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Northeast Asia Peace Initiative

M.P. Barry: Is the Unification of North and South Korea on the Horizon?

In early August cash-strapped North Korea offered to repay its long-standing debt with former socialist ally, the Czech Republic, through barter and offered 400 tons of ginseng. The Czechs responded they only use one ton a year, but would accept zinc ore. Then on August 15, in his Liberation Day address, South Korean president Lee Myung-bak proposed the nation adopt a unification tax to prepare for unification with the North, reflecting an anxiety about North Korea’s near-term stability and potential for collapse. These two events raise questions about North Korea’s current condition and the costs and benefits of reunification.

The North’s economy remains in dire economic straits. It had considerably worsened from the early 1990s after aid was drastically cut from the Soviet Union and China. Floods and severe food shortages beginning in 1996 compounded the hardships of life for North Koreans, and perhaps two million died of hunger. Even this year, with humanitarian food aid at a low, it has been extremely difficult for its people to feed themselves from the spring through the summer; major flooding has again compounded these problems.

China regularly provides additional food and energy supplies to the North to maintain stability on its border. Its northeastern provinces also have increased their investment in North Korea, which the North welcomes in the short-term, but is very wary of in the longer run. Koreans both north and south express concern that China could gain enough economic leverage in the North to make it impossible for the North to remain independent or for Korean reunification to occur without China's assent.

North Korean leader Kim Jong Il suffered a stroke in 2008 and is regarded to be in declining health. He has apparently selected his third son, Kim Jong-eun, 27 or 28, as his successor, with his brother-in-law, Jang Song-taek, acting as a modern regent. The youngest Kim has no official title yet, but that could change when a major Korean Worker’s Party meeting is held next month. A succession should be in place by 2012, the 100th anniversary of Kim Il Sung’s birth.

The elder Kim was in China, likely introducing his son to the Chinese leadership, during the recent visit of former U.S. President Jimmy Carter, who had come on a humanitarian mission. In 1994, Carter, with behind the scenes assistance from the Summit Council for World Peace in enabling CNN to accompany him, defused a nuclear crisis when he met in Pyongyang with the late DPRK President Kim Il Sung.

North Korea’s March 26 sinking (which it publicly disavows) of the South Korean navy vessel, the Cheonan, may have been credited to Kim Jong-eun as a way of beefing up his credentials before the North’s military. One rationale for the sinking, reportedly was the lack of a response by South Korea’s conservative government to the North’s request for a third summit meeting.

Kim Jong-eun also is said to have been behind the North’s disastrous currency reform last November, which wiped out the savings of the North Korean elite and emerging middle class. Rather than strengthening the regime’s grip on power, this reform is reported to have created great bitterness toward the Kim family and worsened the people’s economic plight. Now, when possible, people hoard Chinese yuan rather than North Korean won.

Yet, North Korea has become more porous in recent years. Nearly 200,000 people possess legal cell phones (for domestic use only), and many more illegal ones are owned by North Koreans along China’s border, enabling them to call relatives in the South. Moreover, South Korean movies, TV dramas, and music, smuggled in on tapes and DVDs and watched on cheap Chinese players, are popular among many North Korean teenagers and college students. This has enabled them to compare their lives in the North with those in the South and China.

Does all this mean North Korea is ripe for revolution or collapse? Experts who know North Korea best say it will most likely continue to muddle through, since it has endured greater hardships during and after the Korean War and at other points in its history. Much of the speculation about instability or collapse reflects the wishful thinking of those who compare North Korea to the former Eastern European socialist states. This is not to say that discussions among the U.S., South Korea, and China should not occur about possible scenarios for North Korean instability; after all, the unexpected can happen.

But the prudent approach is to find ways to influence a North Korean evolution away from totalitarianism while gradually building the North’s economy to a level where its reintegration with the South will be less drastic. Some say that normalization of U.S. and Japanese relations with North Korea would help balance China’s overbearing influence in the North; in particular, establishment at an authoritative level of a more trusting relationship with the U.S. will quell the North’s nuclear program.

A unification tax may not be enacted anytime soon, and the North surely regards the tax idea as a sign of a South Korean intention to absorb its northern neighbor. However, it is time to start thinking about the goal of unification. This year is the 60th anniversary of the Korean War, which is commemorated in a tour of the 16 nations that fought on the UN side by the Little Angels Children’s Folk Ballet, founded by Rev. Sun Myung Moon. This reminds us that the war remains unresolved and technically only an armistice exists. At some point, a permanent Korean peace agreement needs to be achieved, with the support of the U.S., China and the United Nations.

What about the costs and risks of Korean reunification? Usually, South Korean governments have looked to the German experience of reunification after the fall of the Berlin Wall in 1989. East Germany’s economy was then about one-third that of West Germany’s. Now South Korea’s economy is 37 times greater than the North’s. This disparity makes unification very unappealing to South Koreans, since the costs would appear to be almost unbearable and lower their standard of living.

But last September, Goldman Sachs, the leading investment bank, issued a study arguing that the German model is the wrong one to follow, that better models for Korean reintegration would be the reform of the economies of Vietnam, Mongolia and the former Eastern European socialist states. Moreover, it said, the two Koreas have remarkable synergies, including talented human capital and rich mineral resources in the North. Goldman Sachs saw Korean unification more of a win-win scenario that could be far less onerous than previously thought. It projected that by 2050 a united Korea’s economy would exceed that of Britain, France, Germany, and possibly Japan. Recently the world’s largest economic analysis firm, IHS Global Insight, went even further, predicting that a unified Korea would surpass Japan in per capita income by 2031 (meanwhile, this past quarter, China became the world’s second-largest economy).

Clearly, a united Korea is poised to become a powerful force in the world; even this November, Seoul plays host to the G-20 economic summit.

One can argue that, at whatever pace Korean unification is eventually achieved, the attitudes of the Korean people, especially in the South, will be pivotal. On this subject, in his 80th birthday address in February 2000, Rev. Sun Myung Moon observed:

“…Healing the division between North and South is not a simple process. As fellow patriots struggle to bring this about, they will need a determination of heart to work through many sleepless nights, transcending time, and overcoming all manner of difficulties. ‘I truly want to live with them. I don't want to die unless I can die with them. I don't want to live unless I can live with them.’ The movement for North-South unification begins when both sides have such a heart toward the other.”

Korean unification cannot be a zero-sum game; both sides need to become winners. The South has the far larger population and economy; it is a democratic state with guarantees of religious freedom. Most likely, real progress in inter-Korean relations will take place when the South demonstrates the kind of overriding concern described above for its brethren in the north, both in public policy and in the diverse actions of the private sector.

To download a pdf of Goldman Sachs' report, click here.

Dr. Mark P. Barry is a senior fellow for public policy at the Summit Council for World Peace. The views expressed here are his own.

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