A PRELIMINARY ESTIMATE OF THE GROSS NATIONAL PRODUCT OF NORTH KOREA 1949 AND 1954-56

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• Publication Date: January 1, 1959
• Content Type: REPORT

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SMtb-L,
ECONOMIC INTELLIGENCE REPORT
N? 63
A PRELIMINARY ESTIMATE
OF THE GROSS NATIONAL PRODUCT
OF NORTH KOREA
1949 AND 1954-56
CIA/RR 59-3
January 1959
CENTRAL INTELLIGENCE AGENCY
OFFICE OF RESEARCH AND REPORTS
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WARNING
This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Secs. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
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ECONOMIC INTELLIGENCE REPORT
A PREUMNARY ESTIMATE OF THE GROSS NATIONAL PRODUCT
OF NORTH KOREA
1949 AND 1954-56
CIA/RR 59-3
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
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CONTENTS
Sunnary
I. Introduction
Page
1
14
A. Magnitude of Gross National Product 4
1. Gross National Product in 1956
2. Comparison with Neighboring Countries . .
B. Trends in GNP
4
4
II. Consumption 12
A. Postwar Change
B. Postwar Consumer Price Levels
III. Investment
A. Role in the Economy
B. Allocation by Sector
Appendixes
APPENDIX A. Statistical Tables
APPENDIX B. Methodology
12
13
15
15
15
23
39
Tables
1. Gross National Product of North Korea, 1949 and
1954-56
5
2. Nominal and Real National Product of North Korea
and Related Data, 1949 and 1954-56 6
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Page
3. Comparison of the Allocation of the Gross National
Product and Total Available Resources of North
Korea, South Korea, and Communist China, 1955 . . 8
4. Comparison of the Allocation of the Gross National
Product and Total Available Resources of North
Korea and South Korea, 1956 10
5. Allocation of Total Available Resources of North
Korea, 1949 and 1954-56 14
6. Gross Domestic Investment in North Korea) 1949 and
1954-56 16
7. Basic Investments in North Korea, 1949 and
1954-56 17
8. Percentage Distribution of Basic Investments in
North Korea, 1949 and 1954-56 19
9. Consolidated Budget Revenues and Expenditures in
North Korea, 1949 and 1954-56 24
10. Personal Consumption in North Korea, 1949 and
1954-56 25
11. Total Retail Sales for Household Consumption in
North Korea, 1949 and 1954-56 26
12. Farm Consumption of Food Crops in North Korea, 1949
and 1954-56 27
13. Household Expenditures for Rent in North Korea,
1949 and 1953-56 29
14. Household Consumption of Electricity in North
Korea) 1949 and 1954-56 31
15. Expenditures for Communal Services in North Korea,
1949 and 1954-56 31
16. Government Purchases of Goods and Services in North
Korea, 1949 and 1954-56 32
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17. Index of Basic Investments in North Korea,
1954-56
18. Agricultural Population in North Korea, 1949 and
1954-56
19. Selected Indexes in North Korea, 1946-49 and
1951-57
TUe
33
33
34
20. Gross National Product of North Korea in Constant
(1949) Prices) 1949 and 1954-56 36
21. Net imports and Aid in North Korea in Constant
(1949) Prices, 1949 and 1954-56 37
' Charts
Following Page
Figure 1. Gross National Products of North Korea, South
Korea, and Communist China Compared with the
Total Available Resources of Each Country,
1955 10
Figure 2. Allocation of Total Available Resources in
North Korea, South Korea, and Communist
China, 1955
Figure 3. North Korea: Index of Changes in the Size of
Labor Force, Industrial Labor Productivity,
and Per Capita Labor Productivity, Selected
Years, 1946-57
Figure 4. North Korea: Relative Changes Among the
Function:411y Related Index Series, Selected
Years, 1946-57
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14
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A PRELIMINARY ESTIMATE OF THE GROSS NATIONAL PRODUCT
OF NORTH KOREA*
1949 AND 1954-56
Summary
The gross national product (GNP) of North Korea in 1956 is esti-
mated to have been about 115 billion current won** (US $958 million)
and per capita GNP about 14,258 won (US $119). Real GNP in prewar
prices*** was 26 percent larger in 1956 than in 1949.
During the Three Year Plan (1954-56) the domestic product of North
Korea averaged about 81 percent of available current resources (GNP
plus Sino-Soviet Bloc aid). In South Korea, by comparison, the domestic
product furnished an average of 88 percent of available resources in
the 2 years 1955 and 1956, while in Communist China it accounted for
nearly all the available resources during 1955 and 1956.
A comparison between North and South Korea on a year-to-year basis,
however, shows that although the degree of North Korea's dependence on
* The estimates and conclusions in this report represent the best
judgment of this Office as of 15 November 1958.
** Except where otherwise indicated, won values in this report are ex-
pressed in current won. North Korea has not announced an official ex-
change rate. The above North Korean figure was converted into a US dollar
equivalent on the basis of a nominal exchange rate of 120 won to US $1.
This rate was derived from the following cross rates: 30 won equal
1 ruble; 4 rubles equal US $1. This exchange value of the won and the
ruble was first revealed by a Bulgarian periodical published in 1954 and
was substantiated by a publication of the Ministry of Railroads of Com-
munist China in 1955, which contained passenger rates for trains traveling
to North Korea expressed in rubles and won at the rate of 30 won to
1 ruble.
Although there are considerable variations among reports concerning
the exchange rate of the won, reflecting the existence of many exchange
rates that vary from transaction to transaction, the above derived rate
is currently used by the intelligence community because it represents 50X1
the first known post-Korean War report of a won exchange rate obtained
from published Communist sources. 1/
This rate is used in
the present report, for 50X1
lack of anything better, for all conversions of North Korean value fig-
ures. In view of the above limitations, all dollar equivalents contained
herein should be regarded only as rough approximations.
*** The term 2E2E241 in this report, unless otherwise specified, refers
to 1949; postwar, to 1954-56; interwar period, to 1946-49; and prelib-
eration period, to the years before August 1945.
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external resources in 1955 apparently exceeded that of South Korea,
this position was reversed slightly in 1956. By the end of its Three
Year Plan, North Korea had supplied about 88 percent of its total do-
mestic requirements from its GNP as against 80 percent in 1955. In
comparison, the proportion of domestic requirements met by the GNP in
South Korea declined from 89 percent in 1955 to 87 percent in 1956.
During the 3-year period 1954-56, Sino-Soviet Bloc aid averaged
roughly one-fourth of gross national expenditures in North Korea, or
nearly one-fifth of the total available resources, thus confirming the
commonly accepted belief that the North Korean economy has relied
heavily on external resources. At the same time, however, quantitative
data reveal the less obvious fact that the GNP has increased in real
terms at the same time that the external economic supports have de-
clined -- a fact which indicates that North Korea's self-generated
economic strength had grown substantially by the end of the Three Year
Plan and also (in the light of achievements since the completion of
the Three Year Plan) that North Korea is gaining indigenous economic
strength at a fairly rapid rate. The above findings also indicate that
North Korea is possibly ahead of South Korea* in its postwar economic
recovery and development. This indication is corroborated by the fact
that during the Three Year Plan period the real GNP increased at an
annual rate of 18 percent compared with 17 percent in South Korea during
the comparable period. Although the extent of war devastation in North
Korea was as great as if not greater than that in South Korea, the
existence of basic natural resources which are necessary for industrial
development, coupled with the adamant industry-first policy of the
P'yongyang regime, undoubtedly helped to accelerate the postwar economic
comeback of North Korea, a recovery which is reflected in the high
growth rate of its GNP.
North Korea has allocated a much larger part of its available re-
sources to productive ends than have its neighbors, South Korea and
Communist China. Evidently this allocation was made at the ekpense
of consumers and their material comforts. The proportion of total
available resources consumed as end products and services dropped from
72 percent in the prewar period to 62 percent in the postwar period.
Although the absolute level of real consumption in aggregate terms has
dropped from the prewar level, the real per capita consumption has in-
creased because of a rise in per capita productivity concurrent with a
* A direct comparison of the relative level of GNP in North and South
Korea would be a useful but impossible task at present, largely because
different monetary units have been in use since about 1948 in these two
areas, thus precluding a comparison in terms of a common Korean unit of
account. Furthermore, nebulous exchange rates in both areas make im-
possible a comparison of the GNP of North and South Korea in terms of
dollar equivalents.
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decline in total population between the prewar and the postwar periods.
The official index of retail prices) whose steady decline in the post-
war years has often been put forth by the North Korean government as
tangible evidence of improvement of "consumer welfare," does not appear
to be unrealistic when studied in the light of the trend of real GNP.
