In the aftermath of the Japanese occupation of Korea which ended with Japan's defeat in World War II in 1945, Korea was divided at the 38th parallel in accordance with a United Nations arrangement, to be administered by the Soviet Union in the north and the United States in the south. The Soviets and Americans were unable to agree on the implementation of Joint Trusteeship over Korea. This led in 1948 to the establishment of separate governments, each claiming to be the legitimate government of all of Korea.
In agriculture, the government moved more slowly towards a command economy. The "land to the tiller" reform of 1946 redistributed the bulk of agricultural land to the poor and landless peasant population, effectively breaking the power of the landed class. In 1954, however, a partial collectivization was carried out, with peasants being urged, and often forced, into agricultural co-operatives. By 1958, virtually all farming was being carried out collectively, and the co-operatives were increasingly merged into larger productive units.
Like all the postwar communist states, North Korea undertook massive state investment in heavy industry, state infrastructure and military strength, neglecting the production of consumer goods. By paying the collectivized peasants low state-controlled prices for their product, and using the surplus thus extracted to pay for industrial development, the state carried out a series of three-year plans, which brought industry's share of the economy from 47% in 1946 to 70% in 1959, despite the devastation of the Korean War. There were huge increases in electricity production, steel production and machine building. The large output of tractors and other agricultural machinery achieved a great increase in agricultural productivity.
Initially Stalin rejected Kim's requests, but in late 1949 the victory of the Communists in China and development of the Soviet nuclear weapons made him re-consider Kim's proposal. In January 1950, the permission to stage an invasion was finally approved by Stalin. The Soviets provided limited support in the form of advisors who helped the North Koreans as they planned the operation, and Soviet instructors trained some of the Korean units. However, from the very beginning Stalin made it clear that the Soviet Union would avoid a direct confrontation with the U.S. over Korea and would not commit ground forces even in case of some major military crisis. The stage was set for a civil war between two rival regimes on the Korean peninsula.
For over a year before North Korean forces attacked the southern government on June 25 1950, the two sides had been engaged in a series of bloody clashes along the 38th parallel, especially in the Ongjin area on the west coast. On June 25 1950 the northern forces escalated the battles into a full-fledged offensive and crossed the parallel in large numbers. Due to a combination of surprise, superior military forces, and a poorly armed South Korean army, the Northern forces quickly captured Seoul and Syngman Rhee and his government was forced to flee further south. However, the North Koreans failed to unify the peninsula when foreign powers entered the civil war. North Korean forces were soon defeated and driven northwards by United Nations forces led by the U.S. By October, the U.N. forces had retaken Seoul and captured Pyongyang, and it became Kim's turn to flee. But in November, Chinese forces entered the war and pushed the U.N. forces back, retaking Pyongyang in December and Seoul in January 1951. In March U.N. forces retook Seoul, and the war essentially became a bloody stalemate for the next two years. The front was stabilized in 1953 along what eventually became the current Armistice Line. After long negotiations, the two sides agreed on a border formed by the Korean Demilitarized Zone, and a ceasefire was declared. An official peace treaty, however, was never signed, and the two Koreas have technically been at war since 1950.
After the war, Kim took control of North Korean politics, with the support of the armed forces, who respected his wartime record and long resistance to the Japanese. Pak Hon-yong, party vice chairman and Foreign Minister of DPRK, was blamed for the failure of the southern population to support North Korea during the war and was executed after a show-trial in 1955. Most of the South Korean leftists who defected to the North in 1945–1953 were also accused of espionage and other crimes and killed, imprisoned or exiled to remote agricultural and mining villages. Potential rivals from other groups such as Kim Tu-bong were also purged.
