Eui-Gak Hwang - The Search For A Unified Korea

The Search for a Unied Korea
Eui-Gak Hwang
The Search for a Unied

Korea
Political and Economic Implications
123
Eui-Gak Hwang
International Centre for the Study
of East Asian Development (ICSEAD)
11-4 Otemachi
Kitakyushu
Kokurakita
803-0814 Japan
hwang@icsead.or.jp
ISBN 978-1-4419-1561-0
e-ISBN 978-1-4419-1562-7
DOI 10.1007/978-1-4419-1562-7
Springer New York Dordrecht Heidelberg London
Library of Congress Control Number: 2010921112
Springer Science+Business Media, LLC 2010
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Acknowledgments
In September 2007, I was invited by the International Centre for the Study of East
Asian Development (ICSEAD), Kitakyushu, to come to Japan to do research work
in a broad spectrum of areas related to East Asian issues. As a research project
for the scal year 20082009, I chose to write a book on what would happen if a
big bang event occurs on the Korean Peninsula. The topic occurred to me because
North Korea has continued its brinkmanship blufng to the world even as the leadership in Pyongyang is incapable of meeting its countrys most basic needs, including
feeding its starving people. I have a dream that as my brothers across the border
gradually learn about the eroding legitimacy of the Norths leadership, sooner or
later they will rise up calling for a fundamental change. What I also dream is that
as the untenable communist regime collapses the two Koreas will be dramatically
unied with the unanimous support from neighboring powers. Can North Koreas
implosion or explosion bring a reunication on the Korean Peninsula? This question
has propelled me to explore these equivocated issues in this manuscript, which is,
of course, far short of my satisfaction.
I am indebted to Dr. Shoichi Yamashita, Dr. Hidehiko Tanimura, and other
ICSEAD research staffs for all their generous help and encouragement despite their
busy schedules. I am also grateful to my wife, Young-Ja Hwang (Kang), who juggled our family affairs alone due to my absence from home in Korea. And to my
grandson, Daniel Ihn Juhn Hwang, whose smile and cute tricks always freshen me
with new hope whenever I am tempted to shrink into the tedium of aging life. Above
all, I thank the Heavenly Father for blessing me with the continued ability to do my
academic and research work both home and abroad, even after my retirement from
Korea University in 2005.
Ms. Gillian Greenough, and the editorial staff at Springer, and two anonymous
referees helped me greatly in rening the contents of the manuscript, but any
remaining errors and shortcomings are solely mine.
Kitakyushu, Japan
Eui-Gak Hwang
Introduction
North Koreas brinkmanship diplomacy has continued to disturb the world with its
seemingly reckless missile testing, as the countrys leader, Kim Jong-Il, is rumored
to be terminally ill with pancreatic cancer. North Korea appears to be in a state
of serious internal crisis not only because its dictatorial system, albeit skillful and
ruthless leadership, is inherently unstable, if not skillful and ruthless leadership, but
also because the main pillar of Kim Jong-Ils legitimacy is rapidly eroding due to
both mass starvations and the exodus of grassroots and mass exodus of the North
Korean people into nearby regions.
The main objective of this book is to explore the probability of North Koreas
implosion, and second to search for a feasible way for Korean reunication as a
possible consequence of a big bang event on the peninsula. The geopolitics of the
Korean Peninsula is historically very complicated as Korea is bordered and surrounded by four big powers; namely, China, Russia, Japan, and the United States.
Each country has its own varying degrees of political, economic, and military stakes
with respect to the Korean Peninsula. Thus, the Land of the Morning Calm has
remained divided since 1945 mainly as a result of the domain war among these
super powers. As the North nears a turning point, however, there is a new possibility
for the two Koreas to reunite if the international environments work in their favor,
and if both countries are well prepared to assume reunication.
Chapter 1 describes the origin and consequence of an ideological division of
Korea. It has been more than 60 years since Korea gained her independence after the
36-year Japanese occupation. But the division of the peninsula between the Norths
communist system and the Souths capitalist system had led the Korean people to be
ideologically split. In North Korea, many hungry people are ghting for food while
living under an oppressive dictatorial regime. Most adult people must join the communist party, in order to survive. They cannot publicly criticize their Dear Leader,
Kim Jong-Il, who although ailing, has so far managed to retain his grip for decades
from his hideout in a radiation-free underground stronghold near Pyongyang.
In South Korea, on the other hand, thousands of well-fed dissidents are often out
in the streets either protesting against foods, namely the United States beef imports,
or against the elites the privileged class just for the sake of opposition. The demonstrators in Seoul like to wear red head bands (symbolizing the red army) and carry
candle lights in their hands. Whatever the disguise, it must be a plot to overthrow the
vii
viii
Introduction
right wing regime in the South. People in both North and South Korea are victims of
two foreign ideologies. Both ideological importers and blind followers are becoming the victims of their own bondage, which, in turn, contributes to the nations
division.
Chapter 2 reviews the consequences of the inter-Korean economic cooperation
and trade during the last decade or so. The political background and current status of the idiosyncratic determinants of the inter-Korean trade are examined by the
resultant impacts on the two Koreas, respectively. Over the past 20 years beginning
in 1989, inter-Korean trade has increased about 90 times in terms of its monetary
value, from US 20 million dollars in 1989 to US 1.8 billion dollars in 2007. Since
1999, in particular, inter-Korean economic cooperation has greatly expanded in a
lopsided way to favor the North. Its share in total North Korean trade accounted
for 13% in 1999, 26% in 2005, and greatly jumped to 61.2% in 2007 and dropped
to 21.2% in 2008 (which reects a cooler relation between two Koreas since Lee
Myung-Bak became the Souths president in February 2008). Despite increased aids
and investments from the South, the economic gap between the North and the South
is still widening. In addition, the Norths cliff-hanger (brinkmanship) strategy is not
likely to end anytime soon. Aid from the South is due mainly to Seouls anxieties
about the Norths possible implosion and the costs of unication, although the real
motive behind Kim Dae-Jungs Sunshine Policy is still somewhat unclear. Instead
of such lopsided aid pouring from the South into the North, this chapter suggests
that reciprocity would work better if the policy aims to insure the autarchic North
evolves toward a self-sustainable market economy.
Chapter 3 compares the strain policy with the sunshine policy from the perspective of shortening the national division. As a result of South Koreas assistance
during a decade of sunshine policy, which amounted to about US 2,902.22 million
dollars, the North Korean leadership has been kept aoat. The Norths elites must
believe that with their skillful policy toward the South of smiling and blufng, they
can maintain their grip on power for much longer. If aids and grants continue to ow
into the North from either the South or Beijing and others, the Norths communist
regime can of course hold on much longer. Here one can argue that strengthening
the strain policy instead of the sunshine policy would be a short cut to national
reunication induced by either implosion or explosion in the North.
Chapter 4 examines the impact of a big bang event on the Korean Peninsula.
North Korea, or the Hermit Kingdom, is on the verge of major change, with both
the deteriorating health of the Dear Leader Kim Jong-Il and the countrys faltering economy. When the regime in Pyongyang falls, how will neighboring countries
(China, Japan, the United States, and Russia) react to the contingency situation?
What political option would make Korean reunication possible? These are questions to be addressed using to both German and Vietnamese unication models and
discussed subjectively at length in this chapter. The author proposes a neutral state
for unied Korea briey here, but will fully discuss this issue in Chapter 8 under the
title of International Politics and a Search for Unied Korea.
Chapter 5 discusses the oncoming new world environment surrounding Korea.
As noted with the dawn of the Year of Cow, there have been many changes in
Introduction
ix
world affairs, including increasing uncertainty regarding the future of the Korean
Peninsula. This chapter looks at new developments ahead for North and South Korea
as well as the required measures that the South must take when the Big Bang bursts
out of the North. This chapter supplements arguments in previous chapters by taking
into account ever-changing world environments and subjective predictions regarding the imminent termination of Kim Jong-Ils regime in Pyongyang. In addition,
the leadership role in the German unication process is highlighted as a way to help
the South Koreans prepare for the possibility of national reunication.
Chapter 6 focuses on the political economy of reunication. This chapter compares both the relative economic strengths of the two Koreas and the economics
of guns and butter in both theoretical and practical contexts. The analysis is followed by the economics as well as costs of Korean reunication with references to
East and West Germanys reunication in 1990 and Vietnams reunication in 1975.
The costs and benets of reunication are presented both conceptually and numerically, if possible, to draw a conclusion that the sooner the reunication is made, the
less the cost, unless North Korea changes its system toward a more open and free
market-oriented direction.
Chapter 7 deals with policy priorities for a unied Korea in terms of a contingency situation. Post-reunication policy for both economic and political integration
are selectively discussed and suggested in the realm of monetary conversion,
economic restructuring and privatization, as well as the integration method.
Lastly, Chapter 8 discusses the feasibility of a neutral Korea in light of conicting
stakes among four big powers; namely, China, Japan, the United States, and Russia.
This points out that reunication will not be such a simple process as long as there is
the perception by the four big powers that a unied Korea could disturb the balance
of power in the region. An alternative solution to disengage the four powers from
the peninsula without fear that the balance of power in the region would be tipped
against any of them would be to propose a neutral unied Korea. But the author
proposes a temporal neutralization in lieu of permanent neutralization. Neutrality is
offered to overcome existing international power politics. When there comes a more
peaceful and cooperative future in the world beyond ideological strife, neutrality or
non-neutrality will no longer matter. Under the current environments, however, only
the idea of a unied neutral Korea would likely buy the no-strong-objections from
all countries involved, namely China, Japan, the United States, and Russia.
Nobody can predict when and how the Korean reunication might become a
possibility. But the biblical truth tells us that a very bad regime (and individual as
well) will not be allowed to sustain forever. Just as there is a time for everything,
and a season for every activity under heaven, so will the rogue regime in Pyongyang
come to an end.
Contents
1 Are Koreans Ideological Victims? . . . . . . . . . . . . . . .