North Korea recovered its prewar level of real GNP in 1955) largely
because of the recovery of its prewar level of industrial production in
that year. A notable growth of industrial production in 1955, which
exceeded the interwar peak by 44 percent, was accompanied by heavy
investment activities that marked a postwar peak. Postwar investment
as a percent of GNP was more than twice that of the prewar period) with
more than half of the total investment for fixed capital going into
industry.
Although the industrial sector received the largest share of in-
vestment capital, a comparison of the percentage distribution of
capital for the 3 postwar years reveals that the transportation-
communications sector received a high investment priority following
the cessation of hostilities, with the share of total capital invested
In this group in 1954 exceeding 20 percent, or nearly double the 1949
percentage. Declining in the 2 subsequent years) the investment volume
of this sector during the Three Year Plan period averaged 13 percent.
Investments in housing and in government facilities are other fields in
which the postwar shares have increased above the prewar level. On the
other hand, the proportions of total capital invested in agriculture,
commerce, education, culture) and health have declined from their re-
spective prewar levels.
The available quantitative evidence shows) therefore, that North
Korea has made substantial headway under its postwar recovery and
development program. This achievement may be attributed on the one
hand to Sino-Soviet Bloc assistance and on the other hand to priority
allocation of available resources to productive ends. North Korea is
achieving viability at a much faster rate than South Korea) a reflec-
tion of the undeniable natural advantages in basic resources possessed
by North Korea. Minerals, forests) and water power loom much larger in
North Korea than in the south, as does the already existing industrial
base.
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I. Introduction.
A. Magnitude of Gross National Product.
1. Gross National Product in 1956.
The gross national product (GNP) of North Korea at the end
of the Three Year Plan (1954-56) is estimated to have been about 115
billion won (US $958 million) (see Table 1*). The war brought about
a considerable inflation in the price level, which in 1956, although
declining since the cessation of hostilities, was about 1.7 times the
1949 level. The 1956 GNP in 1949 values amounted to about 60 percent
of the above figure, and this was an increase of 26 percent above the
level of 1949 (see Table 2**). In 1956, per capita GNP in current
prices amounted to about 14,258 won*** (US $119). Per capita GNP in
1949 prices, however, was about 59 percent of that amount.
2. Comparison with Neighboring Countries.
Sino-Soviet Bloc economic aid supported a significant por-
tion of the total current resources of North Korea during the Three
Year Plan period. In 19550 more than 20 percent of North Korea's
available resources**** came from Bloc aid compared with about 10 per-
cent attributed to US aid in South Korea and only 1 percent representing
imported resources in the case of Communist China (see Table 3t).
* Table 1 follows on p. 5.
** Table 2 follows on p. 6.
*** This estimate may be checked against the fact that, if the aver-
age wage of North Korean workers is assumed to fall within the 7th or
8th grade in the official North Korean wage schedule, the average wage
is 18,000 won per annum. 2 Assuming that the civilian labor force in
1956 totaled 4 million, total wages (including imputed wages of
farmers) would be 72 billion won. Assuming further a total population
of 8 million, the per capita money wage in 1956 becomes 9,000 won. To
this amount must be added the food ration and allowances that workers
and dependents receive, which in value terms probably represent the
difference between the estimated per capita GNP and the money wage thus
computed.
**** In the case of North Korea, available resources may be defined
as GNP plus Sino-Soviet Bloc aid received. For countries like Korea)
where the size of external support has been large relative to indigenous
product, total available resources must be taken into account as well
as domestic product in order to make a meaningful comparison with other
countries.
t Table 3 follows on p. 8. (Text continued on p. 9.)
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Table 1
Gross National Product of North Korea
1949 and 1954-56
1949
1954
1955
1956
Million
Current
Won
Percent
Million
Current
Won
Percent
Million
Current
Won
Percent
Million
Current
Won
Percent
Consumption)/
39,483
72.9
78,522
84.7
72,238
73.3
83,085
71.9
Investment b
7,620
14.1
31,673
34.2
37,530
38.1
36,948
32.0
Government."
4,424
8.2
6,433
6.9
6,o4o
6.1
5,538
4.8
Military d
3,100
5.7
6,453
7.0
6,190
6.3
5,650
4.9
Net imports
and Sino-Soviet Bloc
aid 2/
-470 f/
-0.9
-30,384
-32.8
-23,470
-23.8
-15,734
-13.6
GNP
54,157
100.0
92,697
100.0
98,528
100.0
115,487
100.0
a. From Table 10, p. 25, below.
b. From Table 6, p. 16, below.
c. From Table 16, p. 32, below.
d. From Table 9, p. 24. below.
e. Except for 1949, data are from Table 9. Data for 1949 are for net imports, and data for 1954-56
are for Sino-Soviet Bloc aid.
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Table 2
Nominal and Real National Product of North Korea and Related Data
1949 and 1954-56
1949 1954 1955 1956
(1) Nominal national
product (million
current won) Ei*. 54,157 92,697 98,528 115,487
(2) Nominal national
product index
(1949 . 100) 12/ 100 171 182 213
(3) Real national
product (million
1949 won) 2/ 54,157 48,818 57,201 67,982
(4) Real national
product index
(1949 . 100) di 100 90 106 126
(5) North Korean offi-
cial index of
"national income"
in 1949 prices'
(1949 . 100) 2/ 100 94 116 146
(6) Total population
(million) I/ 9.1 7.7 7.9 8.1
(7) Nominal per capita
GNP (current
won) gi 5,951 12,039 12,472 14,258
(8) Nominal per capita
GNP index
(1949 . 100) LI/ 100 202 210 240
(9) Real per capita GNP
(1949 won) .i./ 5,951 6,340 7,241 8,393
(10) Real per capita GNP
index
(1949 . 100) 1/ 100 107 122 141
(11) North Korean index
of per capita in-
dustrial labor
productivity
(1949 . 100) E/ 100 99 118 152
* Footnotes for Table 2 follow on p. 7.
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Table 2
Nominal and Real National Product of North Korea and Related Data
1949 and 1954-56
(Continued)
1949 1954 1955 1956
(12) Nominal consumption
(million current
won) 2/ 39,483 78,522 72,238 83,085
(13) Nominal consumption
Index
(1949 = 100) yi 100 199 183 210
(14) Nominal per capita
consumption
(current won) 1/ 4,339 10,198 9,144 10,257
(15) Real consumption
(million 1949
won) 2/ 38,787 33,846 32,687 41,751
(16) Real consumption
Index
(1949 = 100) 2/ 100 87 84 108
(17) Real per capita
consumption
(1949 won) 2/ 4,262 4,396 4,138 5)154
(18) Real per capita
consumption index
(1949 = 100) 2/ 100 103 97 121
a. From Table 1, p. 5, above.
b. Derived from (1).
c. From Table 20, p. 36, below.
d. Derived from (3).
e. From Table 19, p. 34, below.
f.
g.Ti) divided by (6).
h. Derived from (7).
i. (3) divided by (6).
j. Derived from (9).
k. Derived from (12).
1. (12) divided by (6).
m. Derived from (15).
n. (15) divided by (6).
o. Derived from (17).
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Table 3
Comparison of the Allocation of the Gross National Product
and Total Available Resources
of North Korea, South Korea, and Communist China
1955
Communist China
North Korea
South Korea
Billion
Current
Yuan 1./
Percent
of GNP
Percent
of Resources
Billion
Current
Won
Percent
of GNP
Percent
of Resources
Billion
Current Percent
Hwan of GNP
Percent
of Resources
Consumption
67.50
73.3
72.5
72.24
73.3
59.1
924.2 pi 88.6
78.9
Investment
14.95
16.2
16.0
37.53
38.1
30.8
127.7 s/ 12.2
10.9
Government
4.23
4.6
4.5
6.04
6.1
5.0
58.0 hi 5.6
4.9
Military
6.50
7.1
7.0
6.19
6.3
5.1
62.1 12/ 6.0
5.3
Available resources
93.18
101.2
100.0
122.00
123.8
100.0
1,172.0 112.4
100.0
Net foreign trade balance
-1.08
-1.2
-1.2
-23.47
-23.8
-19.2
-120.9 4/ -11.6
-10.3
plus foreign aid
(-8.8) s/ (-0.8)
(-o.8)
GNP
92.10
100.0
98.8
98.53
100.0
80.8
1,042.3 100.0
88.9
a. 6/
c. Representing 94.3 billion hwan of private and 33.4 billion hwan of government investment.
d. Including US aid of 97.7 billion hwan.
e. Statistical discrepancy
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Looking at the same phenomenon from a different angle, it
Is apparent that domestic product in North Korea in 1955 constituted
only about 81 percent of its total current requirements compared with
89 percent in South Korea. In the case of Communist China, domestic
product represented nearly all (99 percent) of the total available
resources (see Figure 1*).