The 1954–56 three-year plan repaired the massive damage caused by the war and brought industrial production back to pre-war levels. This was followed by the five-year plan of 1957–61 and the seven-year plan of 1961–67. These plans brought about further growth in industrial production and substantial development of state infrastructure. By the 1960s North Korea was the second most industrialized nation in East Asia, trailing only Japan. While a number of internal limitations appeared, such as in the production of consumer goods, the national standard of living was considered by many third-world nations as an alternative to the capitalist model of development sponsored by the United States. Building upon the ruins left by the Korean War, the North Korean economy by the late 1960s provided its people with medical care, universal education, adequate caloric intake, and habitable housing.
Kim Il-sung promoted Juche ("self-reliance"), a slogan he began to develop in the late 1950s and which he ultimately made North Korea's official ideology, displacing Marxism-Leninism. The goal of Juche is to make North Korea strong enough to resist foreign invasion and capitalist intervention. Juche did not aim to make North Korea self-sufficient. The North Korean people were making use of domestic materials, technology, and innovations instead of becoming dependent upon those from outside the nation. Juche urged the North Korean people to resist foreign invasion by launching a series of mass-campaigns designed to strengthen the country economically, militarily, and culturally.
North Korea's position was complicated by the Sino-Soviet split, which began in 1960. Relations between North Korea and the Soviet Union worsened when the Soviets concluded that Kim Il-sung was supporting the Chinese side, although in fact Kim hoped to use the split to play China and the Soviets off against each other while pursuing a more independent policy. The result was a sharp decline in Soviet aid and credit, which could not be replaced by the less advanced Chinese. In fact, Kim's enthusiasm for Mao Zedong's policies was limited, despite his rhetorical denunciations of "revisionism." While he supported Chinese campaigns such as the Great Leap Forward, he saw Maoist initiatives such as the Hundred Flowers Campaign and the Cultural Revolution as destabilising and dangerous. In this way, Kim Il-sung showed his determination to mark an independent path for North Korea when possible.
Adding to the above, the centrally planned economy, which emphasized heavy industry, had reached the limits of its productive potential in North Korea. Juche repeated demands that North Koreans learn to build and innovate domestically had run its course as had the ability of North Koreans to keep technological pace with other industrialized nations. By the mid to late-1970s some parts of the capitalist world, including South Korea, were advancing into new phases of technology and economic development and phasing out the coal-and-steel-based economies of the earlier period.
Kim Il-sung, continuing his ideology that had once been highly successful, was unable to respond effectively to the challenge of an increasingly prosperous and well-armed South Korea, which undermined the legitimacy of his own regime. Having failed at their earlier attempt to turn to the market and conduct market-economy reforms such as those carried out in China by Deng Xiaoping, Kim opted for continued ideological purity. The DPRK by 1980 was faced with the choice of either repaying its international loans, or continuing its support of social welfare for its people. Given the ideals of Juche, North Korea chose to default on its loans and by the late 1980s its industrial output was declining.
During the decade of Kim Jong-il's rule, North Korea's economy has continued to deteriorate and the standard of living of its 23 million people has continued to fall. From 1996 to 1999 the country experienced a large-scale famine which left some 600–900,000 people dead. The fundamental cause of this decline is that the state, which runs the entire economy, is bankrupt, and cannot pay for the necessary imports of capital goods to undertake the desperately needed modernization of its industrial plants. The inefficiency of North Korea's Stalinist-style collective agricultural system also contributed to the disaster. North Korea spends about a quarter of its GDP on armaments, including the development of nuclear weapons, and keeps nearly all able-bodied males aged 18–30 in uniform, while the basic infrastructure of the state is allowed to crumble.
As a result, North Korea is now dependent on international food aid to feed its population. According to Amnesty International, more than 13 million people suffered from malnutrition in the DPRK in 2003. In 2001 the DPRK received nearly $US300 million in food aid from the U.S., South Korea, Japan, and the European Union, plus much additional aid from the United Nations and non-governmental organizations. Unspecified (but apparently large) amounts of aid in the form of food, oil and coal are also provided by China every year. Despite this North Korea maintained its hostile rhetoric against the U.S., South Korea and Japan. The supply of heating and electricity outside the capital is practically non-existent, and food and medical supplies are scarce. When there is a bad harvest, as has been persistently the case over recent years, the population faces actual famine: a situation never before seen in a peacetime industrial economy. Since 1997 there has been a steady stream of illegal emigration to China, despite the efforts of both countries to prevent it.
