The Flawed Comparison: Korean and German Reunification

The death of Kim Jong Il earlier this week has set off a firestorm of speculation in the news as to the future of North Korea. Featuring prominently in this speculation is the thought that this may be the first step toward Korean reunification, with comparisons often made to German reunification in 1990.

A quick analysis of German and potential Korean reunification shows that this comparison may not be as accurate as it first appears. Korea and Germany have major geographic, political, and economic differences that make potential Korean reunification more complex and, potentially, combustible.

Cold War Similarities:
After WW2, Korea and Germany were occupied by the Allied forces: Germany because it initiated the war in Europe and Korea because it was the base that Japan used to make war in China. Both countries were then divided along borders that roughly corresponded to where the US and Soviet armies met at the end of the war. The US then setup a democratic society with a market based economy in its zones and the Soviets a Communist society with a planned economy in its zones. During the Cold War, both countries then saw the US occupied zones far outstrip their Communist rivals in almost every major economic category.

German Reunification:
German reunification took place during the general collapse of the Soviet Union. This collapse led to the removable of Soviet influence throughout most of Eastern Europe and included revolutions in most of Germany’s neighbors (Poland, Czechoslovakia, and Hungary). Once the Berlin Wall fell, the two Germanys signed a treaty that amounted to a corporate takeover of the East by the West.

As a result, modern day Germany is a democratic society with an open economy. It also carries a significant amount of debt (83% of GDP in 2010) that it inherited during the merger 20 years ago.

Geographical Challenges:

Unlike Germany, Korea was not an active participant in WW2. It simply had the bad luck to be geographically located between two of the warring powers: China and Japan. This makes Korea geographically more similar to Poland or Belgium than to Germany. It is sandwiched between two rival powers, each of whom has a long history with the other and a strong incentive to control it. This incentive has not disappeared, so as long as Japan and China are both strong, Korea will be caught in a geographical tug-of-war.

Political Challenges:

Unfortunately for Korea, modern Japan and China are both strong global powers. They have the 2^nd and 3^rd largest economies in the world and the rivalry that led to the Asian theatre of WW2 is starting to re-emerge. Both countries therefore have a stake in controlling Korea (or at least denying the other control of it). This will complicate any attempt at Korean reunification since Japan is a South Korean ally and China a North Korean ally.

Economic Challenges:
When Germany reunified, the West was substantially larger and wealthier than the East. It had four times the population (62M to 16M), and a per capita GDP that was 50% higher ($15.3K to $9.7K). Despite the massive and wealthy population that it could draw upon to fund the reunification, Germany is still suffering economically from the unification 20 years later.

Korea’s differences in population and GDP paint a far different story. South Korea is more populous and wealthy than the North, but the differences are not as favorable as Germany’s were. South Korea’s population is twice the North’s (49M to 24M) and its per capita GDP fifteen times larger ($31.7K to $1.9K). Korean reunification would therefore require a tremendous transfer of wealth from South to North. This would result in a significant change in lifestyle for the South Koreans and could cripple the unified Korean economy for much longer than the 20 year impact that Germany has seen.

Conclusion:
The analogy to German reunification may be an easy one when looking at the regime change in Korea, but it ignores many of the complexities that Germany did not have to face. It is therefore difficult to imagine a situation where quick reunification takes place without having dramatic and possibly combustible, consequences for the region.