1.1
The Division and Loss of Indigenous Identity . . . . . .
1.2
Kim Il-Sungs Miscalculation and the Subsequent Years
1.3
Brief Retrospect of the North Juche (Self-Reliant)
Hermit Kingdom . . . . . . . . . . . . . . . . . . . . .
1.4
Different Roads . . . . . . . . . . . . . . . . . . . . . .
1.5
Mass Starvation Under Plenary Power Elites . . . . . .
1.6
For Whom the Mourning Bell Tolls? . . . . . . . . . . .
1.7
The Shelter for Fearful Leaders . . . . . . . . . . . . .
1.8
Who Will Likely Take Over After Kim Jong-Il? . . . . .
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2 Inter-Korean Economic Cooperation: The Need

for Reciprocity. Does Lopsided Cooperation Soothe
the Norths Bluffing Mentality? . . . . . . . . . . . . . . . . . .
2.1
The Denition: Economic Cooperation Versus Bilateral
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.2
The Historical Outline of Inter-Korean Economic
Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . .
2.3
The Status of the Inter-Korean Trade . . . . . . . . . . . . .
2.4
Comparison of the Inter-Korean Trade with the North
KoreaChina Trade . . . . . . . . . . . . . . . . . . . . . .
2.5
The Determinants of Inter-Korean Economic Cooperation .
2.5.1
The Brief Outline . . . . . . . . . . . . . . . . .
2.5.2
Trade, Investment, and Economic Assistance . . .
2.6
The Effects of the Inter-Korean Economic Cooperation . . .
2.6.1
The Impacts on the South Korean Economy . . .
2.6.2
The Impact on the North Korean Economy . . . .
2.7
New Policy Paradigm Under Lee Myung-Baks Leadership?
2.8
Closing Remarks on Reciprocity Principle . . . . . . . . . .
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Contents
3 The Strain Policy Versus the Sunshine Policy: A Road

to Korean Unification . . . . . . . . . . . . . . . . . . . . . . . .
3.1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . .
3.2
How Long Will the Red Flag Fly with the Souths Subsidy?
3.3
What About the Sunshine Policy? . . . . . . . . . . . . . .
3.4
What Exacerbates Internal Tensions? . . . . . . . . . . . .
3.5
Conclusion: Shorten the Regime on the Brink . . . . . . . .
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4 What if a Big Bang Occurs on the Korean Peninsula? . . . . . . .

4.1
Introduction: What if North Korea Falls? . . . . . . . . . . .
4.2
Historical Evolutions of the NorthSouth Korean Relations . .
4.3
The Spillover Effects of Perestroika and Glasnost . . . . . . .
4.3.1
Gorbachev Phenomenon and Communist Bloc
Change . . . . . . . . . . . . . . . . . . . . . . . .
4.3.2
Why Does North Korea Refuse Fundamental
Change? . . . . . . . . . . . . . . . . . . . . . . .
4.4
Can Kim Jong-Ils Regime Last Much Longer? . . . . . . . .
4.4.1
Some Scenarios on North Korean Regime Collapse
4.5
What Will Neighboring Nations Do if North Korea Falls? . .
4.5.1
Big Bang and the After Scenario:
Dynamite-Implosion Model . . . . . . . . . . . . .
4.5.2
Chinese Perceptions of the Korean Peninsula . . . .
4.5.3
Chinese Response to the Norths Collapse
Due to Implosion . . . . . . . . . . . . . . . . . . .
4.5.4
China and North Korea at the Crossroad . . . . . .
4.5.5
US Policy and the Korean Peninsula . . . . . . . .
4.5.6
Japan and the Korean Peninsula . . . . . . . . . . .
4.5.7
Russia and the Korean Peninsula . . . . . . . . . .
4.6
How Should Koreans Cope with a Big Bang? . . . . . . . .
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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5 New World Environment Surrounding Korea . . . . . .

5.1
Introduction: Misty and Rugged Road to Korean
Reunication . . . . . . . . . . . . . . . . . . . . .
5.2
The DPRK and Obama Administration . . . . . . .
5.3
Will Kim Jong-Ils End Differ from Ceausescus? . .
5.4
Will Korean Unication Be Welcome? . . . . . . . .
5.5
Leadership Role in German Unication Has a Lesson
for Korea . . . . . . . . . . . . . . . . . . . . . . .
5.6
Timely Conditions for a Paradigm Shift . . . . . . .
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6 The Political Economy of Reunification Between

the Two Koreas . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.2
A Brief Comparison of Economic Performance Between
the Two Koreas . . . . . . . . . . . . . . . . . . . . . . . . . .
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Contents
6.3
6.4
6.5
xiii
The Economics of Guns and Bread . . . . . . . . . . . . . . .

The Economics of the Norths Nuclear and Missile Tests . . . .
The Political Economy of Korean Unication . . . . . . . . . .
7 Policy Priorities for the Unified Korea . . . . . . . . . . .

7.1
Introduction . . . . . . . . . . . . . . . . . . . . . . .
7.2
Contingency Tasks for a Post-Kim Jong-Il Era . . . .
7.3
Approach for Economic Integration . . . . . . . . . .
7.3.1
Economic and Monetary Integration for the
Unied Korea . . . . . . . . . . . . . . . .
7.3.2
Economic Restructuring and Privatization .
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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8 International Politics and a Search for Unified Korea . . . . . .

8.1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . .
8.2
Four Gangs Tug-of-War Politics and the Korean Peninsula .
8.3
What Is the Unication Formula: Option for Colorless State?
8.4
Concluding Remarks . . . . . . . . . . . . . . . . . . . . .
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Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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List of Tables
2.1
2.2
2.3
2.4
2.5
2.6
3.1
6.1
6.2
6.3
Trend of annual intra-Korean trade (unit: 1000 US dollars) .

