I'm trying to figure out how a country could get into the shape it's in. I started with the present but the further I go back the less information I can find. An example of one of the questions I'm trying to answer is how could a personality cult like the one we see establish itself? How were people who were alive during the beginnings of the cult not think it was all bullshit?
Surprisingly, when Kim Il-sung took power the positions of the two Koreas were largely reversed. The North was a developing industrial power and the South was an incredibly poor agrarian state. The changes began in earnest during the 1960s, when a combination of global factors made North Korea less and less of a player on the world stage. A few of these include:
The Sino-Soviet Split. North Korea took a distinctly Stalinist approach to Communism. As Kim Il-sung became more and more of a Stalin-style dictator, the Maoist Chinese began to view him as a revisionist. Thus the two countries stopped being as close as they had been in the 1950s. Instead of aligning more with the Soviets, Kim decided to develop a state that was as independent as possible from the rest of the world. Thus, we get Juche: basically North Korea's way of being separate from the world.
South Korea began to do better economically. Under Park Chunghee, South Korea jumped from an agricultural economy to a full blown industrialized nation. With the South outpacing the North, Kim's dream of reuniting Korea under favorable conditions for the North were over. Plus, Park began to create a distinct South Korean identity through rebuilding lots of old palaces and monuments, as well as creating a distinctly pro South historiography.
The South began to do better militarily. Again, under Park, the South began to receive updated weapons from America due to him sending about 300,000 troops to Vietnam. So not only was Northern economic domination unlikely, but military domination as well.
So, the North alienated China and the USSR, and South Korea proved able to exceed the North in every way without them. This makes their list of friends pretty thin- who else would help them?
As to establishing a personality cult, I understand that Kim Il-sung followed Stalin's method- find a group of people, use them to eliminate your enemies, then kill them all using a new group. Rinse and repeat until you have a full blown personality cult. He did this with great success using a lot of the guerrilla leaders that helped fight off the Japanese in Manchuria.
Sources: A Review of Korean History. It details both Koreas during this time. It is VERY pro-Park Chunghee, but also one of my only references for Korean history. Understand that Park was also a fairly repressive dictator for the South.
"Nothing to Envy." Which details the lives of a few North Korean refugees that fled to the South or China.
The Democratic People's Republic of Korea is has been the subject of many threads on /r/AskHistorians, some of which may interest you:
How did North Korea get into the position it's in?
Modern North Korea
North Korean Foreign Policy
Past North Korea
Drawing Comparisons
A good examination would be Bruce Cumming's books on the Subject. Specifically, his book Korea's Place in the Sun deals with the larger history of Korea, and how that resulted in the divided nation. Cummings is a little weird, and he may have drunk a little too much of the North's Kool-aide, but he does examine how the North transitioned from a regionally competitive power to a complete shit hole. /u/Onionheadhat has given a pretty good explanation of that, but Id like to just hit on the economic issue just a second.
When Korea was under Japanese rule, the Japanese built a lot of industry in the northern section of the country. There was fast running rivers, as well as a plethora of natural resources. But most importantly, the Japanese shipped materials south from Manchuria into Korea, and later onto Japan. After 1945, this system was partially broken. While the Chinese were willing to ship the North some things, it was never enough to support Northern industries. Specifically, the Soviet Union became a major trading partner of North Korea.
But when the Soviet Union collapsed, the Korean economy tanked. China was, and in many ways still is, lukewarm on Korea. They dont need Korean resources, and North Korean industry doesnt have the capacity to export many goods. When the USSR collapsed, the money, food and resources from the Russo-Korean trade disappeared, and Korea fell apart. The massive famines of the 1990s changed Korea demographically and economically, while weakening the central state. Executions, repressions, and harsh measures have only further weakened the country, whose economy remains poor.
Add to all this the smashing success of South Korea, and it demonstrates the problems with the Korean division. Without the labor force and agrarian culture of the South, North Korea has fared poorly. While South Korea initially had its own difficulties, US aid and a naturally strong position has really boosted South Korea's economy.
This is a question that crops up pretty frequently in the field, and it has a complicated set of answers. One of the things that makes it such a tough question is that many of the people who knew Kim il-Sung personally ended up in North Korea's concentration camps with their families in tow. Not only were firsthand witnesses to North Korean history destroyed, but the people most likely to have been told of their experiences were destroyed as well. We've been able to assemble a decent and (we hope) accurate narrative of North Korean history from other sources, but it's still a disquieting reality that the Kims stamped out so many people who knew who and what Kim il-Sung really was.
(We'll get back to the subject of the camps in a little bit, because -- unsurprisingly -- they're part of the answer too. It's very hard to build a series of concentration camps in a country and not have them leave a mark on the political landscape.)
Let's address your first question here, which is by far the more complicated.
Warning: We're going to start in the stratosphere and then gradually come back to earth, because for all that North Korea looks like an extreme aberration, it actually isn't as special as it appears. If you just want an explanation of the more historical aspects of how and why the personality cult got its start, I wrote a set of comments here that I hope are helpful. Here I'm going to try to dig into the underlying reality of postwar North Korea and how Kim il-Sung managed to to gain so much traction in such a small period of time.