Kim Jong-il has said that the solution to this crisis is earning hard currency, developing information technology, and attracting foreign aid, but despite some movement towards reform it has not substantially reduced the state's control over the economy or introduced the market-oriented reforms which have produced spectacular economic growth in China since 1979. So far the DPRK, not surprisingly given Juche and UN attempts to isolate them, has made little progress in attracting private capital.
In July 2002 some limited reforms were announced. The currency was devalued and food prices were allowed to rise in the hope of stimulating agricultural production. It was announced that food rationing systems as well as subsidized housing would be phased out. A "family-unit farming system" was introduced on a trial basis for the first time since collectivization in 1954. The government also set up a "special administrative zone" in Sinuiju, a town near the border with China. The local authority was given near-autonomy, especially in its economic affairs. This was an attempt to emulate the success of such free-trade zones in China, but it attracted little outside interest. Despite some optimistic talk in the foreign press the impetus of these reforms has not been followed with, for example, a large-scale decollectivization such as occurred in China under Deng.
North Korea remains a Stalinist state. The lack of access to the foreign media and the tradition of secrecy in North Korea means that there is little news about political conditions, but Amnesty International's 2003 report on North Korea says that "there were reports of severe repression of people involved in public and private religious activities, including imprisonment, torture and executions. Unconfirmed reports suggested that torture and ill-treatment were widespread in prisons and labour camps. Conditions were reportedly extremely harsh.
There seems little immediate likelihood that North Korea will undergo an East German-style collapse: a prospect that South Korea and China view with great trepidation because of the fear of a sudden and large exodus of North Korean refugees into their countries. There appears to be little significant internal opposition to the regime. Indeed, a great many of the refugees fleeing to China because of famine still showed significant support for the current government as well as pride in their homeland. Many of these food refugees reportedly return to North Korea after earning sufficient money.
In 2002 Kim Jong Il declared that "money should be capable of measuring the worth of all commodities", followed by some small market economy relaxations, and the creation of the Kaesong Industrial Region with transport links to South Korea was announced. Experiments are under way to allow factory managers to fire underperforming workers and give bonuses. China’s investments increased to $200 million in 2004. China has counseled North Korea’s leaders to gradually open the economy to market forces, and it is possible this path will be successfully followed as well as China's policy of keeping political control firmly in the hands of the communist party.
North Korea declared on Feb. 10, 2005 that it has nuclear weapons bringing widespread calls for the North to return to the six-party talks aimed at curbing its nuclear program. It was initially disputed by outside sources whether or not North Korea has nuclear weapons, and many Russian sources denied that North Korea has the technology necessary to build a nuclear weapon. On Monday, 9th October 2006, North Korea has announced that it had successfully detonated a nuclear device underground at 10:36 am local time without any radiation leak. An official at South Korea's seismic monitoring center confirmed a magnitude-3.6 tremor felt at the time North Korea said it conducted the test was not a natural occurrence. Associated Press
Additionally, North Korea has a very active missile development program, although they have not successfully tested their longer-ranged missiles. In 1998, North Korea tested a Taepondong-1 Space Launch Vehicle, which successfully launched but failed to reach orbit. On July 5th, 2006, they tested a Taepodong-2 ICBM that reportedly could reach the west coast of the U.S. in the 2-stage version, or the entire U.S. with a third stage. However, the missile failed shortly after launch, so it is unknown what its exact capabilities are or how close North Korea is to perfecting the technology.
North Korea's advancements in weapons technology appear to give them leverage in ongoing negotiations with the United Nations and other countries. On Feb 13, 2007, North Korea signed an agreement with South Korea, the United States, Russia, China, and Japan, in which North Korea will shut down its Yongbyon nuclear reactor in exchange for economic and energy assistance.