Although the above comparison indicates that the degree of
dependence of North Korea on external supports in 1955 exceeded that
of South Korea, a further comparison shows that this was not the case
in 1956. While North Korea's GNP in 1956 had increased to 88 percent
of available resources from the preceding year's Si percent, that of
South Korea had declined to 87 percent from the previous year's 89 per-
cent (see Table 4**). In other words) between 1955 and 1956 the indi-
cated degree of North Korea's dependence on external resources for
Its domestic requirements had declined from 19 percent to 12 percent,
whereas the degree of South Korea's external dependence had increased
from 10 percent to 12 percent.***
Although this phenomenon is no absolute indication that
North Korea is gaining an increasing degree of indigenous economic
strength in comparison with South Korea, a comparative analysis of the
internal allocation of available resources in the two countries reveals
that North Korea has allocated a much larger portion of its resources
to productive ends than either South Korea or Communist China) and this
policy undoubtedly has had a salutary effect on the inherent growth
potentials of North Korea. Figure 2**** shows that North Korea in 1955
consumed as end products and personal services a far smaller portion of
its available resources than either of its neighbors. In 1955, nearly
60 percentt of the total available resources represented consumption.
The South Koreans, by comparison, consumed nearly 80 percent, and the
Chinese 72 percent. In 1955, North Korea allocated more than 30 percent
of its resources to investment,tt while South Korea invested less than
11 percent and Communist China 16 percent. By foregoing its present
* Following p. 10.
** Table It follows on p. 10.
*** It should be understood that this statement is based on the avail-
able quantitative evidence only.
**** Following p. 10.
t Consumption was 73 percent of GNP in 1955, which was below the
average, 77 percent, for 1954-56. The fact that 1955 was the peak in-
vestment year probably accounts for below-average consumption in that
year, both in consumption as a percent of GNP and in absolute level
of consumption. GNP grew faster than consumption, and this growth was
attributable largely to the increase in capital investment.
tt "Investment" includes an unknown proportion of military expendi-
tures. (See Methodology, Appendix B, section 1, b, p. 40, below.)
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Table 4
Comparison of the Allocation of the .Gross National Product
and Total Available Resources of North and South Korea
1956
North Korea
South Korea
Billion
Current
Won
Percent
of GNP
Percent
of Resources
Billion
Current
Ewan
Percent
of GNP
Percent
of Resources
Consumption
83.08
71.9
63.3
1,122 5 2/
88.4
77.2
Investment
36.95
32.0
28.2
182.5 2/
14.4
12.5
Government
5.54
4.8
4.2
80.8 2/
6.4
5.6
Military
5.65
4.9
4.3
68.6 2/
5.4
4.7
Available resources
131.22
113.6
100.0
1,454.4
114.6
100.0
Net foreign trade balance
plus foreign aid
-15.73
-13.6
-12.0
-175.9 g
(-9.5) Pi
-13.9
(-o.7)
-12.1
(-04)
GNP
115.49
100.0
88.0
1,269.0
loo.o
87.2
b. Statistical discrepancy
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Figure 1
GROSS NATIONAL PRODUCTS
OF NORTH KOREA, SOUTH KOREA
AND COMMUNIST CHINA COMPARED WITH
THE TOTAL AVAILABLE RESOURCES OF EACH COUNTRY
1955
NORTH KOREA
(BILLION WON)
23
TOTAL 122
ino-Soviet
Bloc Aid
SOUTH KOREA
(BILLION HWAN)
et Imports
and US Aid
COMMUNIST CHINA
(BILLION YUAN)
TOTAL 93
...Statistical discrepancy" as shown in the original source.
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Figure 4
ALLOCATION OF TOTAL
AVAILABLE RESOURCES IN NORTH KOREA
SOUTH KOREA, AND COMMUNIST CHINA, 1955
NORTH KOREA
(BILLION WON)
CONSUMPTION
INVESTMENT
MILITARY
GOVERNMENT
SOUTH KOREA
(BILLION I-IWAN)
COMMUNIST
CHINA
(BILLION YUAN)
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material comforts and allocating the largest possible portion of its
available resources to investment, North Korea is bent on achieving
industrial growth as rapidly as possible. In the light of these facts,
it appears likely that North Korea is achieving viability much faster
than South Korea.
B. Trends in GNP.
In Table 2* the index of estimated GNP is compared with the
Index announced by the Central Statistical Bureau of the Central
Planning Committee of North Korea. On the average, the North Korean
index is about 10 percent higher than the index of estimated GNP.
The index of estimated GNP was obtained by deflating GNP in current
won by official price indexes. Thus the discrepancy between the index
of estimated GNP and the official index of national income arises
chiefly from the broader coverage of the former.**
The average annual rate of increase of real GNP during the
Three Year Plan period is computed to be 17.9 percent.*** The rate
of increase of GNP in current prices during the same period was 18.5
percent. Thus there was no serious price inflation during this
period. In spite of this relatively high rate of increase, the real
GNP did not regain its 1949 level until 1955, when, largely as a
result of a substantial increase in capital investments in that year,
GNP exceeded the interwar peak by a small margin.
The 18-percent annual rate of growth of North Korea during the
Three Year Plan period appears at first glance rather high when com-
pared with the rate of growth of 7 to 8 percent of Communist China dur-
ing its First Five Year Plan 11/ and with the annual rate of growth of
17 percent of South Korea during the comparable period. 1?../ The validity
of this high rate of growth may be assessed in the light of the follow-
ing considerations. (1) Although North and South Korea were both
devastated during the 3 years of hostilities, North Korea started its
postwar recovery program on a much more favorable footing than its
southern counterpart in terms of natural advantages in raw materials
* P. 6, above.
** This discrepancy probably arises from the fact that the North
Koreans follow the Communist concept of "net material product," 2/ which
omits the types of services not directly instrumental to material pro-
duction. Also, the rate of postwar growth of the "material product"
sector has been much higher than that of the service sector. This fact
tends to overstate the official index in comparison with the index of
estimated GNP, which includes the service sector.
*** This figure represents a geometric mean of changes. The rate of
increase asserted by the North Koreans is 27 percent. 12/
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(mineral and forestry resources); in the industrial base (electric
power, metallurgy, and the extractive industries); and in transporta-
tion and communications facilities. 1,1/ (2) Both the material and
technical support of the Sino-Soviet Bloc and the economic policy of
the North Korean regime have been heavily oriented toward the foster-
ing of industrial growth through rationalization of resource alloca-
tion rather than toward immediate improvement of material welfare of
the masses. This policy has prevented the uneconomic depletion of
available capital and other resources by the consumer sector which
probably has occurred in South Korea. ly
The period under analysis represents the years in which North
Korea received a substantial amount of Sino-Soviet Bloc aid (about 25
percent of GNP), and this aid obviously helped the growth of national
product, especially in view of the fact that capital goods and raw ma-
terials made up nearly 60 percent of the material aid received. 12/
The fact is, however, that the GNP has grown in real terms while the
aid has diminished, and this relationship can be explained as the mani-
festation of an increase in the inherent productivity of the economy.
II. Consumption.
A. Postwar Change.
The postwar industrial recovery of North Korea owes much to the
fact that more than 28 percent of the total available resources were
channeled to investments under the Three Year Plan. Evidently this was
done at the expense of the material comfort of the consuming masses.
Total personal consumption expenditures as a percent of available re-
sources dropped from 72 percent in 1949 to an average of 62 percent*
during the Three Year Plan period (see Table 5**).
Largely because of postwar inflation in consumer prices, nom-
inal consumption expenditures in 1956 were double the 1949 level (see
Table 2***). Real consumption, however, did not regain the prewar
level until 1956. Real per capita consumption, xxxx on the other hand,
* This average level may be compared with the South Korean consump-
tion levels of about 81 percent in the prewar period (about 1949)
and 88 percent in the postwar period (about 1955-56). 11/
** Table 5 follows on p. 14.
*** P. 6, above.
**** Aggregate consumption is here analyzed in quantitative terms only.
There is no assurance implied anywhere that the consumption and abso-
lute living standards have improved in a qualitative sense and in terms
of distributive justice among the different layers of economic and
social strata of North Korea. Under the jbotnote continued on p. 137
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exceeded the 1949 level by a considerable margin. Evidently this para-
dox is due to a drop in total population from about 9 million in 1949
to about 8 million in 1956, coupled with a rise in per capita labor
productivity at a rate higher than the increase in the size of the labor
force (see Figure 3*). The indexes of real per capita GNP and of real
per capita consumption and the North Korean official index of per capita
Industrial labor productivity (see Table 2**) exhibit a rather close
correlation.
