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With a $1 billion economy, North Korea can easily afford nukes

People watch a television broadcast reporting the North Korea's nuclear test at the Seoul Railway station on February 12, 2013 in Seoul, South Korea. North Korea confirmed it had successfully carried out an underground nuclear test, as a shallow earthquake with a magnitude of 4.9 was detected by several international monitoring agencies.

When first reported last night, news was that there'd been an earthquake near the Korean peninsula. Then the political scientists took over from the seismologists and the tremor became North Korea's third nuclear test. But given the impoverished state of the country and the fact that building weapons is pretty expensive, how can North Korea afford it?

"The economy is certainly a decrepit economy but it is in the range of $1 billion in terms of annual production," says Georgetown Asian studies professor Victor Cha. "In addition, they devote about 30 percent of the entire nation's resources to the military and to the development of weapons systems."

"So," he adds, "their people are starving, but they are able to do this."

North Korea gets its money by selling minerals to the Chinese but, says Cha, a lot of its financing comes from "front businesses" run by the military that are both legal and illegal, including the sales of black market pharmaceuticals and cigarettes.

More economic sanctions are expected from the United Nations.

About the author

Kai Ryssdal is the host and senior editor of Marketplace, public radio’s program on business and the economy.

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