Before the post-WWII division of Korea, the North only had about 18% of the total commerce and about a third of the light industry and agriculture of the peninsula. Despite the destruction of the North by American forces during the Korean War, the DPRK had managed to achieve higher GNP per capita than South Korea until the mid-1970s. The North Korean economy in the mid-1960s was actually praised even by western Keynesian economists like Joan Robinson:

Eleven years ago in Pyonygang there was not one stone standing upon another. (They reckon that one bomb, of a ton or more, was dropped per head of population.) Now a modern city of a million inhabitants stands on two sides of the wide river, with broad tree-lined streets of five-story blocks, public buildings, a stadium, theaters (one underground surviving from the war) and a super-de luxe hotel. The industrial sector comprises a number of up-to-date textile mills and a textile machinery plant. The wide sweep of the river and little tree-clad hills preserved as parks provide agreeable vistas. There are some patches of small gray and white houses hastily built from rubble, but even there the lanes are clean, and light and water are laid on. A city without slums.

There is already universal education […] There are numerous nursery schools and creches, all without charge. There is a complete system of social security […] The medical service is free. […] Workers receive holidays with pay.

All the economic miracles of the postwar world are put in the shade by these achievements

The DPRK later encountered a number of severe setbacks from increased military pressure from the US that caused the North Koreans to devote up to 25% of its GNP to its military (which is extremely high), crippling sanctions, the Sino-Soviet split that strained its economic relations with both China and the Soviet Union, excessive unbalanced growth with an overemphasis on heavy industry and underinvestment in light industry and consumer goods, bottlenecks in some sectors from mistakes in planning, a lack of hard currencies, and devastating droughts and floods hurting agriculture. The loss of the Soviet Union and the rest of the Soviet-bloc left the DPRK even more extremely economically isolated and vulnerable. This ultimately led to its economic devastation in the 90s.

South Korea’s economic rise actually relied heavily on a state-led model (which ironically contradicts the neoliberal dogma of the Economics Explained channel) of 5-year plans, protectionism, industrial policies, and state-owned enterprises (like Pohang Steel Company) as well as receiving large amounts of foreign investment, technology, and aid from the West and its allies.

For some time, North Korea did have a higher standard of living than South Korea, in spite of the international isolation and near obliteration they suffered under the war.