by what they make, rather what they have been made from; the history of Taiwan is dominated by the remembrance of Chiang Kai-shek’s brutal slaughtering of prominent Taiwanese figures on February 28, 1947.  Similar to North Korea, the end of World War II left Taiwan in a state of confused leadership instilled by the United States.  As the war ended the Allied Forces left the rule of Taiwan in the hands of Chiang Kai-shek.  Chiang Kai-shek had simultaneously remained in control of large sections of China with his Nationalist forces.[9]  Taiwanese initial welcomes quickly turned to woes as the realization hit that Chinese Nationalist forces were corrupt and repressive of the new ideas of the Taiwanese people.  February 28th, 1947, represents the ‘straw that broke the camels back’:

 

The 28 February 1947 arrest of a woman selling cigarettes without a license was the spark which led to large-scale public protests against repression and corruption. For some ten days, Chiang still on the mainland and his governor Chen Yi kept up the pretense of negotiations with leaders of the protest movement, but at the same time they sent troops from the mainland.[10]

It was only a matter of time before Chiang Kai-shek’s troops arrived, and when they did, the ‘rounding up’ process began.  Scholars, lawyers, doctors, and students were rounded up like the strongest of cattle, as they posed the biggest threat in the protest movement.  Approximately 18,000 – 28,000 people were murdered, while thousands of others were arrested, in what the Taiwanese identified as the “White Terror” campaign that dominated the next decade.[11]

The events of February 28th, 1947, remain one of the most notable characteristics of Taiwan, yet as a significant piece of Taiwan’s history it plays little into their current economic success.  In the 1950’s, Taiwan was still primarily an agriculturally based economy.  Why then is Taiwan currently viewed as an economic marvel, one of the “Four Tigers”, and a nation full of high technology, capital intensive goods?  The answers to these questions will be found in the analysis of North Korea’s deprived, stagnated economy- in the economic and political structure of the country.  

Part 3:

    North Korea’s isolated centrally planned economy has been in despair as it continually faces negative GDP growth rates (-3%, 2000est), yet has not taken the proper steps to ensure the hope of prospective growth.[12]  North Korea continually chooses to fund its military, rather than employing those funds in infrastructure and growth promoting industries.  The population relies heavily on other nations to support its food consumption:  “The nation faces its seventh year of food shortages because of weather-related problems, including major drought in 2000, and chronic shortages of fertilizer and fuel”.[13]  North Korea depends primarily on its work force to produce labor intensive goods (i.e. mining: coal, iron ore, graphite, copper, zinc, lead and precious metals).  Although North Korea relies heavily on labor intensive goods such as agriculture and mining, it does little to improve the machinery and equipment necessary for success in such industries.  This practice of little to no investment in capital stock has lead to the continual regression of North Korea.  “Industrial capital stock is nearly beyond repair as a result of years of underinvestment and spare parts shortages”.[14]  The current state of North Korea’s economy is due to over fifty years of isolation, centralization, state-ownership, lack of worker incentive; all resulting from Kim Il Sung’s strict socialist reign.[15]

 Under the leadership of Kim Il Sung, in 1958, North Korea had underwent a complete social reform.  Industries such as agriculture became collective, while state ownership of land, natural resources, major factories, banks, transportation, and major enterprises help lay the foundation for a planned economy.[16]  North Korea’s current cooperative farming system has changed in various ways since its implementation:                

The Workers Party defined the following 3 types of agricultural cooperatives: first, a fixed form of  labor cooperatives; second, semi-socialist cooperatives, where output is allocated according to contributed land and labor; third, perfect socialist cooperatives where all production means including land and farming machines are integrated for distribution of relevant output based on the quantity and quality of labor. On the surface, the North Korean authority allowed its farmers to select out of the three types of cooperatives above at their discretion.[17]

Inherent in such a system is the problems of allocation of resources.  A problem that has continually plagued North Korea.  Following suit, North Korea also nationalized all major industries: major factories, enterprises, mines, transportation, and banks.[18] Similar to agriculture, the commercial and industrial industries were split into various types of cooperatives:  

