The Economic System of North Korea: An Analysis

What is the economic system of North Korea? The economy of North Korea is a centrally planned economy. But the country even when claimed not to have achieved socialism or communism is building and working toward the establishment of socialism in its territory.

North Korea’s economy is heavily centralized and state-controlled, with a focus on heavy industry, mining, and agriculture. International trade is limited due to sanctions and isolationist policies.

In North Korea, the state determines the production and distribution of most certain goods and services. No country is purely capitalist or purely communist.

What do the freedom indexes tell about the economic system of North Korea?

Now, to determine if a country is mostly a market economy or a planned economy, it is useful to examine some economic indexes. For instance, according to the 2026 Index of Economic Freedom, which measures the ability of every human to control his own labor and property, North Korea scores 3.1/100 and is ranked last globally (174th out of 174 countries) and 39th in the Asia-Pacific region, indicating that the country has a repressed economy.

In a similar way, the 2026 Freedom House index evaluates the state of political rights and civil liberties globally. Generally, market economies tend to align more with democracy and freedom, while command economies tend to be characterized by greater state control and fewer democratic and civil liberty protections. North Korea gets a score of 3/100, which qualifies it as Not Free.

North Korea is a country where the government controls what people do for political reasons, and people have limited freedom to choose (what, how much and how to produce, whether to buy or not, selling price, etc.)

Note: Reliable economic data for North Korea is extremely limited due to the country’s isolationist policies. Figures cited by outside sources are estimates and should be treated with caution.

What do the biggest companies in North Korea say about the country’s economic system?

There are no companies in North Korea.

The historical factors that have influenced the economic system of North Korea

The current central planned economic system of North Korea is the result of a combination of factors, including the legacy of the Cold War, the country’s isolationist policies, and the influence of the Chinese and Soviet economies.

In the last decade, the North Korean government has implemented a number of economic reforms, including the introduction of a market economy, to try to improve the country’s economic situation.

However, these reforms have been largely unsuccessful, and the country remains one of the poorest in the world and as a command economy.

Sources

• List of countries by the public sector size
• ILOSTAT
• 2026 Index of Economic Freedom – North Korea
• Freedom in the World 2026 – North Korea

Last updated: June 20, 2026