Inter-Korean trade by major categories (unit: million US
dollars) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Annual exchange visits of people (unit: numbers) . . . . . .
Tour visits to Mt. Keumgang and Gaesung region . . . . . .
The share of the Inter-Korean trade to the South Koreas
economy (2005) . . . . . . . . . . . . . . . . . . . . . . .
North Koreas trade balance earned from the inter-Korean
economic cooperation in 2005. (unit: millions of US dollars)
Major qualitative index of North Korean systems . . . . . .
Comparison of per-capita GNP (or GNI) between the two
Koreas (in US dollars) . . . . . . . . . . . . . . . . . . . .
Comparison of military strengths between the two Koreas
(end of 2008) . . . . . . . . . . . . . . . . . . . . . . . . .
Comparison of Rocket Technology between the Two Koreas
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xv
Chapter 1
Are Koreans Ideological Victims?
You shall hear of wars and rumors of wars, but see to it that you
are not alarmed. Such things must happen, but the end is still to
come. Nation will rise against nation, and kingdom against
kingdom. There will be famines and earthquakes in various
places. All these are the beginning of birth pains.
Matt. 24:6, 7, 8.
1.1 The Division and Loss of Indigenous Identity

The invisible hand of fate has worked to divide and separate the Korean people
into two separate camps: the pro-communist North and the pro-capitalist South,
beginning with the turmoil transition period of 19451948 as the nation gained
its independence after the Japanese occupation of 36 years. National independence
movement leaders had once fought hand in hand against the Japanese occupation,
but when the country gained independence, the two groups began to dissent as they
competed for their own respective political power. An internecine struggle pitting
brother against brother over different political ideologies and power games threatened to devour all groups. Hostility continued to air up and no real reconciliation
was to be found between the two fratricidal enemies. Indeed, just as is it impossible
to mix re and water, it has been impossible to reconcile the followers of capitalistic
democracy with those of egalitarian communism in the evolving course of Korean
history.
From the joy of independence in August 1945 until the Norths red army tanks
awoke the Seoulites in the early quiet Sunday morning of June 25, 1950, the southern brethren had never prepared, or imagined, that its communist counterpart was
so well organized to cross the 38th line to liberate its poor people from domination
of the US imperialists followers in the south. Until that time, political parties south
of the 38th parallel engaged in endless political disputes as they experimented with
imported democratic systems with no prior practical knowledge. Political retaliation against opposition groups often took place and mounting discontent by the
general population toward politicians became daily events. In such conditions, the
weak government and infant military leaders paid little concern to the organized war
preparation under way on the other side of the 38th parallel division line. In those
E.-G. Hwang, The Search for a Unied Korea, DOI 10.1007/978-1-4419-1562-7_1,

C Springer Science+Business Media, LLC 2010
1 Are Koreans Ideological Victims?
days, many conscientious intellectuals in the South had already begun to suspect
the sustainability of Seouls immature democratic system and thus were inclined to
favor the then seemingly efcient system in the controlled socialist north. This disgruntled political atmosphere contributed in paving the easy way for the communists
to quickly grasp the city of Seoul without strong inside resistance.
In no more than 3 days after the communists overall attack, the heavily armed
North Korean soldiers completely overran the streets of Seoul as many citizens welcomed them by waving red ags. Many innocent citizens did not foresee that this
warm welcome would become a miserable nightmare afterwards under communist
rule. Once the red army controlled the city, the Norths security ofcers would often
go from house to house mostly during the nights to not only seize people for mobilizing to the front line or for reconstructing the bombed Han-river bridge and other
bridges and roads but also to conscate food and valuable household goods such as
sleeping blankets with US brand labels.
All household goods made by American reactionary imperialists were collected
by the newly arrived leftists, but their disposition was never known. Whenever the
security ofcers searched a house, they pretended to be very gentle using comforting
words to the families. But after their visit, families were left with no food, and men,
whether young or old, if found, were dragged away. The security ofcers would even
pierce the attic roof with their bayonets, searching for hidden men. Young children
and women were forced to pick edible grasses or plants from outskirt lands and
hills so as to ll their hungry stomachs. I was 10 years old at the start of Korean
War and I still remember how hungry I was. One day my mother brought home
nine sweet potatoes (according to news report from a hidden radio, the back and
forth ghting across the Rack-dong River near Daegu region was taking place).
When she began boiling them, I thought they were to be a special family breakfast.
She bundled up the sweet potatoes into little packages and told me to sell them
to passersby at a street corner. There were a few other sellers of the same product
on the street that day. Regardless of my competitors in this market, this 10-yearold hungry boy could not tolerate the allurement and surrendered himself to eating
one potato out of each bundle, thereby reducing each bundle to two sweet potatoes. I
stood there until dusk with no passersby showing any pity enough to buy the smaller
potato bundles (compared with the other sellers offer) from me. So I eventually
took the unsold three bundles home and they were distributed to the mouths of other
family members, thus frustrating a poor housewifes naive calculation to raise some
extra income. During the 3 years (19501953) of the fratricidal war, every Korean
suffered without exception due to the war disasters, including loss of loved ones and
neighbors and lack of food. Many experienced the pains and tears of serious famine,
which was compounded by a drought for the entire three war years.
Most innocent Koreans, north and south, just struggled to survive without
seriously questioning why the nation was swirled into war. Nor were there any grassroots efforts to understand the evils hidden in those few elites ideological faiths and
attributes that would so lead to such enmity and desire to eliminate one another.
The subjects the then ideological leaders used were of course ideologically innocent and ideologically indifferent people. The ideologically brain-washed leaders,
1.2
Kim Il-Sungs Miscalculation and the Subsequent Years
whether past or present, are usually ignorant and indifferent in sacricing the general population to achieve their political objectives. They know how well to cover
their real intentions with false patriotism and concealed love for people to believe
their propaganda. The events that brought war between the two groups misguided by
ideologically divorced leaders but possessing the same history, culture, and ethnic
foundation tell that the leading elite class was more important (alternatively rather
ego-centered) in determining the live-and-die path than the people themselves. This
simplied hasty conclusion is contrary to Bruce Cumings quote of the following:
The people were usually more important than the leaders. The deeper I have excavated, the more I have satised myself that the best was underneath, in the obscure
depths. And I have realized that it is quite wrong to take these brilliant and powerful
talkers, who expressed the thought of the masses, for the sole actors in the drama.
They were given the impulse by others much more than they gave it to themselves.
The principal actor is the people (Michelet).1 Of course, the role and inuence of
actors would alter circumstantially depending on whether it is a socialistic theater
or a democratic one.
The three years of bloody conict left millions of casualties (deaths, wounded,
and missing), devastated economies, north and south alike, and, under a 1953 truce
agreement, unresolved battleelds of almost the same size of land division prior to
the war. Opposing political ideologies along with their respective different economic
systems have henceforth created further antagonistic hostility and feelings of bitter
enmity between the two halves of the same country.2
1.2 Kim Il-Sungs Miscalculation and the Subsequent Years

The leader of North Korea, Kim Il-Sung, was later reported to have regretted invading the South because his hasty miscalculation failed to win the support of people
in the South.3 He thought that the South would have fallen sooner or later under his
control without so much blood. When the war broke out in 1950, there were still
several leftist guerrilla units along with thousands of additional supporters in the
South. The rampant corruption and rivalry, unstable politics, endless strikes, vicious
circle of poverty with mounting unemployment, and pro-leftist sentiments in the
South were signaling the death of the Souths system. However, the war brought
a tremendous dislocation of leftist supporters from the South. The end of the war
provided the Souths regime with good excuse to impose strong anti-communist
1
Cumings (1990, p. 237).