B. Postwar Consumer Price Levels.
Other things being equal, an inverse relationship normally
exists between the general price level and the level of real output
of an economy. This is the case with respect to the two time series
In question, as shown in Figure 4,*** which depicts within the given
range of analysis a nearly symmetrical relationship between the down-
ward trend in prices and the upward trend in real GNP.
The state-administered prices, although controlled in North
Korea as they are in other Sino-Soviet Bloc countries, are neverthe-
less anchored on the natural prices in a free market. 12/ The free
enterprise system with its competitive prices, although operating in
a strictly circumscribed sphere, serves as a guidepost for the govern-
ment's price policy by acting as an automatic regulator of production
and consumption and as a barometer of the natural forces of supply and
demand. State-administered prices are kept at such levels as to mini-
mize the disparity between them and free market prices, to prevent the
arbitrage profiteering which is rampant when there is a wide price
differential between the controlled and free markets and thus to main-
tain an equilibrium in the flow of goods between the two markets.
That the state-administered prices are not entirely arbitrary figures --
but are rather a direct or indirect indication of real economic
forces -- is evident from a consideration of the above elements that
underlie North Korea's price policy. 20/
Communist preferential rationing system, elite individuals) consti-
tuting roughly 30 percent of the total civilian population, reportedly
enjoy special rations amounting to one-third more than that which the
other 70 percent of the population consume. The dietary composition
of the food is also said to be poor. 1.q/
* Following p. 14.
** P. 6, above.
*** Following p. 16.
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Table 5
Allocation of Total Available Resources of North Korea 2.1
1949 and 1954-56
Percent
1949
1954
1955
1956
Available resources
Consumption
72.3
63.9
59.2
63.3
Investment
13.9
25.7
30.7
28.2
Government
8.1
5.2
5.0
4.2
Military
5.7
5.2
5.1
4.3
Total
100.0
100.0
100.0
100.0
Net imports and aid
-0.9
-24.7
-19.2
-12.0
GNP as a percent of resources
99.1
75.3
80.8
88.0
a. Derived from Table 1, p. 5, above.
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NORTH KOREA
INDEX OF CHANGES
IN THE SIZE OF LABOR FORCE, INDUSTRIAL LABOR PRODUCTIVITY
AND PER CAPITA LABOR PRODUCTIVITY, SELECTED YEARS, 1946-57
Figur(PX1
1949=100
Industrial
Labor
Productivity
,'
I
160
Per
Capi
a Labor
Productivityi
//
1
f
1
;
,
140
I
do
/
/
."
120
100
1 ,
1.1
/,?
_ _
I/
/ 1
I
..?,.?...,
/ / .
60
60
i1
Labor
Force;
/I
i
/
40
1946
1947 1948 1949 1950 1951 1952
1953 1954 1955 1956
1957
5(
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III. Investment.
A. Role in the Economy.
North Korea regained its interwar peak GNP level in 1955, in
large measure because of a substantial gain realized in that year's
industrial production, which exceeded the interwar peak by 44 percent
(see Figure 4*). This gain in turn was due to heavy postwar invest-
ment activities which reached a peak in 1955 (see Table 6**). About
52 percent of the total capital invested in the economy that year went
to the industrial sector, and more than half of the amount invested in
Industry went into production of capital goods. a/
Gross domestic investment as a percent of the national product
averaged 35 percent in the Three Year Plan period -- more than double
that of 1949) when it was 14 percent.
B. Allocation by Sector.
The investment priority in terms of volume in North Korea went
to the industrial sector (see Table 7***), which on the average received
50 percent of the total investment capital during the Three Year Plan
period compared with 44 percent of the basic investment capital devoted
to that sector in 1949. Agriculture, on the other hand, received a
smaller share in 1954-56 (9 percent) than in 1949 (11 percent). In-
vestment in domestic commerce also dropped, from 3.5 percent in 1949 to
an average of 1.2 percent in the postwar period.
The sector which evidently received the earliest attention for
recovery following the cessation of hostilities was the transportation-
communications sector (see Table 8xxxx). Apparently for strategic
reasons, first priority in the postwar rehabilitation program was given
to the reconstruction of the overland transportation system. As a
result) almost all trunk rail lines had been restored by early 1954,
through intense joint efforts of North Korean and Chinese workers. 22/
By 1955 the rail freight haulage exceeded that of 1949 by 3 percent.
A more pronounced increase occurred in motor transport. The volume of
motor freight haulage in 1955 was more than six times that of 1949. LI/
Investment in the so-called "productive fields"t as a whole in-
creased from 70 percent prewar to 73 percent postwar. This shift intt
*
Following p. 16.
44*
Table 6 follows
on p.
16.
***
Table 7 follows
on p.
17.
*Het-
Table 8 follows
on p.
19.
t A literal translation of the North Korean term.
tt Text continued on p. 21.
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Table 6
Gross Domestic Investment in North Korea
1949 and 1954-56
Million Won
(1)
Fixed capital investment
1949
1954
1955
1956
(1949 won) 2/
6,659
24,840
29,368
26,392
(2)
Fixed capital investment
(current won)
6,659
28,342 12
33,443 2/
32,886 ci.
(3)
Implicit price deflator 2/
1.000
1.1141
1.139
1.2146
(4)
Investment in working capital
(current won)
1,602 L./
5,552 Ei
6,811 E/
6,770 g/
(5)
Increase in inventories
(current won) hi
961
3,331
4,087
4,062
(6)
Gross domestic investment
(current won) 1/
7,620
31,673
37,530
36,948
(7)
Inventories
(1949 won) 1/
961
2,919
3,589
3,260
(8)
Gross domestic investment
(1949 won) hi
7,620
27,759
32,957
29,652
a.
From Table 7, p. 171 below.
b.
c.
25/
d.
e.
fl) divided by (1).
f.
h.
. (4) times 0.6.
i.
2) plus (5).
j.
(5) divided by (3).
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(1) plus (7).
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600
400
200
100
80
60
40
NORTH KOREA
RELATIVE CHANGES AMONG THE FUNCTIONALLY
RELATED INDEX SERIES, SELECTED YEARS, 1946-57
FO?.(1
-n ?.-_ I -1-7 Li _ i __ _ ;
itriH4 ;_ r r_; f. - 1 ? / ? . 4
; rt.-4 4 t--, -
_. ? _
.? . . __. 1 f
1 .
i - : , ' ? ? - r 4 ? 1 i r Basic Investments
1 4
i-
r
...- r . 4-- - - - .--
--1---- 'Vali-self - ?
Industrial Production
I . a
/ ?
/
? /
iitlE . i T- ' A 11 f- i
1 eG iiIrl Prices .../ -r-r I. - --.+, - -
/ _,_
I
- . - t i ' / 1 I /1 - "National Income"
?11 ' 1 / I 1 1
1
f
- ? ' - ?/ !
-... -.
l ! a y
? r 1 i e
//.1. ? P. #.0?? !rain Pro.duction
r
. I I
i
I ? /,-
/
/ /tr.\ ''''????? Pr
r/ // / \
I r/..........".... //A .../...
I. ..
.
?
'-'1...
????;...1 /
` . . ! - . i
Ii i 1- i , i
?-?4-t4 /1-?? -I -/- ? I
? i : 1--1- ' !
? .
? -
.. . ????? T. i " ! I
-7,1-/ -1-1-1--,f /-+-i- ? - 4----4-- ? i ? - ,.,-;-i----- ? ...:
- ; ? ; ' t ..... .
.... i . ;
- ,
t+71.1.L.c.4-,f .4 pH" .7 ..-11-.4 . tt+it st, T
;4:7-44-- ?it 4.4--+ I- ,--1- it I
/ ' t
/ . t
. .
it .
of '
I
::v
1
+44??? 7hi4. i
?
4!
ri-rt!
;
F
11--0.1-1----t--tt _
. ? ? 44
..... ? - ?
1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957
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Table 7
Basic Investments in North Korea
1949 and 1954-56
Million 1949 Won
1949 21*
1954 12/
1955 hi
1956 2/
1954-56 2/
"Productive fields" 2/
Industry
2,950
10,266
15,281
14,431
39,978
Agriculture
752
1,579
3,023
2,813
7,415
Transportation and communications
719
5,083
3,581
1,895
10,559
Commerce
233
270
273
424
967
Total
4,654
17,198
22,158
19,561
28,919
"Nonproductive fields" 2/
Housing
746
2,633
3,208
3,831
9,672
Education and culture
761
2,032
1,309
1,737
5,078
Health
271
409
683
36
1,128
Government facilities
226 1/
2,568
2,010
1,225
5,803
Total
2,004
7,642
7,210
6,829
21,681
Total basic investments gi
6,659
214,840
29,368
26,392
80 600
* Footnotes for Table 7 follow on p. 18.
