2021 Index of Economic Freedom

North Korea

OVERALL SCORE5.2
WORLD RANK178
Rule of Law

Property Rights27.7

Judicial Effectiveness5.0

Government Integrity20.2

Government Size

Tax Burden0.0

Government Spending0.0

Fiscal Health0.0

Regulatory Efficiency

Business Freedom5.0

Labor Freedom5.0

Monetary Freedom0.0

Open Markets

Trade Freedom0.0

Investment Freedom0.0

Financial Freedom0.0

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Quick Facts
  • Population:
    • 25.7 million
  • GDP (PPP):
    • $40.0 billion
    • 2.3% growth
    • -0.5% 5-year compound annual growth
    • $1,700 per capita
  • Unemployment:
    • 25.6%
  • Inflation (CPI):
  • FDI Inflow:
    • $25.8 million

North Korea’s economic freedom score is 5.2, making its economy the least free in the 2021 Index. Its overall score has increased by 1.0 point, primarily because of an improvement in the property rights score. North Korea is ranked last among 40 countries in the Asia–Pacific region, and its overall score is well below the regional and world averages.

The economy of North Korea is severely repressed and has been the lowest-ranked in the world every year since the inception of the Index in 1995. Chronic structural problems beset one of the world’s most centrally commanded and least open economies. In a country that lacks even the most basic policy infrastructure of a free-market economy, individuals and businesses lack any economic freedom whatsoever, both in principle and in practice.

IMPACT OF COVID-19: As of December 1, 2020, no reliable information was available on the number of deaths from the pandemic in North Korea.

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Background

Founding President Kim Il-sung’s family has ruled the Democratic People’s Republic of Korea with an iron fist since 1948. After years of self-imposed national isolation, Kim Il-sung’s grandson, Kim Jong-un, burst onto the international diplomatic stage in 2018, initiating summits with South Korea, China, and the United States. Kim’s offer to discuss denuclearization raised hopes for a long-sought diplomatic solution, but those hopes were dashed when Pyongyang made it clear that it refuses to disarm unilaterally as required under U.N. resolutions. Despite repeated attempts at engagement, there has been no progress toward denuclearization. After decades of economic mismanagement and resource misallocation, the DPRK has faced chronic food shortages since the mid-1990s.

Rule of LawView Methodology

Property Rights 27.7 Create a Graph using this measurement

Judicial Effectiveness 5.0 Create a Graph using this measurement

Government Integrity 20.2 Create a Graph using this measurement

Almost all property belongs to the state. Government control extends even to chattel property. There is no functioning judiciary, and the rule of law is weak. Corruption and bribery are rampant throughout the government, and state institutions are opaque. The ruling Workers’ Party, the Korean People’s Army, and members of the cabinet run all companies earning foreign exchange.

Government SizeView Methodology

There is no effective tax system, and the government operates more like a large conglomerate than a traditional government. Resource flows to and from enterprises and individuals are controlled directly rather than through neutral fiscal policy. The military regime has tolerated limited private entrepreneurship in order to boost government revenue. The state controls production levels, and state-owned industries account for nearly all GDP.

Regulatory EfficiencyView Methodology

Entrepreneurial activity is given a low priority and can be seen as a threat to political control. The labor market lacks opportunity to such an extent that the risk of starvation is a legitimate concern. North Korea’s monetary regime is completely controlled, leading to price distortions, and China continues its extensive subsidies of the country’s food and energy.

Open MarketsView Methodology

Trade and investment flows are controlled by the government and affected by multilateral economic sanctions. The regime may be attempting to start modest economic opening by encouraging limited foreign direct investment, but the dominant influence of the military establishment makes any meaningful near-term change unlikely. Access to financing is very limited and constrained by the repressive and firmly state-controlled economic system.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Singapore89.70.3
2New Zealand83.9-0.2
3Australia82.4-0.2
4Taiwan78.61.5
5Malaysia74.4-0.3
6Japan74.10.8
7South Korea740.0
8Kazakhstan71.11.5
9Thailand69.70.3
10Indonesia66.9-0.3
11Brunei Darussalam66.60.0
12Philippines64.1-0.4
13Kyrgyz Republic63.70.8
14Mongolia62.46.5
15Fiji62.2-1.2
16Samoa61.9-0.2
17Vietnam61.72.9
18Vanuatu60.5-0.2
19Papua New Guinea58.90.5
20China58.4-1.1
21Uzbekistan58.31.1
22Bhutan58.3-3.8
23Tonga57.5-1.3
24Cambodia57.30.0
25Bangladesh 56.50.1
26India56.50.0
27Solomon Islands56.53.6
28Sri Lanka55.7-1.7
29Tajikistan55.23.0
30Burma55.21.2
31Maldives55.2-1.3
32Laos53.9-1.6
33Afghanistan53-1.7
34Pakistan51.7-3.1
35Nepal50.7-3.5
36Micronesia50.4-1.6
37Turkmenistan47.40.9
38Timor-Leste44.7-1.2
39Kiribati44.4-0.8
40North Korea5.21.0
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