North Korea formed the following three types of commercial and industrial cooperatives as in the case of agricultural collectivization: first, manufacturing cooperatives of handicraftsmen in urban areas; second, cooperatives of minor merchants and industrialists; third, perfectly socialist cooperatives where production means are jointly owned.[19]

Currently in North Korea, agriculture is no longer collectively controlled, however, the commercial and industrial sectors remain nationalized.  North Korea’s socialist economic system lays open to the same problems innate in all socialist economies, primarily the lack of coordination of supply and demand, the inefficient allocation of resources, and dwindling worker incentive.  A combination of lack of incentive for workers to produce and lack of machinery and resources to prompt production has culminated in the nation’s economic stagnation.[20]  

Taiwan’s economic structural changes since the 1950’s has lead to consistent rapid growth in GDP, while its practices of extensive exports, and conservative financial approach has ensured its continued growth, while further protecting it from flux, “Taiwan suffered little compared with many of its neighbors from the Asian financial crisis in 1998-99”.[21]  In 1952, 35 percent of GDP came from the agricultural sector, compared to the 3 percent agriculture currently contributes to GDP.[22]  Why?  The answer comes in a synopsis of points that can simply phrased: Taiwan has a dynamic capitalist economy, continually pursuing privatization, with an incredibly stable foundation constituent of low inflation and unemployment; an export based trade surplus funding industrialization; and a healthy edge regarding high-technology/capital intensive goods.[23]  An analysis of these points will illuminate the features that have allowed Taiwan to flourish into a ‘Tiger’.  Comparing each of these points to North Korea it becomes evident why North Korea has faced stagnation, while Taiwan has reaped the benefits of industrialization.

            It would be impossible for Taiwan to produce the capital intensive goods it does today if it did not have a strong foundation to build on, thus it is necessary to begin by looking at Taiwan’s trade off between labor intensive goods and capital intensive goods.  The fact that Taiwan’s workers are not malnourished is obviously a fundamental element in their success, yet in comparison to North Korea’s malnourished work force, this fact no longer seems so basic.  Another key element of Taiwan’s core is its dynamic capitalist economy.  It is dynamic trading partner on the world market, (main supplier of semiconductors), and it is a dynamic investor in industrialization and research and development into innovative technologies.  Taiwan’s capitalist economy allows it to potentially reap the benefits open to all capitalist/market economies.  In comparison with North Korea’s bureaucratic socialism, the failure of one system is highlighted by the success of the other.  One of the main characteristics of Taiwan’s success has been its continual privatization.  Privatization has allowed for optimal allocation of resources and greater coordination of supply and demand, further allowing Taiwan to depart from the market of agricultural goods, and enter the realm of high-technology goods.  Taiwan’s greatest investment may be the investment into human capital through education.  As the country’s work force has opted to place more emphasis on brain than brawn, the country has went “From Rice to Riches”.  Taiwan’s dependence on agricultural and other labor intensive goods has moved to foreign shores as, its primary focus has shifted to the production and exportation of capital intensive high-technology goods.  Much of Taiwan’s success can be found in small silicon wafers that have become a staple in world technology.[24]  

Part 4:     North Korea’s labor force produces primarily labor intensive goods, due to the lack of education and technology that presides in this isolated country.  North Korea’s socialist ideology is so deeply engrained that they have attempted to become entirely self-reliant, leading to an exclusive dependence on domestic resources and domestic technologies, while rejecting imports of foreign capital and technologies.[25]  Most of the nations work force finds itself in the state owned manufacturing industries.  Those out of the labor force receive payments from North Korea’s extensive social welfare program that “absorbs about fourteen percent of GNP”.[26]  Income levels of both the urban and rural populations are nearly equal due to an equitable income distribution system.  Most of the countries GDP comes from the industrial sector, and most of this industrial sector is concerned primarily with military defense, production, and innovation, in an attempt to stockpile weapons.  Recently, North Korea has entered the nuclear arms race, making it an even more dangerous military based country.  What would be the result of a change of investment away from the military sector and into human capital and consumption goods?  A possible answer may lie in an analysis of Taiwan’s dominant sectors.     