Hwang E.-G. (1993) The Korean Economies: A Comparison of North and South. Clarendon
Press, Oxford, p. 23.
3 However, the origins of the war have until recently been a matter of dispute. Ofcially, North
Korea has insisted that the US imperialists started the war, but hearsay backed by various documents from the Soviet archives showed that in 1949 and early 1950 Kim implored Stalin repeatedly
to authorize an invasion of the South. Kims words of regret are also based on hearsay circulated
among North defectors and North Korean observers in the South.
2
wipe-outs and to tighten its political security. The people had also learned a good
lesson about the many bad shades and lies of communism when the north communists occupied the South. Civilian incompetence, social instability, and the peoples
hope for a better economy paved the way for South Koreas military regimes to make
the most use of anti-communist measures in exercising political objectives. Under
the banner of cracking down leftist elements, the power group could easily control
political dissidents, not to speak of suppressing the human rights of opposing forces
in the society. The military regimes had in fact implemented their economic policies more efciently and forcefully than any alternative civilian government could
do. But they had produced countless dissidents for more than a quarter century since
General Park Chung-Hee seized power in a coup in 1961. They were successful in
seizing power and winning a majority of peoples support under the fresh slogan for
the elimination of social unjustness, corruption and vicious circle of poverty.
The Korean War and the countrys historical path of a quarter century of strong
military culture in the South has resulted in the extreme division of thought and
faith between the before and mid-war generation and the young generation
born after the 1960s. This division is a continuing source of a generational and
cultural clash. But this diversity of thought and lifestyle in the South is believed, if
looked from a positive angle, to greatly contribute to a maturing democratic mode
in the society, though the between-class conicts are sometimes credited with the
heightened speed of the economic and social development (take-off) tempo. Good
or bad, all this social evolution is a result of the past history through which generation after generation has accumulated various experience-based knowledge and
cognition of conicting ideological systems. During the last three decades, South
Korea has achieved a remarkable economic success surging to the 12th or 13th
rank of world economic strength as of 2008 with no major natural resources and
with only a population of about 45 million in a small land area of 98,190 square
meters, slightly larger than Indiana in the United States. This miracle transition from
hunger to afuence could be based on the private incentive-oriented free market
economic system in South Korea. This open economic system has been supplemented by the past experiences of hardships, pain, and tears that all Koreans have
experienced. This of course does not rule out that macro-economic achievement
does not involve any unrighteousness, unjustness, or other social dark aspects. Not
at all. There are mounting problems such as widening income and wealth disparity,
moral and ethical depravity, and much human derailment in South Korea as in other
market economies. But anyone can freely choose a decent life as long as he or she
is willing to work and abide by the law. This does not mean, as already briey mentioned above, that there has been no political and human rights suppression in the
South. Many children and descendants of those who were classied as ideologically
impure elements before and after the Korean War had been systematically excluded
from employment in public organizations or social activities. Through a prolonged
time of hardship and distress under right-wing regimes, they sought jobs mostly in
schools and publishing houses, heaping hardened hatred upon hatred against the ruling conservatives. In schools, particularly elementary and junior high schools, those
teachers have formed an alliance with outside discontent forces and persistently
1.3
Brief Retrospect of the North Juche (Self-Reliant) Hermit Kingdom
propagated both anti-government and anti-American propaganda to sensitive young

pupils. During the 1980s and 1990s when the new wave of democracy began in the
South, these groups began to resurface in all parts of the South, shaking the country
with their crimson head bands and jackets in a much more different mode and environment than ever before. Riding on these groups support, two new liberal regimes
of Kim Dae-Jung and Roh Moo-Hyun consecutively grasped power in the South for
exactly 10 years beginning in 1997. This period is often called a decade insufated
widely by would-be leftist forces that came out in the sun.
The 17th President Lee Myung-Bak (inaugurated on February 25, 2008) confessed that the past 10 years inuences of former two Presidents (Kim Dae-Jung
and Roh Moo-Hyun) are too big across the landscape of the South. The remark
was made when he met news reporters (May 15, 2008) on the issue of Korea-US
FTA ratication. He expressed his deep concern regarding the ever-mounting worrisome number of candle-carrying street demonstrators in erce protests against the
unrealized risks of beef imports from the United States. President Lee made a special address to the people on May 22, 2008 that he is very sorry for having failed
in reecting fully the wide spectrum of public opinion in the process of his policy decision on the beef imports and assured that his government would humbly do
its utmost to enhance the public health. This series of events over US beef imports
reects not only that there is greatly improved freedom of speech and the ability
to have organized protests, but also the reduced power of the government in the
South. As such, although sometimes appearing bogged down, the democratic system has been moving forward with higher per capita mean income from a less
than US 80 dollars in early 1960s to above US 20,000 dollars in 2007, in spite of
enlarged income standard deviation in due course. In the South, political ideology
has sometimes victimized many innocent people, but in due course, human rights
and democratic freedom has greatly grown along with improved income and the
wellbeing of the people as a whole.
On the other side of the peninsula, the Marxist brethren have been missing the
market incentive motives in every aspect of economic life. The Hermit Kingdom
of the North appears to have come to a dead end. There are reports of mass starvation leading to the death of more than two million people as of mid-2008, all
due to shortages of food, medicine, and other basic necessities. How the North
Korean people are grievous victims of the deceiving ideology, which has repeatedly
assured them with fake promises of white rice, meat soup, tile-roof house,
and silk clothes, made rst by Kim Il-Sung in November 1962, the second year
of the Norths First 7-Year Plan. We must offer a retrospect of the past course of the
communist regime in the North.
1.3 Brief Retrospect of the North Juche (Self-Reliant)

Hermit Kingdom
In the North, Kim Il-Sung, was a 33-year-old guerrilla commander when he seized
power with the support of the Soviet army in 1945. He effectively created a highly
centralized system that accorded him unlimited power, and he systematically purged
his political opponents. In the early 1970s, he fully cultivated his power to generate a formidable cult of personality for himself and to establish a communistic
monarchy kingdom, which would pave the way to make his son Kim Jong-Il his
heir. While following a Stalinist control line, he had distanced himself from Marx
Engels intrinsic philosophy. In other words, he was a pedigree-centered impure
socialist. Most orthodox communists had to compromise with this new hybrid communist ruler Kim Il-Sung and his dear son Kim Jong-Il only if for survival in the
North. Otherwise, they had to either go underground or defect from the North at a
great personal cost and risk to their families left behind.4
But in the rst two decades, the North could successfully mobilize people to
effectively rebuild the North Korean economy, which had quite formidable heavy
industrial bases along with abundant coal and hydroelectric resources. The socialistic approach of running the economy had the Norths per capita income ahead of
that of the South until the end of 1974.
The peoples workers had demonstrated their eagerness for production in the
early stage of the socialist economy. The hard-working culture was systematically
driven by collective slogans and vigorous encouragement for the quick construction
of a great socialist paradise. But the working ethics began to gradually erode over
time as workers were awakened to the system that would equalize everything at the
expense of incentives.5 They began to learn how to meet the daily or monthly topdown targets of production. The quantity targets could be hardly accomplished when
the workers were less concerned about the quality aspects of what they were producing. In the state of missing ownership, state control functions had crucially expanded
in every production elds, but only with diminishing efciency and effects. The
workers began to realize that one who is today the leader may be tomorrow the
one receiving leadership in the communist society. In such circumstances, if leader
fail to monitor his or her subordinates effectively, as with the principalagent problem, the leader and subordinates may also be monitored by pressures from within
their own organ. This leads to mounting mutual disbelief. Thus, the autarky economy which lacks human trust and condence in one another as a whole will begin
The most sensational defection of a high-level insider from the North to the South was the 1997
case of Hwang Jang-Yop who was speaker of the Supreme Peoples Assembly from 1972 to 1984.
He had educated Kim Jong-Il at Kim Il -Sung University in Pyongyang in which he was appointed
president of the university in 1965, the year after the Dear Leader graduated. Hwang was the
principal authority on Juche Idea, which became the ofcial credo of the DPRK in the 1972 constitution. But Hwangs world began to erode when an article in Rodong Shinmun (ofcial newspaper)
attacked careerists and conspirators (who) outwardly pretend to uphold the leader and be faithful
to the revolutionary cause while seeking another dream inwardly and making conspiracies behind
the scenes. Certain that the article was aimed at him, Hwang chose to defect in Beijing on his
way back after delivering the main address at a Cho Chong-ryun (pro-North residents association)
symposium in Japan in early February 1997.
5 In 1947, Kim Il-Sung borrowed Lenins biblical principle that he that does not work, neither
shall he eat. But the socialist principle, that from each according to their ability, to each according
to their work, had not been practically challenged for application in the North.
1.4
Different Roads
to erode. Indeed, North Korea has explosively lagged behind the economy of the
South ever since the turn of mid-1970s.
Under the slogan of communist economic construction, North Korea had
aimed to build a self-reliant economy under a central planning and management
system.
After observing the ideological and border dispute (clash) between the postStalinist Soviet Union and Maos China in 19531955, Kim Il-Sung sought to
exercise autonomy by keeping an equal distance between the then Soviet Union and
China. North Korea had persistently advanced the juche idea (self-reliance doctrine) as her guiding ideology in politics, economy, and military after Kim Il-Sungs
rst initiative remark at the Workers Party Central Committee in 1955. It became
the principle guideline in the Norths new constitution promulgated in December
1972, with the MarxistLeninist philosophy as a supporting pillar. Kim Jung-Il,
son and heir-designate, enriched further the juche idea as a tool for fostering his
political position in the power transition that began in 1972. As in other communist
economies, materials and labors are the means of production owned collectively by
the people in the form of all-people ownership. Paradoxically, individual workers
like physical inputs are nothing but means and tools of production owned by the
state (or party), which in vague communist theory is geared to serve the promotion of the material well-being of the masses. The reality has, in turn, given the
state being represented successively by the Greater Leader and Dearest Leader the
carte blanche to override the grassroots population. As such, the helpless masses
are being consumed as sacrices not only to serve the great fatherland but also to
exalt the state ideology.
1.4 Different Roads