"How could a personality cult like the one we see establish itself?" We should start this off by observing that the personality cult isn't unique to North Korea. Various forms of it have been standard operating procedure in world government until recently (e.g., absolute monarchies), and some fairly innocuous elements remain in developed countries, even if most of the time we're not really aware of it. We laugh at North Koreans for supposedly believing that Kim Jong-il was the greatest golfer who ever lived, that a comet heralded his birth in the heavens, or that Kim il-Sung was the reason the Japanese empire fell, or that he wrote a bunch of amazing operas in between gunning down scores of Japanese soldiers on the sacred Mount Paektu. This is the "Cool story, bro" approach to international relations.
Then without any sense of irony whatsoever:
So. If we take a very dispassionate view of the "cult of personality" in human government, we're forced to admit that the psychological mechanism that generates it appears to be pretty common. Why this happens is a question we should probably toss to the good folks at /r/AskAnthropology, but as historians, let's shrug and say that you'll probably have difficulty finding nations from any era of human history that lack it entirely.
"So what?" is a reasonable rejoinder. "I have Thomas Jefferson on my nickels, but that doesn't mean I worship politicians. Jefferson's just a symbol of the American government."
Exactly! He's a symbol of something. All nations, cultures, and societies have these symbols; people and their images are used as a shorthand for something that we value or believe. Jefferson on a nickel is representative of the U.S. government, its guarantee of the currency's value, and -- if you really want to get into lofty examinations of state symbolism -- the government's belief in the ideals expressed in the Declaration of Independence, and Jefferson's advocacy for the rights and dignity of the common man.
But "So what?" is still the correct reaction, because there are ultimately big differences between "state symbolism" and a true personality cult:
So when we ask about how or why the North Korean personality cult developed, and why things got so bad, the first thing we should REALLY ask is this:
What is Kim il-Sung a symbol of?
And the answer to that is straightforward if we look at Korean history in the late 19th and early to mid-20th century:
Kim il-Sung is a symbol of Korean independence and defiance after the humiliation of Japanese imperial control.
A history of the Japanese empire and its colonization efforts in East Asia is way beyond the scope of this comment, but we'll TL:DR things a bit. The Japanese were (justifiably) afraid of being overrun by more powerful imperial states in the late 19th century and started to do whatever they could to expand their economy, access to resources, and political influence in East Asia and the Pacific. They forcibly integrated the Korean peninsula into their economy as of 1876, turned it into a protectorate in 1905 shortly after the conclusion of the Russo-Japanese War (one of the most important conflicts that the West almost never hears about), and then formally annexed Korea in 1910. (Kim il-Sung was born about a year and a half after Korea was annexed.) Korea would remain a colony until the fall of the Japanese empire at the conclusion of World War II in 1945.
I'm going to try and give a summary of the views of Brian Reynolds Myers from his book The Cleanest Race, which is rather unorthodox compared to the way most people think about North Korea, but it's a very interesting and I would say convincing approach.
Myers traces the origins of North Korean ideology back to Japanese imperialism in Korea, during which the Japanese attempted to co-opt Korean nationalism by propagating the idea that the Korean people and language were merely a regional variation and dialect of the Japanese. Similarly, they were incorporated into the Japanese imperial ideology of the Japanese race being morally (note: not physically, as in Nazism) superior to all other peoples.
Myers goes on to claim that after the Soviets took North Korea from the Japanese, there was no large-scale purge of pro-Japanese collaborators (unlike say, East Germany), and in fact many were included within the new state, which merely adapted the Japanese ethnic nationalist ideology for the new situation (according to Myers, Marxist-Leninist rhetoric by Kim Il-Sung and others was largely for the sake of appearances and to maintain aid from the USSR and China). Crucially however, Korea had quite a different history from Japan; Japan, which had largely been able to fight off external invaders quite well, promoted the idea that Japanese moral and ethnic superiority had protected them for invasion. Korea, on the other hand, had regularly been invaded and controlled by outsiders, so Korean ethnic nationalism promoted the idea that Koreans' moral superiority had left them naive, vulnerable, and easy prey.
From this, Myers argues that the Kims' personality cult is rather different from Stalinism; Stalin was always presented as a paternal, teaching figure, who existed to guide the Soviet workers on their path to socialism; the Kims, on the other hand, are presented as maternal figures who exist purely to protect Korea, both from military invasion and from moral corruption; they are not guiding or teaching figures.
This is what makes North Korea different from the Soviet Union and the Eastern Bloc. In the latter case, the justification for the regime's existence was its ability to deliver economic prosperity to its people (contrary to perceptions, the Soviet Bloc, while poorer than the West in absolute terms, did actually see quite strong growth from the 1950s through to the early 1970s), and when it became apparent in the 1980s that it could no longer do that, it collapsed. In North Korea, economics is secondary; the primary reason for the regime's existence is as the bulwark of Korean ethnic nationalism against foreign threats such as the US, so economic incentives have little effect.
To piggy back on this, is there any information out there relating to how and if we'll see Korea United again, and in our lifetime?