Station 1: Document b – North and South Korea’s gdp (pg. 65)

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Station 1: Document B – North and South Korea’s GDP (pg. 65)

  1. Define the term GDP per capita?

  2. What was the GDP per capita in South Korea in 1990? How did it change over the next 15 years?

  3. What was the overall trend for the GDP per capita in North Korea from 1990 to 2005?

  4. What does this graph suggest about the productivity of the two countries?

Station 2: N. Korea Blocks a Market Economy Article

  1. As of 2004, what options did consumers have for purchasing food?

  2. What is the ration system? Why has the government reinstituted this system?

  3. How do North Korea’s changes in policy reflect the role of government in the nation’s economy?

Station 3: Making Cars for the World Article

  1. Identify the ways in which Hyundai has become so successful over the past two decades.

  2. How has the economy of South Korea enabled the nation to compete globally and create wealth?

Station 4: Document C – Samsung and the “Next Great Tech Revolution” (pg. 65)

  1. How has the Samsung Corporation changed over the past decade?

  2. What aspects of a market economy are illustrated by the growth and success of Samsung?

Station 5: How Does North Korea Make its Money?

  1. What consumes much of the total government spending?

  2. Use data from the World Factbook to compare and contrast North and South Korea’s GDP per capita.

  3. According to Jang, how does North Korea make most of it income?

How Does North Korea Make it’s Money?
What's the overall condition of North Korea's economy?

Not good. North Korea's economy is one of the world's "most centrally directed and least open" and faces "chronic economic problems," according to the CIA World Factbook -- which collects information for U.S. government agencies.

"Industrial capital stock (machinery) is nearly beyond repair as a result of years of underinvestment, shortages of spare parts, and poor maintenance. Large-scale military spending draws off resources needed for investment and civilian consumption," it continues.
The factbook projected data from a 1999 OECD study to estimate North Korea's Gross Domestic Product (GDP) in 2011 to be $1,800 per capita. It puts growth at 0.8%. However, U.N. estimates for 2011 put per capita GDP at $506 and growth at -0.1. In comparison, the factbook estimates South Korea's GDP per capita in 2011 to be $31,700 and puts growth at 3.6%. Figures for 2012 were $32,400 and 2% respectively.
What are North Korea's main sources of income?

The factbook defines North Korea's industries as military products, machine building, electrical power, chemicals, mining, metallurgy, textiles, food processing and tourism. Its main exports were minerals, metallurgical products, manufactures including armaments, textiles and agricultural and fishery products and its main imports petroleum, coking coal, machinery and equipment, textiles and grain, it says. Estimated industry accounted for nearly half of GDP, followed by services and agriculture, the factbook says.

South Korea's Ministry of Unification put the amount of trade between the two countries in 2011 at about $1.7 billion. Of that, about $914 million was inbound and $800 million outbound. Government and private humanitarian assistance to North Korea totaled about $17.4 million, the ministry said.
Jang Jin-sung is the editor-in-chief of the website New Focus International, which produces news based on a network of North Korean exiles and sources within North Korea. Jang himself in 2004 fled North Korea, where he said he had been on the DPRK Central Broadcasting Committee and the country's Poet Laureate. Jang said South Korean investments generated the bulk of North Korea's foreign currency income with another large chunk of income coming from trade with China. The largest portion of this was from the arms trade, he said.
All North Korean businesses involved with China were also required to give part of their profits -- usually more than 50% -- to the government's financial organization known as "Office 38" as "loyalty offerings," Jang said.
Excerpt taken from How Does North Korea Make its Money? By Susannah Cullinane, CNN, April 10, 2013

Making Cars for the World
South Korea, in contrast to North Korea, is a market economy and has achieved economic success, especially in electronics. South Korea is also revving up its auto-manufacturing business. This reading includes excerpts from an article on the Hyundai Motor Company.
South Korean’s Auto Industry

Chung Mong Koo, chairman of South Korea’s Hyundai Motor, carefully scrutinizes a newly designed gearshift lever for the automaker’s Sonata sedan while his entire senior management team hovers around, anxiously awaiting his approval. The executives are justifiably edgy. Engineers added a plastic plate beneath the shifter to prevent spilled coffee and other items from falling into the mechanism and gumming it up. It’s a minor change, but no one is treating it that way, least of all Chung, a hard-nose, detail-oriented boss…After eyeballing the plastic plate from several angles, Chung demands, “Is this enough?” He’s worried that the gizmo won’t do its job. Finally, he nods his O.K., but reminds his executives: “We can’t allow any defects to damage our cars.”

