Would Korean Reunification Cripple the South?

Integrating the North’s economy would be difficult but the South also stands to gain.

North Korea, poor, malnourished, authoritarian, with supposed nuclear capabilities and a new crowned boy leader, is wildly different from its cousin beneath the 38h parallel. There they grow four inches taller, are workaholics, cyber obsessed users of democracy who lay claim to some of the most successful companies in the world such as Hyundai, LG and Samsung.

There are always rumors flying about over whether the two will take the same path as East and West Germany did even when they are busy trying to slay each other’s citizens, whether through sinking ships or the shelling of South Korean islands. Many believe that the economic cost of reunification to South Korea and the loss of Chinese influence in the North mean that it will not happen. But if it does, there’s some reason to be optimistic.

In 1960, South Korea was a starveling with a per capita annual income of $80. Since then, “The miracle on the Han River” has boasted the world’s most explosive economy: 8.7 percent annual growth through 1990 transformed it from an agricultural nothing into techno-metro sophisticate.

Just think what all those comparative undereducated North Koreans could do to the country. Goldman Sachs projects that, in an ideal scenario, the gross domestic product of a united Korea would overtake that of Japan and other highly industrialized economies in thirty to forty years — if North Korea’s full growth potential were tapped.

Peter M. Beck, a fellow at Stanford University, estimates that the cost of reunification would be $2 to $5 trillion. While that may cripple the South Korean economy, more than two hundred different minerals are trapped in North Korea, with, according to Bloomberg Businessweek, a combined net worth of some $7 trillion. This would pay fully for the reunification of the peninsula and leave some change floating about.

A reunified Korea would also have an extremely strong military. If one were to combine the active forces of North and South, you get the second largest army in the world, almost two million soldiers. Add into this a formidable swarm of airplanes, artillery, submarines and North Korea’s developing nuclear weapons program and you have a very tough “Asian tiger” indeed.

Why should the People’s Republic of China not want such a strong reunified Korea on its border? Well, much like the old Soviet Union, China has its own “near abroad”: those nations on its periphery where it wants to exercise preponderant influence, even hegemony and North Korea is certainly one of them.

Not having reunification could see the North slowly integrate economically into Manchuria and thus be viewed as a favorable investment for China. It could economically absorb the fellow communist state, not merely limit its autonomy. North Korea would remain a de facto Chinese vassal state. Such a scenario of economic assimilation means that henceforth Korean reunification could only take place, if ever, under Chinese auspices and only if a united Korea’s foreign policy conformed to China’s.

There is growing mistrust in China toward the North, however, largely due to its sometimes erratic behavior but also because it shares the South’s historical experience with Chinese domination. Despite the deep divisions and divides between the two Koreas, the same people live there with common memories of Chinese hegemony and bellicosity.

Reunification would not only avert the “Finlandization” of the North; it would constitute a strategic realignment in the region which would be a win-win scenario for both countries as well as Japan and the United States. For the proud North, moreover, it would send the message to China that it will no longer be relegated to beggar status and subject to its exploitation.

While reunification seems highly unlikely in the short term, few expected the “Arab Spring” uprisings just two years ago. If we’re in for a similar surprise in Northeast Asia, she the prognostications shouldn’t be all doom and gloom.