Reunification of Korea

Almost exactly 10 years ago, in March 2003, the U.S. invaded Iraq. I had mixed feelings about that decision and I still have mixed feelings. At any rate, Iraq (#2) used to belong to the Axis of Evil, as defined by George W. Bush, along with Iran (#1) and North Korea (#3). Quite certainly, one original member of this axis is no longer a member.

Note that John Bolton has defined the "Beyond the Axis of Evil Group" composed of Cuba, Libya, and Syria. Cuba has softened somewhat and Raul Castro is planning to retire; the Libyan regime has been overthrown so a re-evaluation would be appropriate; and Syria is in the state of a Civil War, we will see what comes out of it. (Condi Rice has talked about the "Outposts of Tyranny": Belarus, Burma, Zimbabwe. Not much has changed about those, AFAIK.)

You see that the Axis of Evil, both the core group and the extended one, has gotten weaker or less scary or nicer, if I exaggerate a bit. At least some good news. This evolution may continue.




For quite some time, I would think that Iran would be the most likely new place where dramatic developments – such as a war with the West and Israel – could take place. That's because of Iran's work on nuclear technology that may be violently abused as soon as the mullahs give new orders. But Iran has convinced us – or fooled us – that not much is happening. They even plan to stop the enrichment (perhaps because they already have enough?).

So quite surprisingly, North Korea is the new epicenter of tensions of possible looming wars.




The last military hotline between North Korea and South Korea has been cut off by Kim III, the ruler of North Korea. They systematically expose their seemingly childish propaganda plans to destroy the United States and some centers in South Korea – a country they primarily blame for being puppets of the U.S. We don't know whether anything should be taken too seriously. But Kim III is an untested young ruler and he may be willing to establish himself with dramatic actions.

Meanwhile, South Korea is full of love and compassion. The asymmetry of the situation is kind of amusing to me.

At any rate, it's somewhat plausible that a conflict could lead to a rearrangement of the order on the peninsula. South Korea has had a reunification ministry for quite some time and it works on the assumption of a peaceful evolution. I am not sure whether it's the right expectation for Korea but fine.

The possible democratization of North Korea would be an interesting event for the regional and even global economy. Note that South Korea has about 50 million citizens and $20,000-$30,000 GDP per capita (nominal/PPP). North Korea has 25 million citizens and below $2,000 GDP per capita.

Despite the much more bloody and war-like relationships between the two Korean states, it seems sensible to compare the situation with the reunification of Germany. For West Germany, it was a doable task to "invite" all the East Germans and artificially bring them to the West German level. After all, the East German population was 4 times lower than the West German one.

For South Korea, it may be a bit harder task because the population ratio is 2 and not 4. However, perhaps with some help from the West, a shock therapy meant to incorporate North Korea into the democratic Korean state as soon as possible could be a feasible plan. The North Korean savers could get some money for their savings, using a generous exchange rate, some extra welfare payments per person to make the transition smoother, but the rest of the economy could be instantly liberalized.

Alternatively, the nine top-level provinces of North Korea could be merged with the democratic Korean state one-by-one, e.g. in one-month intervals. The order of incorporation of the provinces could depend on "how ready they are", "how eager they are according to polls", and "how many of them want to emigrate to South Korea".

At this level, the plans sound straightforward and easy but I am afraid it could be much harder in Germany because it's very likely that a huge fraction of the North Korean citizens really believe the propaganda so the non-communist side could face many more enemies than just the leaders. They're much more detached from the external reality, I think. On the other hand, I think it's partly due to the lack of leadership in the West. The West should try to provide the North Korean citizens with much more information in some way and actually outline the alternatives. It seems painful that these things aren't really happening much.

Intuitively, I feel that the North Koreans would turn out to be at least as hard-working as the South Koreans and the addition of this territory and population to the global free economy would be an improvement for importers as well as exporters across the globe.