Last week, South Korean media reported that South Korean government agencies had finished the compilation of a contingency plan of economic reforms to be implemented in case of Korea’s German-style unification. The plan dwells on how the South Korean government should handle such a scenario and what should be done to transform the North Korean economy.
The South Korean military is known to do regular rounds of contingency planning for a possible regime collapse in the North. However, such plans usually focus upon the immediate response of the military. The new plan is seemingly different because it considers what should be done in the longer-term.
On paper, both Koreas are firmly committed to the principle of national unification. Of course, during official contacts between the two governments, both sides regularly pay lip service to the idea that their eventual unification should be peaceful, gradual and agreed upon by the two current governments, currently co-existing on the Korean peninsula. Some in South Korea sincerely believe that such pronouncements bear some relation to reality. But in real life, a gradual unification is highly unlikely, if not outright impossible.
Now, when the world celebrates the 25th anniversary of German unification, it is a good time to be reminded: If the two Koreas are to be re-united in the foreseeable future, the German scenario is highly likely to be repeated on the Korean peninsula.
Officially, Koreans on both sides of the border are supposed to believe that unification, in whatever form it eventually comes, would be a great triumph for their long-suffering nation – recently, the ROK president even said that unification would be a “bonanza” for her country. However, with the passage of time, it becomes increasingly clear that the younger generation of South Koreans have different opinions about unification. Put simply, younger Koreans do not see Northerners as their brethren, and are not willing to make sacrifices for the impoverished North. At the same time, there is a belief, especially among the younger generation, that the immediate economic impact of unification is likely to be disastrous for the taxpayers of the rich South.
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There are significant reasons that should have the South Korean public worried. In the past decade or so, there have been over a dozen attempts to estimate how much unification is going to cost South Korea.
Given the near complete absence of reliable statistics regarding the state of the North Korean economy, and the near unprecedented nature of the task, one shouldn’t be surprised that estimates vary considerably.
Be that as it may, most of the estimates cluster around two points: optimists believe that unification is likely to cost about $200 billion, while pessimists believe that the figure is liable to be in the neighbourhood of $1.5 trillion. Both camps believe that their respective figures represent the amount of money required to narrow the income gap between the two Koreas.
Currently, the entire GDP of South Korea is roughly $1.2 trillion, so even at the low end we are talking about a massive burden. If pessimists are correct, the burden could be truly crushing, capable of wiping out the South Korean economy.
Once upon a time, North Korea was well ahead of the South in its per capita income (largely, but not exclusively, because it inherited pretty much all the industry the Japanese companies built in Korea during the colonial industrialisation boom of the 1930s and 1940s). These years are long gone, though.
After 1960, it would be a minor exaggeration to say that Korean economic history can be presented as the near perfect success of the South and near perfect failure of the North. The results are clear for all to see. Exact estimates remain impossible because the North Korean government ceased to release all economic statistics in the early 1960s, but the per capita GDP in the South has been estimated to be between 14 and 30 times higher than the North. Even if we take the most conservative estimate, this still means that the per capita income gap between the two Koreas is the world’s largest gap between two countries that share a land border.
North Korean refugees … have great difficulties in finding work and basically find themselves ill-adapted to life in a modern, technologically advanced, hyper-dynamic and highly competitive society.
When it comes to social and cultural issues, the gap is equally great. For security reasons, the North Korean government has always been very careful in controlling interaction between its citizens and the outside world. As a result, the average North Korean has very little understanding about the ways a modern society operates.
It is not incidental that North Korean refugees in the South do not normally fare well: their average income is roughly half the nationwide average, they have great difficulties in finding work and basically find themselves ill-adapted to life in a modern, technologically advanced, hyper-dynamic and highly competitive society. Given that defectors usually come from more socially active groups of the population, this bodes ill for the future of a unified Korea.
No wonder that the above mentioned report assume that the unemployment rate in the post-unification North might reach the totally unprecedented 30 percent level. Indeed, one can only wonder what would happen to North Korean engineers who might have good training in calculus, but have never used computers.
Similarly, North Korean medical doctors who are well educated in treatments and drugs that would be seen as out of date in the 1960s are likely to be lost. Manual workers, trained in the 1930s technology, would also be of little use in the high-tech economy of the South. And what of the North Korean Army, one of the largest standing military forces in the world, that currently has over one million soldiers?
Exposure to capitalism
Should German-style unification occur on the Korean peninsula, North Koreans would immediately find themselves exposed to the ways of modern capitalism, of which they currently have very vague ideas. One can easily imagine how South Korean speculators would descend on the North and buy all valuable property they can find (they will be able to afford it with their far higher incomes). And the scions of former North Korean landlords, whose lands were confiscated during the 1946 land reform, are also likely to reappear and make their claims on what used to be their great-grandfathers’ lands.
This does not mean that unification will ruin the North Koreans. Most likely, in absolute terms it will bring fast and dramatic improvements to their living standards, albeit accompanied by great social confusion and, perhaps, sense of alienation. For the Southerners, things are different. In the long run, the unification will indeed make Korea a safer and better place, but its immediate impact will be a crushing blow to the South Korean taxpayers – and they are increasingly aware of this.
All of this is understandable, but it does not negate one fact: unification can happen regardless of what people want and what they fear. History seldom cares about us, humble humans, and as the experience of countless crises and revolutions has shown, the situation can easily get out of control.
After all, the existence of the rich South is a great destabilising factor in itself. East Germans challenged their state once it became clear that Soviet tanks would not come to crush their rebellion. They wanted western freedom and, even more, they wanted western prosperity. But we should not forget that the income gap between the two Germanys was between 1:2 and 1:3, an almost unnoticeable gap by current Korean standards. So, if things start crumbling in the North, South Koreans will have little to do but to accept fate and embrace unification.
When seen in such a light, it is indeed good news that the South Korean government is planning for such a contingency.
Andrei Lankov is professor of Korean Studies at Kookmin University, Seoul. He is the author of “The Real North Korea: Life and Politics in the Failed Stalinist Utopia”.