North Korea’s Mercantile System

North Korea’s industrial sector is now so broken and looted that it’s trucking its raw iron ore to China. Having worked in a few mines myself, all I can say is how ridiculously inefficient it all is. Simply milling, crushing, and smelting the ore vastly improves its value and saves millions on transportation (not to mention wear-and-tear on roads and trucks). Indeed, moving iron ore over any significant difference is almost always done by rail in a normal economy.

The article also contained some interesting stats on North Korea’s increasing economic dependence on China:

According to statistics from China’s Customs General Authority, China accounted for 25 percent of North Korea’s total foreign trade in 2002, but the figure rose to 33 percent a year later and to 39 percent last year. Meanwhile, Japan — North Korea’s third largest trading partner — dropped from 13 percent in 2002 to 7 percent last year, while South Korea’s share of North Korea trade has been decreasing.

In elementary school, you may recall learning about the Mercantile System that existed between Britain and its American colonies. Under that system, America simply produced raw materials and shipped them back to Britain’s mills for finishing. Without these “downstream” industries, the American economy could not develop the facilities and technical experience to participate in the Industrial Revolution. The issue became another controversy between Britain and its American colonies. As with contemporary China, Britain’s vast pool of cheap labor could make the system work, but depended on outside resources to prevent mass unemployment that could destabilize an authoritarian government.

Photo: North Korean trucks laden with iron ore line up at the Chinese border. Across the border, green grass and construction cranes. Note what appears to be a late-model South Korean-made SUV on the North Korean side. From The Chosun Ilbo.