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Table 7
Basic Investments in North Korea
1949 and 1954-56
(Continued)
50X1
b. The 1949 values moved as shown in Table 17, p. 33, below.
c. Obtained as residuals -- 1954-56 totals minus 1954-55 totals.
d.
e. A literal translation of the North Korean term.
f. Derived from Table 8, p. 19, below.
g. 2/. Totals are derived from unrounded data and may not equal the sum of the rounded components.
These figures were obtained as follows:
1953 1954 3955
Investment index (1949 = 100) 135 373 441 Total = 949
Percent of 949 14.225 39.304 46.469
Investment for 1953-55
is 63.2 billion won
Allocated on the basis of
distribution (million yon) 8,990 24,840 29,368
Investment for 1949 (million won): 8,900 + 135 = 6,659, which checks roughly
with the planned 1949 investment of 6,787
million won. 33/
Investment for 1956 (billion won): 80.6 - (24.840 + 29.368) = 26.392, which
checks roughly with the 26.3 billion won
announced by the Central Statistical
Bureau in February 1957. 111
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Table 8
Percentage Distribution of Basic Investments in North Korea
1949 and 1954-56
Percent
1954756 Average
1949 9:/*
1954 12./
1955 12/
1956 12/
Estimated
Announced Ei
"Productive fields" d/
Industry
44.3
41.3
52.1
54.7
49.6
49.6
Agriculture
11.3
6.4
10.3
10.7
9.2
9.2
Transportation and communications
10.8
20.5
12.2
7.2
13.1
13.1
Commerce
3.5
1.1
0.9
1.6
1.2
1.2
Total
69.9
69.3
75.5
74.2
73.1
73.1
"Nonproductive fields" ci/
Housing
Education and culture
Health
Government facilities
11.2
11.4 2/
4.1sj
3.4 2/
10.6
8.2
1.6
10.3
10.9
4.5
2.3
6.8
14.5
6.6
0.1
4.6
12.0
6.3
1.4
7.2
12.0
6.3
1.4
7.2
Total
1221
22:1
24.5
25.8
26.9
26.9
Total basic investments
100.0
100.0
100.0
100.0
100.0
100.0
* Footnotes for TSble 8 follow on p. 20.
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Table 8
Percentage Distribution of Basic Investments in North Korea
1949 and 1954-56
(Continued)
a. .32/
b. Derived from Table 7, p. 17, above.
c. 2.?./
d. A literal translation of the North Korean term.
e. The Central Statistical Bureau announced that "of the 30.1 percent invested in the nonproductive
fields in 1949, 15.5 percent was invested in the construction of educational, cultural, and public
health establishments and 11.2 percent in housing construction." 2// This calculation leaves an un-
explained category of 3.4 percent, which is taken to be basic investment in government facilities for
that year. The same category for 1954-56 (7.2 percent average as announced) is composed of 1.4 percent
for government facilities and 5.8 percent for "Konggong Kyongni," which may be translated as "public
utilities." During the Three Year Plan period this item averaged 80.6 x 0.058 = 4.6748 billion won. ay
The investment in health establishments has been isolated from education and culture on the basis
of the budgetary allocation of investment funds in order to conform to the investment index classifica-
tion in Table 17 (p. 33, below), which was used to move the 1949 absolute values to the postwar period.
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the composition of investment was attained at the expense of "nonproduc-
tive fields," whose share of investment dropped from 30 percent prewar to
27 percent postwar. Within the "nonproductive fields," however, housing
investment increased consistently during the 3-year period, from 11 per-
cent prewar to an average rate of 12 percent postwar. Investments in
education and culture dropped from 11 percent prewar to 6 percent post-
war, while investments in health facilities dropped more pronouncedly
from 4 percent prewar to about 1 percent postwar. Investments in
government facilities, on the other hand, rose from 3 percent prewar
to 7 percent postwar.
In sum/ a cross-section analysis of North Korea's capital in-
vestment program under the Three Year Plan has brought out, in terms
of percentage relationships among economic and social sectors which
received various shares of investment capital, a rather well-defined
order of priority in the North Korean regime's postwar development
policy. The genuineness of the often-stressed North Korean policy of
giving "absolute" priority to the development of industry is borne
out by the fact that about half of all investment was devoted to in-
dustry throughout the period 1954-56. In terms of priority in time,
however, this was apparently not the case -- although the proportion
of total capital which was invested in industry increased gradually
(from 41 percent in 1954 to 52 percent in 1955 and 55 percent in 1956,
averaging about 50 percent for the 3-year period), the transportation-
communications sector received more than 20 percent of the basic in-
vestment capital in the first year of the Three Year Plan. The pro-
portion of total capital invested in this sector subsequently dropped
to an average of 13 percent for the 3-year period. External evidence
indicates that the postwar rehabilitation of the transportation-
communications sector was accomplished quite rapidly. The above in-
vestment analysis lends substance to such indications.
Tables 9 through 19* give the basic estimates and original
data for the aggregative process described above.
* Appendix A, pp. 24-35, below.
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APPENDIX A
STATISTICAL TABLES
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Table 9
Consolidated Budget Revenues and Expenditures in North Korea al
1949 and 1954-56
Revenues
Taxes
Profits of state enterprises
Sino-Soviet Bloc aid
Other revenues
Total
Expenditures
Economic construction
Education, culture, and health
Military
Administrative
Other expenditures
Total
Surplus
1949
1954 hi
1955 hi
1956 hi
Million
Current
Won
Percent
Million
Current
Won
Percent
Million
Current
Won
Percent
Million
Current
Won
Percent
5,121 2/
15,780 2/
20,901 2/
24.5
75.5
100.0
11,392
45,278
30,384
3,130 2/
90,184
12.6
50.2
33.7
3.5
100.0
9,920
65,224
23,470
9,543 li
108,157
9.2
60.3
21.7
8.8
100.0
8,711
73,450
15,734
97,895
8.9
75.0
16.1
100.0
8,093 2/
3,775 f/
3,100 g/
4,650 g/
19,618
41.3
19.2
15.8
23.7
100.0
56,077
7,923
6,453
6,781
3,407 2/
8o,641
69.6
9.8
8.0
8.4
4.2
100.0
75,345
9,510
6,190
6,451
3,123 2/
100,619
74.8
9.5
6.2
6.4
3.1
100.0
70,701
12,119
5,650
5,907
815 sii
95,192
74.3
12.7
5.9
6.2
0.9
100.0
1,283
9,543
7,538
2,703
a. The term consolidated budget refers to the combined budgets of central and local governments. In 1954-56, central government
budgets averaged more than 90 percent of the consolidated budget. 32/
b. 112/
c. 11-1/
d. Residuals.
e. ii-2/
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Table 10
Personal Consumption in North Korea
1949 and 1954-56
Million Current Won
1949 1954 1955 1956
Retail sales for household consumption 2/ 29,138 60,439 53,526 60,314
Farm consumption of food crops 2/ 6,902 11,641 10,570 11,548
Household expenditure for rent 2/ 1,329 1,735 1,917 2,135
Household electric light 2/ 119 182 202 225
Communal services 2/ 2,743 5,482 7,518 10,346
Minus transfer payments -748 f/ -957 d -1,495 h/ -1,483 1/
Total
39,483, 78,522 72,238 83,085
a. From Table 11, p. 26, below.
b. From Table 12, p. 27, below.
c. From Table 13, p. 29, below.
d. From Table 14, p. 31, below.
e. From Table 15, p. 31, below.
f. 4
g. 46
h.
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Table 11 .
Total Retail Sales for Household Consumption in North Korea
1949 and 1954-56
(1) Index of total retail sales
(1949 = 100) RI
(2) Total retail sales in 1949 prices
(million won)
(3) Total retail sales in current prices
(million won) di
(4) "Social commodities" 1/
as a percent of retail sales
(5) "Social commodities" di in current prices
(million won)
(6) Index of retail sales in current prices
(1949 = 100) gi
(7) Retail sales of goods and services to
enterprises, in current prices (million won)
Total retail sales for household consumption
in current prices (million won) 1/
1949 1954 1955 1956
100 94 90 119
32,037 Li 30,115 28,833 38,124
32,037 69,867 63,721 75,867
N.A. 7.9 1/ 10.4 2/ 14.9 2/
1,106 f/ 5,519 6,627 11,304
100 218 199 237
1,793 h/ 3,909 3,568 4,249
29,138 60,439 53,526 60,314
a. 112/
b.
c. (2) times the general retail price index from Table 19, p. 34, below.
d. North Korean official sources use the term social commodities to refer to retail goods purchased by
the government.
e. 21/
g. Derived from (3).
h. 53/
minus (5) minus (7).
