The Economic Benefits of Korean Reunification
In Response to Eberstadt’s Hastening Korean Reunification
With bad memories of the Korean War and the fiscal crisis of the German reunification, South Koreans are often wary of reunification. Eberstadt briefly argues in his paper that people are against reunification because of the economic issues, especially those similar to the ones that struck during the fiscal crisis of the German reunification. However, I disagree with his statement and I argue that this potential reunification of the Koreas has many economic benefits with a positive outlook due to factors involving the work force, available land, and the natural resources.
To begin, South Korea currently faces a similar problem to Japan where the aging work force is hindered by low birth rates that is not high enough to compensate. North Korea’s relatively young demographic can compensate for South Korea’s aging population as they phase out of the workforce. This is in stark contrast to Eberstadt’s comparison that North Korean workers will push the native South Korean workers out of the job market just like the migrant East Germans pushed out the Ossi work force in Western Germany. This also alleviates fears that there will not be enough jobs for North Koreans, forcing them to rely on welfare from the South Korean government. Once again, this proves that Eberstadt’s claim that the reintegration of the two Koreas will “place immediate financial burdens on the working-age population of South Korea” is wrong. Overall, the integration of North Korea’s relatively inexpensive labor force can and will relieve South Korea’s hollowing-out of manufacturing sectors, incipient labor shortages, and reduce pressures on wages and other production costs.
Most nations do not want a unified Korea for various reasons. Whether it’s the loss of a buffer state between China and the United States or the loss of forward bases in South Korea, many nations actively oppose the unification of the Koreas. South Korea, for years, has not been particularly friendly to foreign investments. In addition, Juche economics, or North Korean centralized planning, has hindered the development of infrastructural and commercial links between North Korea and nearby areas of China, Russia, and Japan. What these anti-reunification nations have overlooked is the magnitude of an investment bread basket a unified northern Korea might become. With a business climate similar to South Korea and significant regions underutilized, North Korea could become a hotbed of gigantic investments that only increases the economic success of reunification. This land mass could be used for the development of production facilities or as scholar Koh states, a trans-Korean railway connected to the trans-Siberian and the trans-China railway system. This and the extension of the Asian Highway network to the Korean peninsula would “substantially improve Korea’s accessibility to every corner of the Asian continent.” In addition, the economic benefits from the connection of energy networks and power grids through gas and oil pipelines from Siberia would not only bring about huge economic benefits for the Korean people but also for Russia and her under-utilized electric power reserves. All in all, the melding of South Korean business culture and the underutilized North Korean land mass will do nothing but enhance Korea’s international competitiveness and boost neighboring nations’ economies through economic spillover benefits.
A main argument overlooked by Eberstadt is the difference in resources available between the two nations. I believe that as soon as economic integration begins, the immediate economic benefit would be realized from the “apparent differences in resource endowments between [the Koreas].” South Korea is mainly a manufacturing industry but is deficient in domestic natural resources and dependent on imports from foreign nations to fuel their economic powerhouse. The South Korean economy would benefit from North Korea’s abundance of natural resources, especially its various mineral reserves. In addition, the technology-deficient North Korea will benefit from the external supply of capital and technology coming from South Korea, neighboring countries, and multilateral development banks. With proper provision of institutional arrangement and physical infrastructure, the North Korean natural resources industry can be maximized in parallel to South Korea’s manufacturing industry. To summarize, the merger of the Koreas could provide a much needed domestic source of resources to sustain the growth of the South Korean economy.
As expected, there are occasionally arguments that a reunification of the Koreas will take even longer than the reunification of Germany. On the basis of current levels of income disparity, it is argued that it will take more than 25 years for North Korea to catch up with South Korea in terms of per capita GDP within the range of 3:1. However, I believe that there are two routes that North Korea can take to help alleviate this concern. First, North Korea can dissolve their military, which consists of over one million military personnel. A displacement of these soldiers who are at their most productive age and a diversion of military spending, which takes up 30% of the national income, could become new sources for economic growth in North Korea. This would also alleviate Eberstadt’s fears that North Korea will eventually retaliate during reunification. Second, as I stated before, North Korea’s current closed economic system could be opened to foreign investments. Through investments from South Korea, other nations, and multilateral development banks, I truly believe that North Korea could become a hotspot of economic activity, speeding up the process of reunification.
In general, many of the South Korean people are against reunification and argue that it will be an enormous cost for the South Korean people to be burdened with while the benefits to them are minimal. Many of the conservative party leaders went through the era where quality of life in South Korea was similar to India and have no plans of forgoing the South Korean “Miracle.” In addition, this is the first cohort of young working-class South Koreans that have never experienced government takeovers and unexpected material sacrifice. However, for all the reasons stated above, I believe that reunification will create economic benefits for both nations. People who compare the reunification of Korea with the German reunification are greatly misinformed and the fact is that the potential reunification of the Koreas has many economic benefits with a positive outlook due to factors involving the work force, available land, and the natural resources.
Bibliography
Niederhafner, S. (2013). The Challenges of Reunification: Why South Korea Cannot Follow Germany's Strategy. Korea Observer, 44(2).
Koh, Il-Dong. 2012. Korea’s Reunification from the Perspective of Northeast Asia’s Economic Integration. Journal of Economic Integration 27 (2): 274–279.
Eberstadt, N. (1997). Hastening Korean Reunification. Foreign Affairs, 76(2), p.77.