Changing Reputation

Chung, 67, has spent six years hammering this zero-defects message into the heads of Hyundai’s employees—and the result has been one of the most surprising turnabouts in automotive history. A few years ago, Hyundai, South Korea’s largest car manufacturer, was a synonym for “shoddy.” Seoul was the only place in the world where you were likely to see large numbers of its cars on the street. Today, the company’s line of pleasantly stylish, relatively inexpensive and certifiably reliable sedans and sport-utility vehicles is tailgating the industry’s best-known brands in several prime markets. In the U.S, Hyundai’s sales reached 419,000 cars last year—up 360% since 1998. In Europe, sales spurted 21% in 2004. In India, Hyundai’s 17% share of the passenger-car market made it the largest foreign automaker in 2004 and the second biggest car company overall behind Maruti, a Suzuki subsidiary. Hyundai is beating competitors by modifying its small cars with features designed for Indian customers, like elevated rooflines to provide more headroom for turban-wearing motorists.

Perhaps most surprising: in China’s hotly contested emerging car market, Hyundai’s operation sold more cars than any other foreign joint venture in the first quarter, according to Singapore’s AutoAsia, an automotive data company. In fact, with a compounded annual revenue growth of 20% over the past five years, Hyundai has been the world’s fastest-growing major automaker since 1999, according to Lehman Bros. Hyundai is putting pressure on everybody,” says Rob Hinchliffe, an auto analyst. Indeed, even Toyota vice chairman Fujio Cho last year acknowledged the blur that is getting bigger in his rearview mirror. “Hyundai has quality and prices that have caught customers’ attention, not to mention ours.”

Excerpt from “One for the Road” Time, June 24, 2005. Copyright © 2005 Time Inc. Used by permission.

North Korea Blocks a Market Economy

In 2002, the government of North Korea loosened some of its control over markets and accepted outside aid to alleviate food shortages. Then, in 2005, it reversed itself, returning to controlling markets and food distribution. The first article analyzes this issue.

Government’s Economic Role in North Korea

Much of the focus [to liberalize] was on agriculture. Collective farms had to deliver a portion of their output to the state-run Public Distribution System for sale to citizens at subsidized prices. But the rest could be sold at higher prices in the market. Farmers were also allowed to till private plots and sell produce in small markets that had sprung up around the country. All this appears to have helped boost food production, augmented by big grain shipments from China and South Korea. By last year [2004] many North Koreans were obtaining much of their food from the market, while the government’s distribution system was withering.

But recently, the government abruptly changed course. Soldiers were deployed to guard the fields and monitor the harvest to make sure all rice and other grains ended up in government warehouses. Aid workers say the government purchased the grains at prices well below those prevailing in the market.
The apparent goal is to revive the ration system, say aid workers and experts. Instead of going to the market, women now [line] up in food-distribution centers, where officials behind a bank teller-like window dispense grain through a chute . . . People are allowed to purchase a fixed amount of grain at subsidized prices…North Korea says the average daily ration for adults has doubled under the new system.
Government Hopes and Plans

The government hopes the shift will help ease the pain of people in the cities, where the collapse of industry has left many unemployed or underemployed and without enough money to buy adequate amounts of food in the market. It likely reflects concern that further hardships could lead to unrest in cities and towns…The revival of the ration system also gives the government an important tool to control the population. “The government’s influence over its people has diminished with the rise of the market,” says Lee Young Hoon, an economist [from South Korea]. “The government doesn’t want to stand by and let this happen.”

Excerpt from “North Korea’s Block on Food Aid Reflects Regime Push for Control” by Gordon Fairclough, Wall Street Journal, December 27, 2005. Copyright © 2005 The Wall Street Journal. Used with permission.

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