During WWII the Japanese insisted the Koreans fight on their side, but few agreed to this and many joined the Chinese army to liberate themselves from Japanese rule. Due to their geographic location, the Korean peninsula was the victim of Chinese-Japanese battles and by war's end the peninsula was in poor condition. To put a bigger strain on the economy, many of those Koreans who fled under Japanese rule returned to the peninsula.
At the conclusion of WWII, the peninsula was divided between the United States (in the south) and the Soviet Union (in the north) in the form of administration zones, but with the idea that the two sides would unite. The United Nations (UN) led a peninsula-wide popular election to determine future political governance, but the north refused to participate. Once results were tallied, the south declared independence as the "Republic of Korea" and the north countered by claiming independence as the "People's Democratic Republic of Korea;" both side claimed jurisdiction over the entire peninsula.
This political tension rose in the late 1940s until the Korean War broke out in 1950. After a surprise attack and quick advance into the south, the north fell back as the UN and US landed troops on the peninsula. To respond, China and the Soviet Union (although unofficially) entered the war and in 1953 the war ceased in a stalemate with a new border almost exactly where the original border had been.
Before, during, and after the Korean War, North Korea's government has been very "stable" as Kim Il-Sung and now his son, Kim Jong-Il have ruled the country during this period. However stability doesn't imply a positive state and the north is filled with restrictions, ridiculous laws, lacks of freedom, and is an example of how to violate nearly every human rights issue.
After great strides of improvement economically and infrastructurally in the 1950s, North Korea has stalled. This began in 1956 with de-Stalinization, a process of condemning self-rule and cult followings. In order to prevent the loss of his own cult, Kim Il-Sung shut his country off from the country leading this charge, the Soviet Union, then closed his country off from nearly every country other than China.
In addition to North Korea's self-imposed isolation, due to their poor human rights record, declining willingness to communicate, and their interest in producing atomic bombs, much of the world has placed trade restrictions or embargoes on North Korea. This has led to an isolated state with a crippling economy and worsening conditions. Every drought is magnified because trade to North Korea is almost non-existent and thousands of people starve as a result of this inability to obtain food.
These economic failures have led to massive barrowing, defaulting on loans, and due to a fear of international invasion, a strong focus on military build-up. Even after Kim Il-Sung died in 1994 and his son took over little has changed.
The situation in relation to South Korea is still unresolved. The people in the south today debate what the best direction for their future is; many people maintain unity, while many young people believe a joint state would be little more than an economic burden, crippling the future of the nation. In the north, most people believe their leaders when told that they are the best country in the world and everyone else is falling behind; if the north and south do unite in the near future, the North Koreans will be in for a sad awakening.