With no exceptions, the pronounced goal of political leaders in every society would
be to help people enjoy higher income and well-being along with individual dignity
and freedom. Very often, however, in the primitive stages of economic growth, the
priority on higher material well-being would precede over individual human right
and freedom. Given the proposition, the approaches to higher material well-being
might deviate from one another in different ideological systems. One major difference between the market economy (South Korea) and the socialist system (North
Korea) lies in the decision-making criterion as to what, how, and for whom
to produce. In deciding what to produce, consumer preference revealed by market
demand plays a very crucial role in the market-oriented economy, while social preference valued by the ruling leaders dominates in the command economy.6 In North
Korea, the priorities of production ranks from the highest with heavy-industrial
(military-related) and public goods, followed by producers goods, light industry
goods, and nally consumer goods. Consumer preferences were largely placed at
6
Hwang (1993), ibid., p. 29.
the tail end of the list for the sake of heavy industrial and military sectors in most
socialist economies during the Stalinist period. Such discriminative policy prevailed
until the socialist bloc began to dissolve during the fall of Soviet Union in 1989
1990. North Korea was an exception. The trend has not fundamentally changed yet
in North Korea as the sustained ruling class and their political ideology has remained
intact. On the other hand, the South capitalists moved from the development of
light and consumer industries to capital intensive industrial policy as the economy
advanced to the higher stage of development. The South leaders believed from the
beginning that an international system of exchange would solve everyones problems in the long run, though they understood that some domestic infant industrial
bases needed protection in early pre-takeoff stage. Unlike the South, however, the
North persistently pursued its self-reliant policy with focal emphasis on enhancing
its formidable heavy industrial complexes and energy sources with which it started.
As time passed, the independent North economy began to reveal the seriousness
of its economic and technological backwardness in no less than two decades. The
self-reliant doctrine faced mounting constraints in its socialistic accumulation.
Nonetheless, the resources for expanding human technocrats had become severely
limited, with nothing left but to urge the peoples workers to unite and to tighten
their belts for their great fatherland and the Great Leader. It was a natural outcome
in that hybrid regime that the poor peasants and lower classes could become proletarian cadres, workers, or technicians virtually overnight during the birth of the
revolutionary communist state. The proletarian cadres had ruthlessly purged the
remnants of intellectual technocrats as reactionary elements over an extended period
before and after the Korean War. Such reckless politics and autarky in North Korea
turned out to be the source of the economys downfall, beginning in the mid-1970s.
The economic battle between the North and South turned around in 19751976
with the capitalistic open market economy far ahead of the autarkic self-reliant
one.7
Per capita income evaluated at Norths ofcial trade exchange rate was about US
175 dollars in 1960 and rose to about US 750 dollars in 1975, but is now estimated at
about US 800 dollars in 2008. The estimates of per capita income depend, of course,
on several key factors such as applied exchange rates, different output accounting
methods in each systems, as well as purchasing power of a unit of nominal income
in the respective economies, all admitting that the functions of money differ completely between market-oriented economy and the self-sufciency seeking socialist
economy.8
7 See Eui-Gak Hwang (1993), ibid., Tables 3.11(a) and 3.11(b), in pages 121122, for the percapita GNP estimates for both North Korea, 19461990 and South Korea, 19531990.
8 See Eui-Gak Hwang (1993), ibid., pp. 6062 on the functions of money in North Korea and also
refer to Hwang (1984), in Korean.
1.6
For Whom the Mourning Bell Tolls?
1.5 Mass Starvation Under Plenary Power Elites

It is apparent that the North juche economy has not been able to prevent the short
food supply not only because of system-made mistakes but also due to continued
punishing weather conditions. In particular, the hardships have been a result of the
breakdown of the socialist system since the early 1990s. Instead of white rice and
meat soup, many people in the North are thought to be starving. According to
recent reports leaked from the North, hungry North Koreans are seeking to cross
the border into China to sell their labor and body in exchange for foods. The annual
shortage of food has amounted to between 1.5 million tons and 2.5 million tons
depending on each year during the period of 19902007. North Koreas minimum
demand for grains is approximated at about 7.0 million tons annually for human consumption (about 5.5 million tons), animal feed, and industrial use. In more detail,
North Koreas minimum food requirement for human consumption in 19951996
was about 5,145,000 tons, but only 4,563,000 tons were available for a total population of 21,685,000, of which domestic production accounted for 3,451,000 tons,
while 962,000 tons and 150,000 tons were supplied from foreign sources, including
China, and South Korea, respectively. In 20052006, 23,165,000 people needed a
minimum amount of 5,496,000 tons of grains, which barely met with 4,540,000 tons
of domestic production, 450,000 tons from foreign import and 500,000 tons from
South Korea. In the latter example, supply and demand were marginally balanced.
However, the reality was that the total supply was not equally distributed to all
people. As usual, the ruling class and the military had taken the larger share, leaving the common people to starve unless they could secure additional food supplies
through all possible means and routs within or outside the country. In any short supply societies, corruption and black markets would without exception be rampant,
resulting in a wide disparity in living standards giving lie to the so-called egalitarian
ideology. Brutal political suppression and economic hardships have so far produced
thousands of dissidents and defectors from the North; and these numbers continue
to rise greatly in recent years. Even discontented high-ranking ofcers and military
personnel are increasingly joining in the exodus, which surely signals the upcoming collapse of the regime in North Korea. So far, North Korea has tried to strictly
control access to news and mass media, thus preventing its people from knowing
about the prosperous South. But various evidence of humanitarian aid from the
South and hearsay about the economic success south of the truce line are known
widely among the populace. The leaders in the North have perhaps overlooked the
old Korean saying, a footless word can travel 1000 li (240 km) over night.
1.6 For Whom the Mourning Bell Tolls?

The North leaders had probably not calculated the eventual outcome when they
allowed tourists from South Korea to visit Mt. Keumgang and later the Gaesung
Special Economic Zone. They do not fully understand that money will matter to
override their closed system. Money from capitalistic markets will sooner or later
10
shake off the dull communist society. The self-reliant system will collapse into itself
either due to starving epidemics or mass revolts.
The current ruler, Kim Jong-Il, was the de facto leader from 1972 according to
Hwang Jang-Yops testimony, but was ofcially designated as his fathers successor
in 1980, assuming a growing political and managerial role until Kim Il-Sungs death
on July 8, 1994. Having deteriorated his countrys economy due to mismanagement,
he has tacitly gambled to secure international economic aid while developing longrange missiles and a nuclear program, which have become his bargaining tools since
the mid-1990s. This outwardly irrational gamble may have allowed him to stay in
power longer as the US administration under George Bush invited him to participate
in the Six-Party Talks in August 2003 (North Korea, China, Japan, Russia, South
Korea, and the United States).
It is very likely that Kim Jong-Ils policy of ostensible diplomatic and economic
self-reliance, coupled with his increasingly oppressive and draconian ruling, will
shorten his fate and his regime. However, it is not possible to forecast how and when
North Korea will falter and fall.
Norths Kim Jong-Il reportedly expressed his deep impression and surprise at
the wonderful changes in Shanghai, Guangzhou, and Beijing when he visited China
in 2005. But the North Leader is not yet certain if his small and heavily isolated
poor economy can follow the Chinese model, which is based on both openness and
market-oriented incentives. Openness will bring in fresh air with lot of ies, but
Kim is afraid that he can be no longer capable to catch and kill those ies. 9 Can
he dare to follow the path of Mikhail Gorbachevs perestroika and glasnost whose
ideology gave way to pragmatism and dramatic change in the Soviet Union in 1989?
Probably the only option for the Kim family is to keep and prolong the status quo,
thus strengthening his teams security. Regardless whether the Democratic Peoples
Republic of Korea wants to change or not, the time is already approaching for the
fall of the North regime. Kim Jong-Il may be lucky enough to avoid the same fate
of decades-long Romanian dictator Nicolae Ceausescu who was overthrown and
executed in late 1989.
1.7 The Shelter for Fearful Leaders

