2014 Index of Economic Freedom

North Korea

overall score1.0
world rank178
Rule of Law

Property Rights5.0

Freedom From Corruption5.0

Limited Government

Government Spending0.0

Fiscal Freedom0.0

Regulatory Efficiency

Business Freedom0.0

Labor Freedom0.0

Monetary Freedom0.0

Open Markets

Trade Freedom0.0

Investment Freedom0.0

Financial Freedom0.0

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Quick Facts
  • Population:
    • 24.7 million
  • GDP (PPP):
    • $40.0 billion
    • 0.8% growth
    • $1,800 per capita
  • Unemployment:
  • Inflation (CPI):
  • FDI Inflow:
    • $79.0 million
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North Korea remains isolated from most of the rest of the world. Data collection is extremely challenging, and reported statistics on the economy remain largely speculative, requiring careful evaluation. North Korea’s economic freedom score of 1.0 is 0.5 point lower than last year due to a worsened rating for freedom from corruption.

Over the 20-year history of the Index, North Korea has remained an unreformed and essentially closed dictatorial state. Despite experimenting with a few market reforms, the world’s most repressed economy adheres firmly to a system of state command and control that upholds the regime’s long-standing songun (“military first”) policy. Every aspect of economic activity is tightly controlled by the Communist Party. The state-run rationing system has deteriorated significantly in recent years. The North Korean economy has been rated the least free throughout the history of the Index.

North Korea may be attempting to open its economy slightly by encouraging limited foreign direct investment, but the dominant military establishment and ongoing leadership transition make any near-term substantial changes unlikely. Normal foreign trade is minimal, with China and South Korea being the most important trading partners.

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Background

The death of Kim Jong-il in 2011 and the ascent of the Western-educated Kim Jong-un generated predictions that North Korea would implement political and economic reforms while moderating its threatening foreign policy. Although the new leader displayed a change in style, he has maintained Pyongyang’s aggressive rhetoric, international provocations, and resistance to market-based reforms. North Korea continues to conduct nuclear and missile tests in violation of U.N. Security Council resolutions and has threatened nuclear attacks on the United States and its allies. Pyongyang has typically escalated, then lowered tensions in attempts to garner diplomatic and economic benefits. The Obama Administration, along with South Korea and Japan, has expressed unwillingness to resume negotiations without tangible signs of change in North Korean policy.

Rule of LawView Methodology

Property Rights 5.0 Create a Graph using this measurement

Freedom From Corruption 5.0 Create a Graph using this measurement

Corruption is endemic at every level of the state and economy. A modern judicial system does not exist. The Workers’ Party, the Korean People’s Army, and members of the cabinet run companies that compete to earn foreign exchange. Property rights are not guaranteed. Almost all property belongs to the state, and government control extends even to chattel property (domestically produced goods and all imports and exports).

Limited GovernmentView Methodology

No effective tax system is in place. The government commands and dictates almost every part of the economy. It sets production levels for most products, and state-owned industries account for nearly all GDP. The state directs all significant economic activity. Large military spending further drains scarce resources. Despite the state’s attempts to crack down on them, black markets have grown.

Regulatory EfficiencyView Methodology

The state continues to regulate the economy heavily through central planning and control. Entrepreneurial activity remains virtually impossible. As the main source of employment, the state determines wages. It also tightly controls the labor market and the movement of people. Monetary instability and hyperinflation stemming from the botched currency revaluation in 2009 continue, with North Koreans preferring to conduct transactions using Chinese yuan.

Open MarketsView Methodology

North Korea’s citizens are highly isolated from other countries. International trade and investment are tightly controlled by the government. Limited foreign participation is allowed in the economy through special economic zones where investment is approved on a case-by-case basis. The financial sector is firmly controlled by the state.

Country's Score Over Time

Bar Graph of North Korea Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing North Korea to other economic country groups

Regional Ranking

rank country overall change
1Hong Kong90.10.8
2Singapore89.41.4
3Australia82-0.6
4New Zealand81.2-0.2
5Taiwan73.91.2
6Japan72.40.6
7Macau71.3-0.4
8South Korea71.20.9
9Malaysia 69.63.5
10Kazakhstan63.70.7
11Thailand 63.3-0.8
12Azerbaijan61.31.6
13Samoa61.14.0
14Kyrgyz Republic 61.11.5
15The Philippines60.11.9
16Sri Lanka60-0.7
17Vanuatu59.52.9
18Mongolia58.9-2.8
19Fiji58.71.5
20Indonesia58.51.6
21Tonga58.22.2
22Cambodia57.4-1.1
23Bhutan56.71.7
24India55.70.5
25Pakistan 55.20.1
26Bangladesh 54.11.5
27Papua New Guinea53.90.3
28China52.50.6
29Tajikistan52-1.4
30Laos51.21.1
31Maldives512.0
32Vietnam50.8-0.2
33Nepal50.1-0.3
34Micronesia49.8-0.3
35Burma46.57.3
36Uzbekistan46.50.5
37Kiribati46.30.4
38Solomon Islands46.21.2
39Timor-Leste43.2-0.5
40Turkmenistan42.2-0.4
41North Korea1-0.5
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