THE THIRD MIRACLE
The Economist, July 10th, 1999
ON KIM IL SUNG'S death, in 1994, some analysts thought the North Korean regime could last no more than a few years. Having been proved wrong, they shifted to the other extreme: most now reckon that the world will be stuck with Kim Jong Il for a long time yet. The real answer is that nobody knows how long he has got. President Kim Young Sam's hawkish stance in the mid-19l90s was based on the belief that the North was doomed, and that appeasement would only prolong its demise. it made the Korean peninsula even more unstable than it was already. The premise of Kim Dae Jung's "sunshine" policy is that by judicious engagement the outside world can buy time for the North to start re-forming, thus lessening the burden on the South of eventual reunification. In fact, buying time makes sense-but not because this will give the North a chance to get reform under way, which it may well resist. Instead, more time will give the South an oppportunity to prepare for the reunification that is bound to come. To see why the So
uth will need time to get ready, consider what unification will involve. The North, according to Mr Hwang, the defector, is so years behind the South. its infrastructure, insofar as it has any, is dilapidated. The first thing the country will need is tens of billions of dollars spent on roads, bridges, and electricity and telecommunications networks. Yet building all this infrastructure will be easy compared with changing the hearts and minds of a generation that has known nothing but tyranny. Defectors from the North who have settled in South Korea find life hard. Many of them are unemployed, spending their days drinking and gambling. They complain that the South Koreans treat them badly. Some of them even try to go back home. Some 10m North Koreans are within a week's walk of the DMZ. The South would struggle to absorb even a small fraction of them. The North prides itself on its education-it added the pen to the ham-mer and sickle on its flags-but a working knowledge of the juche idea and of the achieveme
nts of the Kim family is not much of a preparation for life in a capitalist economy. As well as acquiring skills that will appeal to employers, Northerners will have to learn about the sorts of things that other people take for granted, such as shopping, travel, advertising and technology, as well as living with competition and respecting private property. They may not get much sympathy from Southerners. There is an economic chasm to bridge too. When East and West Germany were unified ten years ago, GDP per head in the east was less than half of that in the west, a gap that has proved unexpectedly hard to close. But North Korea is much further behind. its GDP per head may currently be about a twelfth of South Korea's. To get to the same starting position as East Germany, it would have to grow at least 15% a year faster than South Korea for 12 years. Koh Il Dong of the Korea Development Institute thinks that it would be impossible to improve the productivity of North Korean workers at that rate. At present, t
he economy is not growing but shrinking. And even if North Korea'S GDP per head managed to reach about half of SouthKorea's, sudden reunification could prove ruinous. Unless Northern wages rapidly rose to Southern levels, lots of Northerners, especially the more skilled and enterprising ones, would migrate southwards, leaving the North in an even worse state. Yet if wages rose fast enough to keep people in place, the North's workers would soon become uncompetitive, discouraging desperately needed investment. The only solution would be to subsidise Northern labour-but South Korea does not have the money.
Make us one, but not yet
It is easy to understand, therefore, why the government in Seoul would prefer the two countries to come together gradually. For a while, the two Koreas would have separate governments, different currencies, a closed border and so on. This is not unimaginable, but it will be hard to pull off. If migrants are determined to come south, they will-and short of using force, South Korea cannot stop them. In essence, the South's approach is contradictory. It aims to prevent collapse in the North today, because having to rebuild it from scratch would place too great a burden on South Korea. Instead, the idea is to give the North a chance to implement the radical reform it needs. Yet the regime of Kim Jong Il is unstable, and the political and economic liberalisation that would accompany radical reform is likely to lead to the very collapse the South is seeking to avoid. The suspicion is that, whatever it says publicly, South Korea really wants to leave the whole awkward business for another day.
That would suit America and China. Unification is a threat to America's Asian bases. America is not particularly popular in the South, where nationalists accuse it of using their country as a training ground and a market for weapons. in a united Korea, America would play a diminished role. In time, a chauvinistic Korean government might even seek to remove all foreign troops from its soil. America might also come under pressure from public opinion in japan to close its base in Okinawa, which is meant to provide rapid support in the event of an-other North Korean attack. China, for its part, would like to avoid an influx of Korean migrants into the border region with North Korea, where ethnic Koreans already number almost half the population. Besides, it neither wants to have American troops on its border, nor, were they to leave, would it be ready for an arms race with Japan. Because all of them want the status quo to endure, China, Japan, South Korea and America supply the lion's share of the aid pouring i
nto North Korea. japan and South Korea are building two nuclear power stations in return for a North Korean promise to abandon its own nuclear programme. China provides a large amount of oil, as well as 250,000 tonnes of food a year. In addition, the United Nations has pledged to supply 584,000 tonnes of food in the next 12 months, almost go% of which will come from America. Such a narrow base of donors is bound to be unstable, especially when the recipient is as belligerent and unpredictable as North Korea. The country has already caused great international irritation by doing things like forging dollar bills on presses imported from Europe, allowing its diplomats to smuggle drugs and counterfeit goods, and sending frogmen and submarine commandos to spy on the South. But what really worries the donors is the evidence that the North is developing weapons of mass destruction. It has good reasons for wanting to do so.Despite spending more than it can afford on its armed forces, North Korea simply cannot keep u
p with America and South Korea. Fighter pilots fly for only about 30 hours a year because fuel is short. Refugees say that guards on the border with China often carry unloaded guns because bullets are scarce. Certainly there are plenty of tank battalions and artillery, but many are out of date. if there were to be a war, South Korea would be far more likely to win it than North Korea. Some analysts say that these days American troops are needed to prevent the South marching North as well as the other way round.
