How Does the Economy of Cuba Differ From the Economy of North Korea?
Both are centrally planned command economies, but Cuba has loosened state control — allowing limited private businesses, self-employment, and market reforms — while North Korea keeps near-total government control over wages, production, and distribution, making it one of the world's most closed economies.
The answer
The key difference is the degree of government control and the presence of private enterprise. Cuba and North Korea are both socialist command economies where the state owns most major industries and central planners direct production. But Cuba has gradually loosened its grip, permitting limited private business, self-employment (the cuentapropistas), small cooperatives, and market-oriented reforms. North Korea has done far less of this, retaining near-total state control over wages, production, prices, and the distribution of goods. So the correct answer to this exam question is that Cuba allows more private economic activity and market reform than North Korea, which remains almost entirely state-controlled.
Why the difference exists
After the Soviet Union collapsed in 1991, Cuba lost its main economic sponsor and plunged into the crisis it called the "Special Period." To survive, Havana legalized limited private enterprise, opened the country to tourism and foreign investment, and later expanded self-employment licenses. These reforms accelerated in the 2010s. The result is a hybrid: still overwhelmingly state-run, but with a growing legal private sector and some exposure to global markets.
North Korea faced its own catastrophe — the 1990s famine — but its regime chose a different path, doubling down on state control and self-reliance (juche). While informal jangmadang markets have quietly grown out of necessity, they remain semi-tolerated rather than legalized and embraced. Officially, the state still sets wages, controls nearly all production, and rations distribution. North Korea is routinely ranked at or near the bottom of global economic-freedom indexes, more closed than Cuba.
Putting the contrast side by side
The cleanest way to see the difference is a direct comparison of control level, private enterprise, and openness. Both share a socialist foundation and one-party rule, so the distractors claiming they are "completely different systems" or that "one is capitalist" are wrong — both are command economies rooted in communism. The real, testable difference is one of degree: Cuba has reformed and decentralized more; North Korea remains the more rigid, closed, and centrally controlled of the two.
Answers suggesting Cuba is a free-market economy are also incorrect. Cuba's private sector is real but limited and heavily regulated — the state still dominates. The accurate statement is comparative: Cuba permits more private business and more market reform than North Korea, not that it has abandoned central planning altogether. Both economies also struggle under long-standing external sanctions, which shapes their scarcity and reliance on informal markets.
| Economic system | Socialist command economy | Socialist command economy |
| Degree of state control | High, but loosened | Near-total |
| Private business allowed | Yes — limited & regulated | Very little; markets only semi-tolerated |
| Market reforms | Notable since the 1990s | Minimal, officially resisted |
| Openness (tourism/foreign investment) | Increasingly open | Largely closed |
| Economic-freedom ranking | Very low | Lowest in the world |
Frequently asked
Are Cuba and North Korea both communist economies?
Yes. Both are one-party socialist states with centrally planned command economies where the government owns most major industries. They differ mainly in how much private activity and market reform each permits.
Has Cuba allowed private businesses?
Yes. Since the 1990s Special Period, Cuba has legalized self-employment, small private enterprises, and cooperatives, and opened up to tourism and foreign investment. The private sector remains limited and regulated, but it is real and growing.
Does North Korea allow any private enterprise?
Officially very little. Informal markets called jangmadang have emerged out of necessity and are semi-tolerated, but the state still controls nearly all production, wages, and distribution, making it one of the world's most closed economies.
How do Cuba and North Korea compare in GDP?
Both are relatively poor economies burdened by sanctions and inefficiency, and both publish limited reliable data. The more important comparison for this question is structural — the level of state control and private activity — rather than raw GDP figures.
What economic reforms has Cuba made?
Cuba legalized self-employment and small private businesses, expanded cooperatives, welcomed tourism and foreign investment, and experimented with currency and market-oriented adjustments, especially from the 1990s onward. These reforms loosened but did not end central planning.