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Table 12
Farm Consumption of Food Crops in North Korea
1949 and 1954-56
(1) Percentage distribution of planted
acreages 2/*
Grains
Vegetables
Potatoes
Total
(2) Index of production (1949 = 100) hi
Grains
Vegetables
Potatoes
(3) Weighted index of food crop production
(1949 = 100) si
Grains
Vegetables
Potatoes
Total
(4) Value of food crop production
(million 1949 won)
* Footnotes for Table 12 follows on p. 28.
1949 1954
92.8
2.0
5.2
93.0
3.2
3.8
100.0 100.0
1955 1956
92.7
3.3
4.0
91.7
3.1
5.2
100.0 100.0
100 84 88 108
loo 104 120 133
100 83 79 128
100 78.11 81.59 99.07
100 3.32 3.94 4.07
100 3.16 3.16 6.67
100 84.59 88.69 109.81
10,785 1/ 9,123 9,565 11,843
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Table 12
Farm Consumption of Food Crops in North Korea
1949 and 1954-56
(Continued)
1949 1954 . 1955 1956
Retail price index (1949 = 100) 2/ 100 232 221 199
Value of food crops in current prices
(million won) f./ 10,785 21,165 21,139 23,568
Index of agricultural population as a
percent of total (1956 = 100) s/ 122 108 101 100
Percent of total food crops retained by
farmers adjusted for changes in farm
population 84 75 70 69 12/
Farm consumption as a percent of total
crops 1/ 64 55 50 49
Value of farm consumption in current prices
(million won) 1/ 6,902 11,641 10,570 11,548
a.
b.
c.
d.
e.
f.
g.
h.
i.
J.
1.7
1) times (2).
From Table 19, p. 34, below.
Derived from (4) and (5).
Derived from Table 15, p. 31, below.
See Appendix B, Mhthodology.
(8) minus the percent of crops sold (15 percent) and feed and seed allowances (5 percent). 2//
(6) times (9).
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Table 13
Household Expenditures for Rent in North Korea
1949 and 1953-56
1949 1953 1954 1955 1956
Index of investment in housing
construction (1953 = 100) 2/ loo 12/ 425 518 619
Additional floorspace
(million square meters) 2/ 0.806 3.426 4.175 4.989
Additional number of houses 11 36,636 155,570 189,776 226,779
Total number of houses
(thousand houses) 2,215 2/ 1,652 f/ 1,807 g/ 1,997 2,224
Household expenditures for rent
(cash and imputed) (million
current won) 1,329 .12/ 1,586 1/ 1,735 1/ 1,917 1/ 2,135 1/
a. Derived from Table 17, p. 33, below.
b. 211/
c. Additional floorspace built in 1953-56 was 13.4 million square meters (sq m). 22/ This amount was
allocated on the basis of the investment index as follows:
(100 + 425 + 518 + 619)
100
x 16. 13.62 4 0.806
16.62
1.00x + 4.25x + 5.18x + 6.19x = 13.4
o.8o6 - 3.426 - 4.175 - 4.989 =11.4
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Table 13
Household Expenditures for Rent in North Korea
1949 and 1953-56
(Continued)
d. (2) divided by 22 sq m. The average size of the houses built in P'yongyang approximates 22.3 sqqm)
which may be compared with the South Korean average of 28 sq in.
e. fig/. Urban dwellings (680,000) divided by urban population as a percent of total population (30.7 per-
cent, derived from Table 18, p. 33, below).
f. fia/. 2)215 - 563 (number destroyed in war) = 1,652 (thousand houses). The average number of persons
per house is as follows; 4.1 in 1949, 4.3 in 1954, 4.0 in 1955, and 3.6 in 1956.
g. 22 sq in x 1.807 million houses = 39.754 million sq m.
39.754 7.7 = 5.16 sqm per capita. The planned per capita floorspace in 1954 was 6 sq in. 21/
h. fi2./. Based on the average annual rent per month in P'yongyang in 1946, which was 50 won per single-room
house.
i.fifi/. Based on the controlled postwar monthly rent of 80 won per house.
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Table 14
Household Consumption of Electricity in North Korea
1949 and 1954-56
1949 1954 3.955 1956
Total number of houses
with electric lights
(thousand units) 660 a/ 337 374 416 fij
Household consumption 12/
(million current won) 119 182 202 225
a. The consumption of electricity for 1954 and 1955 was estimated
on the basis of an assumed correlation between the number of houses with
electricity and the total number of houses estimated in Table 13, p. 29,
above.
b. 0/. The value of consumption for 1949 was estimated on the basis of
the flat monthly rate of 15 won charged per 60-watt light, which is the
average size bulb allowed for civilians. The postwar rate is 45 won per
light. ?.2,/ It is assumed that, on the average, one light is allowed for
each household and that the household consumption of electric power is
negligible.
Table 15
Expenditures for Communal Services in North Korea
1949 and 1954-56
Million Current Won
1949 1954 1955 1956
Total education, culture, and health
expenditures paid out of budget a/
3,775
7,923
9,510
12,119
Capital investment in ccumune.1 facilities
1,032
2,441
1,992
1,773
Current expenditures for commlina] services
2,743
5,482
7,518
10,346
a. From Table 9, p. 24, above.
b. The postwar price movements in this sector undoubtedly differed from
those in the field of industrial capital investment. Because of lack of
information, however, these figures were derived from Table 7, p. 17,
above, and were used here with out modification for postwar price changes
In capital goods (which, according to Table 6, (3), p. 16, above, were
relatively slight).
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Table 16
Government Purchases of Goods and Services in North Korea
1949 and 1954-56
Million Current Won
1949
1954
1955
1956
Total administrative expenditures W
4,650
6,781
6,451
5,907
Basic construction outlays hi
226
348
411
369
Government purchases of goods and services
4,424
6,433
6,c4o
5,538
Military expenditures W
3,100
6,453
6,190
5,650
a. From Table 9, p. 24, above.
b. Derived from Table 7, p. 17, above. For 1954-56 the 1.4 percent representing the average invest-
ment in government facilities (see Table 8, footnote e, p. 20, above) was applied to aggregate invest-
ments without adjustment for postwar price changes, because of lack of information.
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Table 17
Index of Basic Investments in North Korea
1954-56
1949 = 100
"Productive fields" a/
1954 11,/
1955 W
1956 2/
Industry
348
518
489
Agriculture
210
402
374
Transportation and communications
707
498
264
Commerce
116
1i7
182
Index for "productive fields"
370
476
420
"Nonproductive fields" 9.../
Housing
353
430
514
Education and culture
267
172
228
Health
151
252
13
Index for "nonproductive fields"
381
360
341
Total basic investments
373
441
396
a. A literal translation of the North Korean term.
c. Derived from Table 7, p. 17, above.
Table 18
Agricultural Population in North Korea
1949 and 1954-56
12112
1954
1955
1956,
Estimated total population (million) a/
9.1
7.7
7.9
8.1
Percent represented by:
Agricultural cooperative members bJ
17.1
26.1
40.0
Independent peasants hi
69.3
44.2
31.2
16.6
Total12/
6.21,1
61.3
27.3
56.6
Agricultural population (million)
6.3
4.7
4.5
4.6
a. Li
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Table 19
Selected Indexes in North Korea
1946-49 and 1951-57
1949 = 100
Basic investments
Total labor force in
"people's economy" 1/
Industrial labor
productivity
Per capita industrial
labor productivity
Value of industrial
production
Grain production
"National income" 2/
in 1949 prices
Retail prices of state
and cooperatives
General retail prices
1946
1947
1948
1949
1951
1952
1953
1954
1955
1956 1957
N.A.
46 2/
39/
N.A.
302/
712/
4o y/
N.A.
N.A.
N.A.
65 2/
59/
N.A.
522/
782/
N.A.
N.A.
172 hh/
N.A.
78 2/
81 2/
N.A.
782/
1012/
148!,!
119 y/
N.A.
100 a/
loo 2/
loo 2/
100 Li
100W
100 1.1
100W
100 y/
100 hh/
N.A.
N.A.
N.A.
N.A.
1472/
852/
N.A.
N.A.
427 hh/
N.A.