Taiwan’s labor force is highly educated, and its highly educated workers produce high-technology goods that in-turn produce high Taiwanese profits and ‘Tiger’ status.[27]  As technology has revolutionized the world of computers, medicine, ITC’s (information and communication technologies), and military defense systems, Taiwan has been the catalyst, with semiconductors as its enzyme.  Taiwan Semiconductors, TWSC (the company not a generic generalization), is the dominant name in the semiconductor industry, producing the most highly demanded and conceivably best semiconductors in the world.  Taiwan has found a unique market niche in a good that seems to have constant demand regardless of shocks to the various industries it supplies.  Semiconductors are the fundamental piece of technology in cell phones, computers, cameras, medical equipment, etc, (almost in any technological devices requires semiconductors).  Taiwan’s almost monopolistic hold on semiconductor production, once again illustrates a firm base producing huge success; a seemingly common trend in the country’s success.  As the demand for semiconductors may change within individual industries, the aggregate demand essentially changes very little.  Silicon wafers have replaced rice as the staple ‘cash crop’ of Taiwan, and the country’s investment in highly educated ‘farmers’ has ensured that the country should enjoy continued economic growth.                 

 

[1] America’s Wars, The Korea War:  “Causes of the War”: http://www.multied.com/korea/causes.html

[2] America’s Wars, The Korea War:  “Causes of the War”: http://www.multied.com/korea/causes.html

[3] America’s Wars, The Korea War:  “Causes of the War”: http://www.multied.com/korea/causes.html

[4] America’s Wars, The Korea War:  “Causes of the War”: http://www.multied.com/korea/causes.html

[5] The “Winners” and The “Losers”:  http://socrates.berkeley.edu/~korea/who_won.html

[6] America’s Wars, The Korea War:  “Causes of the War”: http://www.multied.com/korea/causes.html

[7] The “Winners” and The “Losers”:  http://socrates.berkeley.edu/~korea/who_won.html

[8] America’s Wars, The Korea War:  “Causes of the War”: http://www.multied.com/korea/causes.html

[9] Information concerning Chiang Kai-shek and the incident of February 28, 1947 taken from: “28 February 1947” :  http://www.taiwandc.org/228-intr.htm

[10] http://www.taiwandc.org/228-intr.htm

[11] http://www.taiwandc.org/228-intr.htm

[12] http://www.cia.gov/cia/publications/factbook/

[13] http://www.cia.gov/cia/publications/factbook/

[14] http://www.cia.gov/cia/publications/factbook/

[15] http://www.taiwandc.org/228-intr.htm

[16] http://www.koreascope.org/etext/sub/2/1/nk3_12.htm

[17] http://www.koreascope.org/etext/sub/2/1/nk3_12.htm

[18] http://www.koreascope.org/etext/sub/2/1/nk3_12.htm

[19] http://www.koreascope.org/etext/sub/2/1/nk3_12.htm

[20] http://www.cia.gov/cia/publications/factbook/

[21] http://www.cia.gov/cia/publications/factbook/

[22] http://www.cia.gov/cia/publications/factbook/

[23] http://www.cia.gov/cia/publications/factbook/

[24] Supplementary information for this paragraph from: http://www.cia.gov/cia/publications/factbook/

[25] http://www.koreascope.org/etext/sub/2/1/index3.htm

[26] North Korea’s Economy, Once Freed, Will Need Shock Therapy.  Junki Kim:  http://www.worldbank.org/transitionnewsletter/marapr98/pgs20-21.htm

[27] The persistent use of the word ‘high’ attempts to drive in the point of Taiwan’s economic dominance compared to North Korea. 

 

 

 

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