The cost of Korean reunification is…

A South Korean financial regulator has pinned the cost of revitalizing North Korea’s economy after a hypothetical reunification at $500 billion. This is based on bringing North Koreans per capita GDP from roughly $1,200 to $10,000. Of course, as this article notes, forecasting this cost is an almost meaningless task, given the virtually endless number of possible scenarios that might bring about reunification.

Some interesting things to think about, though, with regard to Korean reunification:

The Korean Peninsula at night from space

Low-light imaging of the Korean Peninsula at night. Notice the difference between North and South.

  • South Korea’s population is around 50 million. North Korea’s is around 25 million. Reunification, then, isn’t just a matter of opening the gates. It would require decades of economic and cultural assimilation. It would have deep implications for the entire region’s economy. In fact, in the event that Kim Jong Un’s regime topples, I’d even expect South Korea to keep borders closed and work to improve conditions in the North via calculated, gradual moves aimed at total reunification at some time far down the road. Simply letting 25 million people flood a country of twice that size isn’t going to help anyone.
  • South Korea’s GDP is $1.6 trillion. North Korea’s is $40 billion—less than three percent of South Korea’s. That’s crazy!
  • According to journalist Laura Ling, North Koreans are slowly being exposed to western culture via smuggled media and smartphones. Black markets exist that double as information-sharing networks and, I assume, give North Koreans some idea of alternative ways to organize economic life—ways that contrast sharply with their rulers’ chosen system. Perhaps significant development could happen endogenously were the nation’s regime to disintegrate. It would certainly make for a fascinating natural experiment.

All this said, it’s not a given that South Koreans would support reunification were it ever to seem possible. From the article cited above:

A survey released by the Unification Ministry earlier this year showed that while 70 per cent of South Koreans supported the idea of a unified peninsula, almost half had no interest in helping cover the massive financial cost.

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