According to a newspaper interview with a defected high-ranking North Korean
general (three stars) called Mr. Ahn Young-Chul (pseudonym), Kim Jong-Il has
been spending most of his time in a radiation-free stronghold, a specially constructed two-story underground command post with advanced equipment stored
9
This is a famous quote by Deng Xiaoping in 1979. Deng said that if China opened its door to
the outside world, many capital and new technology (fresh air) would ow into China but with
many negative cultures and political elements (ies). He suggested ies could be caught after
fresh air was introduced. Another famous Dengs analects is If a cat catches mice, what does
it matter if its black or white, which is, Dont ask whether a policy is socialist, ask whether it
works.
1.8
Who Will Likely Take Over After Kim Jong-Il?
11
in two dozen ofce rooms with a total space of about 200 square meters.10 The
bunker which is named Chul-Bong-Kak (meaning iron-hill-palace), is believed
to be located about 15 km northeast of the Kim Il-Sung Square in Pyongyang city.
This bunker is connected by an 80 km underground tunnel to the Nampo port in the
west coast. Apparently, Kim Jong-Il began to stay in the bunker just after he was
informed of the US-led invasion of Iraq in March 2003. Kim Jong-Il is fearful that
the United States is decapitating his regime. To protect himself and his followers,
he forced his people to construct this palace-like fortress.
Just as the innocent people have been victims of the ideological organ and chronic
economic problems, can we say that the North leaders are also being victimized by
the worlds ideological conicts and the Norths policy failures? The communist
dictatorial leaders are unsure about how their regimes will end and what kind of
retribution will be taken against them.
Kim Jong-Il, born in February 1942, is known to be in poor physical health.
Being chairman of the National Defense Commission, Kim Jong-Il is known to stay
most of the time in the bunker along with his military operation core staff, which
comprises Kim Du-Nam, operation head; Cho Myung-Rok, political bureau chief
of the Supreme Command Headquarter; Kim Yong-Chun, command-in-chief of
Peoples Army; Kim Myung-Sup, operation head of DPRK Workers Party (KWP);
and about 120 leaders of both the Peoples Armed Forces and the KWP.
1.8 Who Will Likely Take Over After Kim Jong-Il?

As of mid-2008, the notable gure in North Korea is General Kim Du-Nam who is
the third son of Kim Yong-Nam, president of Supreme Peoples Assembly (SPA).
He is now general superintendent of the Peoples Army, second only to Kim JongIl in the North power hierarchy.
If something happens to the Dear Leader, it is likely that this man will take over
during the interim period as the supreme power in the DPRK. Not much is known
about his personal position and opinion regarding neighboring nations. The question here is how much longer can the North political cadets sustain their status
quo while sticking to their juche ideology in every aspects of the state management. Unless the North decides to reform its system, including the so-called juche
farming, it appears unlikely that the North can save its thousands of people from
ongoing starvation and male nutrition dilemma. The key for solving North Koreas
serious economic setbacks is to reform its stubborn and closed collective economic
system into a well-guided incentive-driven economy, learning from the lesson that
Deng Xiaoping bravely adopted for China in 1978. In fact, Kim Jong-Il could have
10
The rst story on the defection of Mr. Ahn, who made the second defection case of high ranking North Korean ofcer following Hwang Jang-yup in 1998, was rst reported in a Japanese
monthly magazine Gaen-dai (Contemporary), June, 2003. A Korean internet newspaper, The
Independence had an exclusive interview recently with this defector and reported the details on the
bunker constructs as well as North Koreas military organization, on May 21, 2008.
12
adopted the similar course of the early Chinese economic reform by criticizing the
Great Leaders past policy failures immediately after his fathers death in 1994.11 He
was too fearful of change, and he is still not a true egalitarian communist in that he
is afraid of importing any reform (perestroika) and opening (glasnost) policy, which
he fears might turn over his power structure and way of life.12 Having not acted
initially, he and his followers are now increasingly nervous about events that are no
longer under their control. As of the summer of 2008, during the food shortages,
North Korea has reportedly used humanitarian food aids from the outside world to
feed its cadets and residents in Pyongyang city and its neighborhood prefectures, as
well as the military forces, leaving the general population to starve.
In conclusion, North Koreas food needs are very likely to increase greatly
despite its ongoing juche farming. The hungry people who are victims of the
communist juche (self-reliance) ideology will ght for foods or inevitably perish.
Ironically, in the summer of 2008, thousands of ideologically divided and well-fed
people in the South protested against the Lee Myung-Bak administration with candle lights in their hands against beef imports from the United States. 13 It is really a
regrettable reality that the homogeneous ethnic people in the Korean peninsula have
been divided for so long and have been made the victims of either too less or too
much food under those conicting ideologies. The victimized people are victimizing themselves with no regard to whichever camps they are destined to belong. The
resulting inictions will fall eventually on both ideological offenders and sufferers
alike.
11
I wrote a newspaper article (Dong-A Ilbo, September 12, 1994) suggesting that Kim Jong-Il
could be the successful leader of North Korean like the Chinese Deng Xiaoping, if he bravely
differentiated himself from his father.
12 Kim Jong-Il made it clear that the North will not accept reform and open policy when the former
South Korean President Roh Moo-Hyun visited him in Pyongyang in October 2007.
13 On April 18, 2008, US and South Korean negotiators reached agreement on the sanitary rules
that Korea would apply to all beef, imports irrespective of age, from the United States. The rules
were expected to take effect in mid-May when South Korea published implementing regulations.
However, continued strong Korean public opposition ignited through a TV coverage of the issue
and internet-spread rumors regarding the US beef infected with mad cow disease or BSE has
resulted in escalating protests. Behind the protests is the suspected inuence from the North Korean
leader or his followers in the South to undermine the standing of President Lee and his conservative
political party, which holds a slim majority in Koreas parliament.
Chapter 2
Inter-Korean Economic Cooperation: The Need

for Reciprocity. Does Lopsided Cooperation
Soothe the Norths Bluffing Mentality?
They do not know how to do right, who hoard plunder and loot
in their fortresses.
Amos 3:10.
I gave you empty stomach in every city and lack of bread in
every town. Yet you have not returned to me, declares the Lord.
Amos 4:6.
2.1 The Definition: Economic Cooperation Versus

Bilateral Trade
The term, economic cooperation, has very multifaceted implications. It may be
generally meant to connote the two-ways balanced transactions based on comparative advantages, cooperative economic projects, and mutual economic aids and
supports, and so forth. In the case of bilateral relations between North Korea and
South Korea, economic cooperation has been used largely to encompass human
exchange (meetings of separated families, mutual visits, and Mt. Keumkang
tourism, and feasibility surveys for Gaesung special zone, and so forth), the Souths
provision of various material supplies to meet the demands of the North, and both
pecuniary and non-pecuniary aids and investments into North Korea. Most of the
time, the main ow of such inter-Korean cooperation has so far run from the South
to the North, not the other direction. It has been an utterly unbalanced transaction.
Inter-Korean trade has also occurred in such a heavily biased direction that the
purchases into the South have overwhelmed the imports into the North, because
the trade has been conducted on the basis of political consideration rather than
economic efciency principle. According to the Law Governing the NorthSouth
Exchange and Cooperation (1990 August) of South Korea, the inter-Korean trade
A version of this chapter was presented at a conference held jointly by the Council on Korea-U.S.
Security Studies and the Heritage Foundation on October 2628, 2008, in Washington D.C. The
version was later published in International Journal of Korean Studies, Vol XII, No. 1 (Fall/Winter
2008), pp. 101126.

