Realism and Unification

Marcus Noland (PIIE)



A friend who had recently immigrated to the US and did not speak the greatest English, once related that when her co-workers said “no problem” it meant it was “my problem.” I have a similar reaction when someone self-describes their own plan as “realistic.”

I recently came across a piece by long-time North Korea watcher Hyoungsoo Zang titled “A Realistic Process towards Korean Unification and the Harmonized Privatization of Properties in the Unified Korea: Issues, Priorities, and Opinions of Key Stateholders,” in the International Journal of Korean Unification Studies. The reader can judge whether in the end they regard Zang’s plan as “realistic;” it strikes me as much more considered than some of the tale spinning that passes for serious thought on this issue.

Zang works off a careful reading of the German experience, making a series of points that are often forgotten: that the East German people wanted unification; that they had a government that was prepared to negotiate to that end; that the West German government had legal structures for unification; and that the government of Helmut Kohl understood that it needed to make an offer that would be enticing to the East German people—if only to forestall mass migration. It was not a simple matter of state collapse and absorption.

So Zang stipulates three conditions for a successful unification: the North Korean people want it, a North Korean government representing the will of the people be in power, and outside actors—principally the US and China—would at a minimum not actively undermine or hinder the process. These conditions may or may not eventuate. (Zang argues that an alternative—a collapse of the North Korean state followed by direct South Korean and US intervention would induce a Chinese counter-intervention. And even without Chinese intervention, a state collapse would probably lead to a pro-Chinese successor regime, a clearly debatable proposition.)

So with the proper conditions specified, the issue becomes how to offer the North Korean people a good deal without breaking the South Korean bank. Zang argues that maintenance of the DMZ as a method of maintaining physical separation for some interim period, as embodied in current South Korean government planning, will block the first condition, that the North Korean people want unification. So the DMZ has to go. This removal of a major physical constraint on mass migration means that the rest of the package has to be really attractive. Zang tries to accomplish this by essentially providing North Koreans who choose to stay at home additional benefits relative to those who cross the old inter-Korean border. To further the cause of getting the North Koreans onboard, Zang also advocates offering a pre-emptive amnesty to all but the highest elites of the old North Korean regime.

Clearly, given how much larger and poorer in a relative sense North Korea is in comparison to South Korea as compared to East and West Germany, South Korea cannot afford to offer the same package of benefits to the North Koreans that the West Germans offered the Ossies. (This point is reinforced if one considers the growing burden created by rapid aging in the South.) Specifically, Zang envisions a social security and pension system in which South Koreans will get more than North Koreans for some transitional period, and North Koreans who stay at home will get more than those who migrate south.

The reader can judge whether in the end they regard Zang’s plan as “realistic;” it strikes me as much more considered than some of the tale spinning that passes for serious thought on this issue.

To add to the economic incentives to stay at home Zang advocates the immediate privatization and transfer of title to user/occupants of de facto private houses, apartments, and small shops (excluding a small group of regime elites). However, if one really wanted to make this an effective anti-migration program, one might want to make this transfer contingent on the recipient remaining in place for some specified period of time, otherwise the recipient might just resell the asset to finance migration! For rural residents, Zang puts forward the interesting proposal of allowing collective farm members to determine privatization rules themselves.

Next Zang considers the issue of wealth transfer, arguing, correctly, that aspects of the German monetary union were designed to shift wealth to East German recipients. Zang says a favorable conversion rate is not the only way such a wealth transfer could be accomplished—the South Korean government could just hand North Korean residents cash.

Large-scale privatization proceeds would go into a trust fund to support the unification process.  Zang observes that many North Korean SOEs are dilapidated, and privatization proceeds have been disappointing in other cases. But North Korea has considerable mineral wealth, and the privatization of the mines could bring in significant revenue that could be recycled to the residents of North Korea, providing them with capital to start businesses, for example.

One can question whether removing the DMZ and pushing money into North Korea would be sufficient to impede potentially destabilizing levels of mass migration. But Zang has offered an alternative view of the unification process, and it is one that may have greater resonance with South Korean progressives who soon may well be calling the shots in Seoul.

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