74 2/
N.A.
N.A.
53p/
922/
N.A.
374 y/
531 hh/
135 2/
102 2/
89 1/
78 1/
642/
882/
70
261 y/
368 hh/
373 2/
122 2/
125w
99 2/
97W
842/
94 H/
183 y/
232 22/
441 2/
135 2/
132 1/
118 2/
'44 2/
882/
116W
163 y/
221 22/
374 2/
143 f/
138j
152 1/
1832/
1082/
1146!,!
143 W
199 22/
408 2/
149 2/
171W
N.A.
264 2/
120 W
1682/
135 22/
N.A.
a.
b. Derived from Table 17, p. 33, above.
c. /11/
d. North Korean official sources
f?
g.
Bence fir- x 143 = 149.37.
use the term people's economy to refer to all state and cooperative enterprises.
50X1
The total labor force in 1957 was 844,000 and in 1956) 808)000. /?/ 50X1
50X1
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j. Si
Table 19
Selected Indexes in North Korea
1946-49 and 1951-57
(Continued)
u. See I, B, and the
second footnote, p. 11, above.
bb.
cc. 22/
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Table 20
Gross National Product of North Korea
in Constant (1949) Prices
1949 and 1954-56
Million 1949 Won
1949
1954
1955
1956
Consumption)/
39,483
33,846
32,687
41,751
Investment b
7,620
27,759
32,957
29,652
Government c
4,424
2,773
2,733
2,783
Military d
3,100
5,656
5,435
4,535
Net imports and Sino-
Soviet Bloc aid s/
-47o
-21,216
-16,611
-10,739
Gross national product
in constant (1949) prices
54,157
48,818
57,201
67,982
Index
loo
90.14
105.62
125.53
North Korean index of
"national income" in
1949 prices E/
100
94
116
146
a. Figures from Table 10, p. 25, above) divided by the
index.
b. From Table 6, p. 16) above.
c. Figures from Table 16, p. 32) above,
index.
d. Figures from Table 16, p. 32, above, divided by
deflator (see Table 61 (3), p. 16, above).
e. From Table 21) p. 37) below. Data for 1949 are
and data for 1954-56 are for Sino-Soviet Bloc aid.
f. From Table 19, p. 34, above.
retail price
divided by the retail price
the implicit price
for net imports
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Table 21
Net Imports and Aid in North Korea
In Constant (1949) Prices
1949 and 1954-56
Million Won
1949 1954 1955 1956
Net imports and aid
in current prices 2/ 470 30,384 23,470 15,734
Average composition of
aid goods, 1954-56 hi:
Capital goods and raw
materials, 60 percent
Consumer goods,
40 percent
Sino-Soviet Bloc aid in
1949 prices:
Capital goods and raw
materials 2/
Consumer goods 1/
Net imports and Sino-
Soviet Bloc aid in
1949 prices 2/
18,230 14,082 9,440
12,154 9,388 6,294
15,977 12,363 7,576
5,239
4,248 3,163
470 21,216 16,611 10,739
a. From Tables 1 and 9, pp. 5 and 24, resepectively, above.
b. 200/
(.
c. 2) divided by the implicit price deflator (see Table 6, (3),
p. 16, above.
d. (3) divided by the retail price index.
e. (4) plus (5). Data for 1949 are for net imports, and data for
1954-56 are for Sino-Soviet Bloc aid.
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APPENDIX B
METHODOLOGY
Although a reasonable number of studies on North Korea have been
made heretofore at the plant or industry level, there has long been
a serious gap in economic intelligence on the aggregative level. The
present report represents the first attempt at estimating the GNP of
this country.
1. Nature of Data.
The Scarcity of aggregative data imposes the following restric-
tions on the scope and depth of GNP estimates for North Korea at the
present time.
a. Approaches Used.
Ideally, a thorougngoing aggregative study should use all
three independent approaches in arriving at an estimate of GNP --
by end-use, by value added, and by distributive shares -- the esti-
mate for each of Which should be arrived at inductively for mutual
check and balance of final results. But the quality and quantity of
data available are such that this procedure is not possible for North
Korea.
Official indexes of gross value of industrial production for
1946, 1949, 1953, and 1955; the percentage distribution of industries
In total industrial production value covering 1944, 1949, 1953, and
1955 101/; and absolute figures on gross value of production for in-
dustries for 1946 are available It is pos- 50X1
Bible to obtain gross value of production for 1949, 1953, and 1955 by
applying the above set of indexes to the 1946 value data, thus obtain-
ing gross output values in 1946 prices for the industrial sector.
Modified value-added weights of Communist China or South Korea may be
used to derive a rough estimate of GNP by industrial origin. From the
accounting truism that that is spent equals vhat is received, which
in turn equals what is produced) it follows that total expenditures
(GNP by end use) equal total income earned by factors of production
(GNP by distributive sharea), which equals total net product (GNP by
sector of origin), and that the magnitudes for either of the two other
estimates may be obtained by means of equality if one of the triple-
identity series can be estimated. The GNP for North Korea by sector
of origin, for example, may be obtained by using the above-cited data
and treating the nonindustrial sector as residual.
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A deductive approach such as this, however, is tenuous at
best, not to speak of the danger of using foreign analogies to get
value-added weights. One of the advantages of GNP by sector of
origin is that this method) if approached inductively through a care-
ful estimation of sector weights industry by industry, will bring
out, among other things, a bird's-eye view of the structural composi-
tion of the total economy as of a given time -- or, if a time-series
analysis is possible) an intertemporal comparison of structural
changes. Lacking the necessary data, one is compelled to resort to a
secondary course, as was done in the present report -- that is, an
analysis of sector allocation of capital investment -- to arrive at
the next best approximation of the structural features of the economy.
Because the primary purpose at hand is to estimate the over-
all magnitude of GNP rather than to probe into the intricacies of
the internal relationships of the economy at a fairly sophisticated
level of analysis (which by the nature of the restrictions imposed by
the dearth of data is quite out of the question for North Korea), the
end-use approach has been used, not only for the reason that this ap-
proach has the advantage over other approaches in the smaller probable
margin of error in the component estimates 12i/ but also for the reason
that it is the only avenue open for a reasonably reliable estimation
of GNP for North Korea at the present level of economic intelligence.
The estimates of growth in real GNP are derived from deflating GNP
in current won by official price indexes of retail trade and invest-
ment. These indexes are adequate to give broad indications of trends
In GNP and its components. Because no information on the methods of
construction of these indexes are available, however, the reliability
of growth trends in comparison with measured trends in other countries
Is subject to considerable uncertainty.
b. Objectivity.
A conscious effort has been made in this report to avoid esti-
mates based on intuitive judgments. Acceptance of data as reported --
with a minimum of dogmatic refinements unless the contrary is obviously
true -- allows little or no room for personal predilections but leaves
some inconsistencies in the final figures. For example, the reported
figures on national defense expenditures are obviously too small in the
light of the available information on North Korea. Evidently the amount
reported in the budget represents military wages to the exclusion of all
other defense expenditures. Most of the latter apparently are buried in
the capital investment figures, thus making these figures disproportion-
ately large in relation to the size of GNP. Because of the absence of
the information necessary for making a reasonably safe adjustment of
these figures and because of the fact that the above distortion would
not alter the final GNP figure owing to mutual cancellation of errors
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within the components themselves/ the figures have oeen accepted as
they stand.
The use of subjective judgments in the selection of data is
unavoidable in view of the many conflicting reports published by North
Korean official and unofficial sources. Discrepancies are particu-
larly prevalent among the figures expressed in value terms Which oc-
cur in the North Korean reports in either current or constant prices
without specifications. Also, if it is known to be in constant value,
the base year is not always defined in these reports.
This kind of ambiguity occurs in both absolute figures and
indexes/ but conflicts are more numerous among absolute figures than
Indexes. For this reason, if a choice is possible between the two
and if the value obtained through index series does not agree with
an absolute figure the former is
used in preference to the latter.
Where there is conflict between the figures of the Central
Statistical Bureau of the Central Planning Commission and those of
other sources, the former are taken to be correct, insofar as
reasoned judgment does not dictate otherwise. If the disagreement
Is found in figures reported by the same source more than once, the
latest figure is taken to be more reliable unless the contrary is
obvious in the light of other evidence.
The years 1944/ 1946/ 1949, and 1953 are familiar base years
for most time series appearing in the North Korean publications. The
year 1944 represents the peak level of output for most sectors under
the Japanese regime, and it is mentioned by the North Koreans in their
discussions of the First Five Year Plan as a criterion for their pro-
duction goals. The year 1946 represents the first full calendar year
under the Communist regime/ and the year 1949 is the "normal" year
under the new regime and often is the base of comparison for the
Three Year Plan goals. The year 1953 is used by the North Koreans for
propaganda purposes because that year had the lowest level of eco-
nomic activity outside the war years, and, naturally, comparisons
with any subsequent years would show impressive gains.