Nuclear, chemical and biological weapons offer the North a line of protection. They are also its only means of attack if it remains bent on its national mission of liberating the South. Moreover, they can turn a tidy profit. The reactor deals that resulted from the desperate diplomacy in 1994 over the North Korean nuclear programme in Yongbyon were worth at least $4.5 billion, more than four times the North's annual exports. Further worries over excavations at Kumchangri, not far from Yongbyon, caused a huge amount of American food aid to be pledged in exchange for an inspection of the excavations. in early June, inspectors at last declared themselves satisfied that there was nothing untoward yet happening at the site. Aidan Foster-Carter, a British academic, has described this combination of extortion and threats as "militant mendicancy". It works only if the North can remain a genuine menace, but not so blatant a menace that engagement seems pointless. Such a delicate balance cannot be maintained if the N
orth's main goal is to enhance its weapons of mass destruction. And even if its main interest is in banditry, rather than in the weapons themselves, the North will inevitably miscalculate. For example, when it test-fired its Taepodong intercontinental missile over japan last August, it claimed that it was just launching a satellite, but caused international outrage because the test implied that japan and America were potential targets for a North Korean warhead. Even China was peeved, because the test gave japan a reason to deploy the sort of missile defence that might also be used to protect Taiwan.
Such miscalculations can be exacerbated by misunderstandings. What made America's Congress so cross about the North's troublemaking was that the Clinton administration had led it to believe the North Korean problem was "solved" after the nuclear-programme crisis in 1994. For their part, the North Koreans also felt let down because they thought that America had failed to honour its promise to lift economic sanctions.
'The job of sorting out America's North Korean policy has gone to William Perry, a former defence secretary. He is expected to propose explicit rewards for North Korean co-operation, such as putting a stop to its nuclear-weapons programme and halting production and sales of longer-range missiles. In the long run, however, North Korea will probably keep making trouble. That is partly because it holds the outside world in contempt; even China complains that it is excluded from North Korean thinking, and is trying to patch up relations. But there are more profound reasons too: making trouble is the only way for North Korea to attract attention, and preparing for war against the South has long been the main pillar of North Korean policy.
The uncomfortable conclusion is that South Korea would be wrong to believe that engagement will lead to benign change in North Korea. It might want to provide aid for its benighted people. itshould do what it can to keep the peace, while being constantly prepared for war. Yet in the unlikely event that Kim Jong Il were to pursue radical reform, collapse would probably follow. Even maintaining the miserable status quo is fraught with difficulty. Donors may tire of feeding millions of people year after year; North Korea may do something foolish. Yet although South Korea cannot prepare the North for the trauma of unification, it can prepare itself. As a first step, it should define the principles of unification, draft emergency legislation and, behind the scenes, plot the possible course of unification with its allies. But there are other dimensions to the preparation too.
Heal thyself
Devolving presidential power to the prime minister, the cabinet and parliament would create a political marketplace that would eventually give the new Korean citizens from the North a real say in how the country is run. it would also bind in Southerners during what are bound to be difficult years. in fiscal terms, the South needs to return to running publicsector surpluses, having understandably fallen into deficit since the Asian crisis. its capital markets need to be modernised to adjust more readily to the shock of unification, and in the longer term to enable the Korean government and Korean firms to raise the money they need to rebuild the country. The chaebol must stop crowding out other South Korean firms, which will help a newly integrated North to benefit from a broader spectrum of investment and ideas. And foreign investors in South Korea should be encouraged so that, when the time comes, they will invest in the North too.
These reforms also happen to be precisely what South Korea needs to put the Asian crisis behind it. So much the better, because it means they are worth doing in themselves, however North Korea turns out. The trouble is that reforms of this kind usually take years. in South Korea so far the statutes have been changed, but the spirit has not. After the Korean war 46 years ago, a united Korea seemed more plausible than a rich or a democratic one. The country remains divided-even though South Korea, against all the odds, has achieved democracy and prosperity. Nobody can pretend that the unification of Korea will be easy. Yet no one should forget how the two Koreas have suffered in the past half-century. out of their suffering has come an immensely resourceful South. Out of their unity may ultimately come prosperity and peace for all Koreans.
