Korean Reunification: Will Two Halves Make a Whole?

With the recent celebration of the 20th anniversary of German reunification, it is something of a curiosity that of the three countries that were partitioned at the onset of the Cold War – Germany, Korea and Vietnam – it is the two Koreas that still resist the compelling pull of reunification. With the recent naming of North Korean dictator Kim Jong-Il’s 28-year old son Kim Jong-un as his successor, doubts have been raised about whether the transition of power will be as smooth as that of the elder Kim 16 years ago. It isn’t just the younger Kim’s age and experience (or lack thereof) that worries North Korea watchers, but the absence of a cult of personality his father enjoyed well before he took over in 1994. Will this instability mean the collapse of the North and eventual reunion? It is too soon to tell. Nevertheless, the political and economic implications of reunification certainly deserve some consideration.
One certainty is that reunification will come with a hefty price tag. In August, South Korean President Lee Myung-bak proposed a unification tax to raise the estimated $1 trillion the South is estimated to have to spend to properly absorb the North. South Korea’s GDP per capita, one of the highest in Asia, is currently more than 14 times that of its northern neighbor, meaning that there would be a lot of catching up to do. What’s more, if the younger Kim continues with the North’s self-imposed autarky and self-destructive policies, its economy would remain stagnant. This would just increase the already high price South Koreans would have to pay for reunification. The incorporation of the North’s decrepit economy could also lead to numerous structural spasms in the unified economy as wages and prices adjust to the addition of 24 million more people.
Even pouring money into achieving something resembling economic parity is unlikely to succeed, at least in the short run: Germany’s own reunification provides an instructive example. Even today, East Germany still lags behind the West on many counts: according to the Financial Times (FT), productivity in the East is stuck at around 70 per cent of the West’s level. Despite numerous financial transfers, the region still has two generations of “catch[ing] up” to do, said Professor Ulrich Blum, president of the Halle Institute for Economic Research, in the same article. The reunification of the two Koreas is unlikely to be any smoother, especially given the larger economic disparity that now exists.
Another worry is the inequality, both economic and political, that will almost certainly emerge. In Richard Wilkinson and Kate Pickett’s book The Spirit Level: Why More Equal Societies Almost Always Do Better, the authors argue that inequality affects not just the poor, but the entire society, through increased rates of mental problems, violence and imprisonment. If America’s current level of income inequality seems to deserve some sort of remedy, a unified Korea’s would require serious rehabilitation. Regardless of the amount of financial transfers and state aid, there would be a period of painful adjustment that might prove both economically and politically destabilizing.
How would a unified Korea look like, politically speaking? Would democratic representation, a concept foreign to most North Koreans, be something they would endorse and even participate in? Again, East Germany’s experience is revealing. As the FT notes, Chancellor Angela Merkel is the only minister who hails from that region. A similar underrepresentation of North Korean policy-makers in a unified cabinet might mean that the region’s interests would not be sufficiently taken into account. All this would lead to de facto disenfranchisement and widespread disillusionment with reunification.
Of course, not all the consequences of reunification would be negative. One silver lining lies in the reduction in defense spending in a unified Korea due to the disappearance of hostilities on both sides. South Korea, which now spends almost 3% of its GDP on defense, could save billions; likewise for the North, which now has one of the world’s largest armies. Moreover, in the long run, the inclusion of North Korea’s largely literate working population would be a new source of growth for the entire peninsula, nudging Korea even closer to economic parity with Japan.
Ultimately, if there ever was a perfect time for reunification, it would be sooner rather than later. Unless the Hermit Kingdom opens up its economy significantly in the interim, an earlier reunification would mean a substantially cheaper one as well. Koreans on both sides have been waiting a long time for reunification; it would be a pity if the South gets a case of buyer’s remorse thereafter.
Photo Credit: EmilyWeg via Flickr