13
14
Inter-Korean Economic Cooperation
refers to the imports and exports between the North and South, which include
movements of all goods between the two states via any third mediator country.
The imports and exports statistics are, however, ofcially being compiled inclusively on the basis of all ows of goods, both commercial trade goods and free
donation goods under cooperative programs, by the Custom Clearing Ofce in
the South. Strictly speaking, the inter-Korean economic cooperation involves all
public and civilian transactions and activities such as economic assistance in cash
and materials, cultural performance swaps, tour visits, food and health and medical assistances, sports, and academic exchanges. Economic cooperation is broader
than trade in its denition. But in reality, inter-Korean trade has so far been loosely
used to involve not only commercial transactions but also non-economic ows of
all sorts of materials and human services crossing the border between the North and
the South. Such inclusive and open concepts would often be sources of denitional
confusion and misunderstanding among people concerned about what is meant by
the inter-Korean economic cooperation and the inter-Korean trade, respectively.
Objectively speaking, trade is a subset of economic cooperation as mentioned above.
But trade involves the interchange of the shipment of goods and services with the
monetary payments for the purchase and sales of the goods and services. On the
other hand, economic cooperation may not necessarily involve the counterows
or exchanges between goods and its corresponding monetary payments. Economic
cooperation may be based either on reciprocity principle or on non-reciprocal principle. Aside from such denitional distinction, trade and cooperation are often being
used interchangeably in the relations between the North and the South. That reects
the peculiarity of inter-Korean relations.
If we look at the inter-Korean economic cooperation, the North has always
enjoyed assistance own into the North. Even if the inows of materials accompanied by the Souths investment into the North are hard to classify as lopsided
economic aid, the North has been and is currently getting more than the South in
the inter-Korean economic cooperation.
In this chapter, we will dene the inter-economic cooperation as broadly including trade, investment, and economic assistance (aid) between the two Koreas. So far,
inter-Korean trade as well as investment into the North has been promoted to assist
North Korean economy. Therefore, we may use the term inter-Korean trade interchangeably with inter-Korean economic cooperation, even if the two terms strictly
differ from one another, in that trade involves the exchange of goods and services
involve monetary payments.
In terms of neo-classical economics theory, the investment saving gap is equal
to the external trade gap plus net capital outow (or inow) inclusive in the income
transfer payments between two trade partners. Namely, I S = (X M) + F(r),
where I is domestic investment, S is domestic saving, X is a countrys exports and
M imports, and F(r) is net outows of capital, which is inversely related to the level
of domestic interest rate (r) given international rate (r ), which is also inclusive of
net transfer payments such as aids and subsidies across the border. This trade gap
equation explains that if a countrys (say, North Koreas) investment (I) exceeds its
2.1
The Denition: Economic Cooperation Versus Bilateral Trade
15
own domestic saving (S), it has trade decits; that is, its exports (X) are less than its
imports (M). The decits need to be supplemented by net inows of foreign capital
and foreign aids (in this case minus F meaning net inows) in order to keep the
balance of payments in equilibrium. In the bilateral trade between the North and
South, the Norths exports into the South have always been greater than its imports
from the South. But the total amount of money gained from trade has moved in the
same direction as the ows of capital in the inter-Korean trade, which is contrary to
the above theory. That is because the trade surplus of North Korea over South Korea
has been possible only due to the Souths concession. If we include all benecial
returns obtained in the bilateral trade as well as investment and various aids and
grants into the category of trade, the money ow into the North has always exceeded
the ow into the South. This suggests that the South has a huge trade surplus in its
transaction with the North. In reality, in terms of pecuniary ows involving the interKorean trade, the North has gotten the most out of the bilateral trade. The South has
tried to import as much as possible from the North instead of attempting to export
to the North in order to give more money to the North. Money runs opposite to the
ow of physical import and export of goods. In the inter-Korean trade, for example,
the sale of commodities from the North accompanies its counterows of payment
money from the South. The purchase of goods from the North is mostly due to
political considerations by the South in that the imports are made to help the Norths
economy. Meanwhile, in the accounting of the Souths exports to the North are
included the tradable commodities as well as investment goods and transfer payment
and aid goods which all pass and are recorded through the Souths custom clearing
ofce. If all of these are considered together in accounting, the South appears to have
a tremendous trade surplus because the Souths aggregate shipments (exports) sent
to the North exceed its imports from the North. But in terms of aggregate monetary
settlements, the North has, in fact, gained most of the pecuniary advantage in its
transaction with the South.
Because the size of the inter-Korean economic cooperation is measured in terms
of monetary ows, the term inter-Korean cooperation inclusive of the loosely
dened- trade, investment and other transfers, and so forth, reduces our confusion
as compared to the counterows of payment involving the pure bilateral commercial trade, as explained above. In the peculiar inter-Korean trade, if more goods and
services are shipped to the South, it means more payments are made to the North
either on a pure commercial basis or complementary basis. But the trade surplus by
the North is not necessarily grounded on the pure comparative advantage trading
principle.
On the other hand, aggregate shipments into the North, including commercial
goods and non-commercial assistance goods, are always larger than that from the
North, which in turn shows as if the South is making the trade surplus. In reality, the
assistance goods and investment goods do not carry immediate paybacks, though
the latter may bring their returns in the long run. In the short run, the surplus from
the inter-Korean cooperation has so far been in the pocket of North Korea, as the
most money has been poured into it.
16
2.2 The Historical Outline of Inter-Korean Economic

Cooperation
The inter-Korean economic cooperation was rst proposed with The Agreement
on the Implementation of Trade and Economic Co-operation and the Establishment
of the South-North Joint Economic Committee (23 articles) signed by both the
North and the South representatives on June 20, 1985, at Panmunjom. The joint
proposal for inter-Korean economic cooperation had very important implications
regarding various aspects including political, military, social, and cultural areas in
the divided nation. But no actual implementation was made until South Korean
President Roh Tae-Woo unilaterally announced his Special Declaration on National
Self-esteem, Unication and Prosperity on July 7, 1988. After the 7.7 Declaration,
small indirect trade (trade via a third country) was timidly attempted by the South
businessmen. Since then, various trade promotion measures were promulgated in
the South. Among them were the Inter-Korean Cooperation Custom Law and the
Law of Inter-Korean Cooperation Fund (1990 August 1). The size of inter-Korean
trade was a mere US 20 million dollars in 1989, which increased 90 times to US
1.8 billion dollars in 2007. In March 1993, North Korea declared its withdrawal
from NPT (nuclear non-proliferation treaty), which threatened to interrupt the intertrade relation. But as top level talks between the United States and DPRK agreed to
end the nuclear issue on October 21, 1994, South Korea swiftly moved to expand
the inter-trade relations. On November 9, the South Korean government announced
the Measures for Inter-Korean Economic Cooperation Promotion, which opened
the door, although under very restrictive control, to the mutual visits of businessmen, the limited investment into the North, and the establishment of the branch
ofces of the South Korean rms in the North. More active inter-cooperation began
with the Kim Dae-Jung regime of the South. After his inauguration to the presidency
in February 1998, Kim Dae-Jung (DJ in abbreviation) set up his policy objectives
toward North Korea with the following three principles:
(1) Active promotion of the NorthSouth economic cooperation based on the
principle of the separation of the economy from politics, (2) cooperation on the basis
of market function, and (3) promotion based on each participants own decision.
In October 1999, the DJ government issued the Guidelines for the Uses of the
Inter-Korean Economic Cooperation Funds in order to subsidize investment into
the North, establish imports and exports and commission-based processing trade
(CPT), as well as nance the small and medium rms involved in the North projects.
Kim Dae-Jungs Sunshine policy was mainly targeted to soften the political and
military strains between the two Koreas and to induce the North to glasnost and
perestroika.
Especially as a result of after the KimKim1 joint communiqu in Pyongyang
in 2000, the Mt. Keumkang sightseeing project (rst opened in November 1998),
1 Kim Jong-Il and Kim Dae-Jung (DJ) met in Pyongyang and released a joint communiqu on June
15, 2000.
2.3
The Status of the Inter-Korean Trade
17
and the Gaesung industrial complex project (started in 1989), other intra-Korean
trade ventures have greatly increased. In the name of mutual cooperation toward
both common prosperity and peace, DJs appeasement policy had mainly focused
on helping the Great Dear Leaders regime in the North, particularly to maintain
the political and military status quo in the peninsula. DJs pro-North policy was
succeeded by the leftist-leaning new administration led by the new President Roh
Moo-Hyun in 2003.
Roh Moo-Hyun greatly promoted the exchanges of both people and materials
across the border by working to provide the Souths investors with various favorable
legal systems, procedures, and ofce openings in the North. On December 24, 2003,
two railroads were connected across the heretofore no-return borders. On October
28, 2005, the NorthSouth Joint Consultant Ofce for Economic Cooperation was
opened in the Gaesung complex. Mr. Roh Moo-Hyun visited Pyongyang on October
24, 2007, to hold the summit talks with the Dear Leader Kim Jong-Il. Six weeks
later, the North and the South Prime Ministers met (November 1416), followed
by Defense Ministers meeting (November 2729). It was also followed by InterKorean Economic Cooperation Committee meeting (December 46) and the West
Sea Peaceful Cooperation Promotion Committee meeting (December 2829).
The Roh Moo-Hyun government encouraged the Souths Congress to pass the
Law for the Promotion of the NorthSouth Relation Development2 in December
2005. Based on the law, the First Basic Plan for the NorthSouth Relation
Development3 was formulated to report to the House of Representatives on
November 22, 2007. The Basic Plan contained three broad principles, six promotion
directions, and seven strategic targets to implement from 2008 to the end of 2012,
which all became uncertain under the new conservative government of President
Lee Myung-Bak in February 2008.
2.3 The Status of the Inter-Korean Trade