The conversion of time series based on any of these years into
a common base does not pose any problems if the series are based on
some homogeneous units of measurement. In dealing with value data,
unlike the index of physical production/ difficulties are encountered
which are insurmountable without recourse to additional information.
A fair amount of information is available from captured documents on
1946 economic aggregates in value terms. The absence of pertinent
information on the monetary reform that took place in November 1947,
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however, creates a serious gap in the link of value relatives between
any of the years before and after 1947, and this makes the 1946 data
useless for the purposes of current analysis. For example, the esti-
mate of gross value of industrial production for 1946 is of historical
significance only, in the absence of price relatives linking 1946 with
subsequent years.
2. Estimation of Personal Consumption Expenditures.
Estimation of personal consumption expenditures in North Korea
represents the most troublesome and the weakest phase of the GNP
estimate. Paucity of data permits only the crudest estimation of
that portion of aggregate expenditures representing personal end use
consisting of total retail sales, the farm consumption not entering
in the trade, the household rent, expenditures for electricity, and
government current expenditures for communal services. The estimate
of expenditures for personal services should ordinPrily include ex-
penditures for transportation and communications services. I
It is possible to obtain data on passenger-
kilometers for train and automobile services for 1946-48.*D./ The
postwar index of passenger turnover rate 12114/ may be used o derive
the figures for passenger-kilometers for each of the postwar years
under analysis. The conversion into value terms entails the average
train and bus fare paid. The average passenger train fare was 0.48
won per kilometer in 1949 122/ and 1.63 won In 1954-56, 12?/ and the
average bus fare was 1.35 won 107/ in 1949 and 3 von in 1954-56. 12f/
Aggregate transportation expenditures estimated on the basis of these
figures yields a magnitude roughly equal to 1 percent of GNP. This
may be compared with 1.8 to 2 percent of the monthly cash income
spent by the South Koreans for these services. 122/ In the case of
North Korea, however, a considerable part of the expenditures pre-
sumably represents official travel. It is impossible to separate
this amount, on the basis of available data, from that portion repre-
senting personal traveling expenses. In view of these difficulties
and also of the fact that the magnitude involved is of such a size as
not to distort the final figures in any perceptible degree, this esti-
mate was omitted from the final consumption figures.
For the estimation of total retail trade, an absolute figure on
retail trade is available for 1949, the figure on "commodity turnover"
for 1956, and a retail trade index series covering 1949 and 1953-56. 112/
The total volume of commodity turnover in 1953 was 31.6 billion won 111/
The turnover in 1956 was 2.8 times that in 1953, 11g/ and thus the value
of trade for 1956 was 88.48 billion won. There are not enough data
available, however, to make it possible to segregate retail trade volume
from this figure. Consequently, the 1949 retail trade figure was moved
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to 1954-56 by using a retail trade index which is based on constant
1949 value terms. This was then converted on a current price basis.
In the estimation of farm consumption outside the trade sector,
the crucial figure is the percent of total food crops consumed by
farm households. In this connection, the following facts are known
for 1956:
Total population: 8,100,000 113/
Agricultural cooperative members: 40 percent, or 3,240,000 RV
Individual peasants: 16.6 percent, or 1,345,000 212/
Number of agricultural cooperatives as of December 1956:
15,825 11.6./
Average nuMber of households per cooperative in December 1956:
54'7 111/
Total grain production: 2,870,000 metric tons*
Average volume of grains retained per cooperative member house-
hold: 1,616 kilograms (kg) 112/
From these data the following estimates can be derived:
15,825 x 54.7 = 865,628, the total nuthber of cooperative member
households
1,616 kg x 865,628 = 1,398,855 tons, the total amount of grains
retained by cooperative households
1,398,855 + 2,870,000 = 48.74 percent, the percent of total
amount of grains retained by cooperative households
3,240,000 + 865,628 = 3.74, the average number of persons per
cooperative member household
1,345,000 + 3.74 = 359,626, the total number of peasant households
1,616 kg x 359,626 = 581,156 tons of grain retained by peasant
households
581,156 + 2,870,000 = 20.25 percent, the percent of the total
amount of grains retained by peasant households
Thus the estimated percent of total food crops retained by farm
households in 1956 is 48.74 20.25 = 68.99 percent. This leaves a
residue of about 31 percent, a large part of which (28 percent in
1955) 122/ presumably represents taxes in kind and state purchase of
grains. The farm consumption was estimated by deducting from this
amount the average percent of grain output reportedly sold by farmers
(15 percent) and the allowances for seed and fodder (5 percent) al/
* Tonnages are given in metric tons throughout this report.
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Implied assumptions are that the average size of peasant house-
holds (3.74 persons) is equal to that of cooperative member house-
holds and also that the average amount of retained grains (10616 kg)
is the same in both groups. Indications are that a higher tax is
levied against individual peasants than against cooperative members,
but this may be offset by the higher unit output of nonmetbers, with
the net effect that the average amount of grains retained by peasant
households may approximate 1,616 kg. In any event, small individual
variations tend to even out when dealing with national aggregates.
3. Derivation of Percentage Distribution of Capital Investmentsj
1949 and 1954-56.
It is useful to know how much of the total investment tlapital
went into each of the economic and social fields in North Korea dur-
ing the Three Year Plan period. North Korea has only published data
on the total for this period. Consequently, the following round-
about process had to be resorted to in order to obtain the breakdown
for each year of the 3-year period.
The Central Statistical Bureau of the Central Planning Commission
has announced the index of basic construction investments for the
years 1953-55 in terms of value as of 1 January 1950. 122/ The same
source gives the percentage breakdown of the total fixed investment
for 1949, as shown in Table 8, column 1,* and also the information
that "the total volume of investments in capital construction during
the period from 1953 to 1955 amounted to 63.2 billion won in terms of
value estimated as of 1 January 1950." lea/
These announcements give a starting point for estimating the total
volume of investments by industries for 1949 and for the first 2 years
of the Three Year Plan period. First the 63.2 billion won of total
Investments in capital construction for 1953-55 was distributed among
the years 1953-55 on the basis of the index of total investments. In
early February 1957 the Central Statistical Bureau announced that
total state investment would be 80.6 billion won (in 1949 prices) dur-
ing the Three Year Plan period and also gave the industry-by-industry
distribution of that amount. lay The 1956 investment was obtained
by deducting from the 3-year total the sum of the investments for
1954-55.
Of the total capital invested for 1949, 69.9 percent went into
"productive fields" and 30.1 percent into "nonproductive fields." Of
the latter, 11.2 percent went into housing and 15.5 percent into educa-
tion, culture, and health facilities, leaving 3.4 percent in an un-
explained category. 122/ This is treated in Tables 7 and 8** as
P. 19, above.
** Pp. 17 and 190 respectively, above.
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representing the capital investment in government facilities. The
hybrid category for "education, culture, and health" had to be divided
up into two separate categories commensurate with the breakdown in
Table 17.* This was done, in the absence of necessary information,
on the basis of the budgetary allocation of state expenditures for
these categories.
The 1949 figures were then moved to 1954-55 for each of the cate-
gories as in Table 7.** The indexes for 1956 were derived from the
absolute figures obtained as residuals of the 3-year totals shown in
Table 7.
The above procedures finally yielded the percentage distribution
of capital investments in all the branches for each of the years in
question. As a means of checking, the average percentage distribu-
tion for each category for the Three Year Plan period is compared with
the averages published by the Central Statistical Bureau as in
Table 8.***
Estimation of inventory accumulation presents almost impossible
problems. At the present level of economic intelligence, on North
Korea, there are no data on the size of the inventory accumulation
In North Korean enterprises. Financial records dated 30 June 1950
of the Kangso Electrical Machinery Manufacturing Company j/ are
available from captured North Korean documents and represent the
only source containing even a rough approximation of the above in-
formation. A careful study of the balance sheet and profit-and-loss
statement of this company reveals that inventories (goods in process
and raw materials on hand) made up itmghly 60 percent of the total
current assets. Through a rather tenuous generalization, it is
assumed that this figure roughly represents the inventories as a per-
cent of the total working capital in North Korea today. It may be
mentioned for comparison that, in the case of the USSR, roughly
75 percent of working capital is estimated to represent inventories. 1E/
*
P.
33, above.
**
P.
17, above.
***
P.
19, above.
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