It has been about 20 years since intra-trade began across the demarcation line on
the Korean peninsula. In the rst two years, annual intra-trade size remained at
a mere level of less than US 20 million dollars. In 1991, when the inter-Korean
Exchange and Cooperation Law was promulgated in the South, intra-trade increased
730% over the previous year. In spite of the DPRKs withdrawal from the IAEA
(International Atomic Energy Agency) Non-Proliferation Treaty, the inter-Korean
trade continued to grow pro-cyclically with the two Korean economic situations.
Amid the newly closed-up nuclear issue between the IAEA (and the United States)
and DPRK in 1988 and the nancial crisis in South Korea, President Kim DaeJung announced his Sunshine Policy, signaling his willingness to expand relations
2 Law
No. 7763, 2005.12.29.
3 See the article 13 of Law No. 7763 cited above. The Basic Plan was made in accordance with the
article 13: 3 item of the Law.
18
with North Korea. In 1988, the intra-trade amount was US $221,943,000, which
was about a 28% decline over the previous year (US $308,339,000), but intra-trade
regained strength to reaching $1,797.9 million in 2007 and $1,820.4 million in 2008.
(See Table 2.1).
Table 2.1 Trend of annual intra-Korean trade (unit: 1000 US dollars)
Year
Import into
South
Export from
South
Total
Annual
Growth (%)
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
18,655
12,278
105,719
162,863
178,167
176,298
222,855
182,400
193,069
92,264
121,604
152,373
176,170
271,575
289,252
258,039
340,281
519,539
765,346
932,300
65
1,188
5,547
10,563
8,425
18,249
64,436
69,639
115,270
129,679
211,832
272,775
226,787
370,155
434,965
439,001
715,472
830,200
1,032,550
888,100
18,724
13,466
111,266
173,426
186,592
194,547
287,291
252,039
308,339
221,943
333,437
425,148
402,957
641,730
724,040
697,040
1,055,754
1,349,739
1,797,896
1,820,400
28.1
726.3
55.9
7.6
4.3
47.5
12.3
22.3
28.0
50.2
27.5
5.2
59.3
12.9
3.8
51.5
27.8
33.2
1.2
Note: Export from the South includes commercial (general) exports, materials for
commission-based processing, investments, and humanitarian and other cooperation
supports to the North while the import includes only purchases by the South
Source: The Ministry of Unication: Trend of Inter-Korean Trade (annual), reorganized
by author
The inter-Korean trade (or economic cooperation) is composed of the following:

(1) commercial trade under which is general trade (GT); commission-based processing trade (CPT); economic cooperation (EC) inclusive of Gaesung Industrial
Complex projects, the Mt. Keumgang sightseeing projects, and other public investment projects; and (2) non-commercial trade, which includes both the public and
private social and cultural projects, aids and grants, grains and fertilizer supports, the
light water reactor construction subsidies,4 and KEDO (Korean Peninsula Energy
Development Organization) diesel oil supplies. As shown in Table 2.2, the commercial trade inclusive of economic cooperation projects (such as Mt. Keumgang
projects, Gaesung industrial projects, and others) occupies a large proportion as
4 Total budget for the light water energy project was set at 4.6 billion dollars of which South Korea
was to assume 70% (3.22 billion dollars), but the project was suspended in December 2003. Actual
spending for the project was 1.48 billion dollars up to the suspension. (South Korea: $1.07 billion,
Japan: $0.39 billion, and EU: 0.02 billion).
2.3
19
Table 2.2 Inter-Korean trade by major categories (unit: million US dollars)

Commercial Trade
Economic Cooperation
1995
1998
1999
2000
2002
2004
2005
2006
2007
GT
CPT
(Mt. Keum.) (Gaesung)
(others) Sub-total
Noncomm.
Total
230.4
73.0
89.0
110.5
171.8
171.8
209.8
304.1
461.4
45.9
71.0
100.0
129.2
171.2
176.0
209.7
253.0
330.0
37.7
40.7
16.2
11.9
41.8
87.1
56.7
114.8
1.2
6.3
17.4
13.1
5.8
6.2
15.5
84.4
11.0
39.4
97.3
151.8
273.8
260.5
366.2
421.7
366.1
287.3
221.9
333.4
425.1
641.7
697.0
1,055.8
1,349.7
1,797.9
0
0
0
0
41.7
176.7
298.8
440.7
236.1
273.3
367.9
436.5
689.5
928.1
1,431.2
Source: The same as Table 2.1
compared to non-commercial trade. The narrowly dened (pure) economic cooperation (EC) projects which include the Mt. Keumgang tour-related project, Gaesung
industrial complex projects and other economic cooperative assistance to the North,
have greatly expanded since 2004. The share of this economic cooperation (EC)
projects out of total commercial trade (GT+CPT+EC) was 6.8% in 2002, which
jumped to 39.2% in 2005, 40.0% in 2006, and 44.7% in 2007. As of the end of 2007,
the commercial trade consisted of the general trade (25.7%), commission-based
processing trade (18.3%), Mt. Keumgang sightseeing (6.4), Gaesung industrial
projects (24.5), and others (4.7), which altogether accounted for 79.6% with the
remaining 20.4% being non-commercial trade (private and public assistance) in
the total trade (imports + exports). In general, non-commercial trade is regarded
as pure assistance being mostly moved from the South to the North. A considerable amount of commercial trade contains the characteristics of non-economical
aid measures, although in the long run, some prots are expected to return
back to those partners who are now extending dont-ask-investment into the
North either from a naive sense of fraternity or due to direct or indirect indications from those in political power. It is believed that a large composition of
GT and CPT has also been propelled to support the North by the South Korean
government.
As a result, both the economic and non-economic motives of many intra-Korean
trade participants have been inconsequentially intermingled in their decisionmaking processes. But as time goes by, South Korean rms have learned their
lessons and are more inclined to be prot motivated when they decide to trade
with the North. Many companies are also experiencing the lack of basic infrastructures, including communication, transportation, and custom clearance across
the borders, not to speak of such problems as default products which occurred
in the commission-based processing works in the North. Above all, many unsolved
political and military tensions remain as the big uncertainty factors in the intraKorean trade.
2,405
575
2,980
SN
NS
Total
8997
3,317
3,317
98
5,661
62
5,599
99
7,986
706
7,280
00
8,742
191
8,551
01
13,877
1,052
12,825
02
16,303
1,023
15,280
03
26,534
321
26,213
04
88,341
1,313
87,028
05
Table 2.3 Annual exchange visits of people (unit: numbers)
101,708
870
100,838
06
159,214
1,044
158,170
07
434,663
7,157
427,506
Total
20
2
00
10,554 148,074 213,009
10,554 148,074 213,009
99
02
57,879 84,727
57,879 84,727
01
74,334
74,334
03
268,420
268,420
04
299,731
1,484
298,247
05
234,446
234,446
06
Sources: The ministry of unication: exchanges of people between the South and the North (monthly statistics)
Total
Gaesung
Mt. Keumgang
98
Table 2.4 Tour visits to Mt. Keumgang and Gaesung region
352,433
7,427
345,000
07
1,743,607
8,911
1,734,687
Total
2.3
21
22
As for the exchanges of people between the South and North, visits to the North
(excluding sightseeing visits to the Mt. Keumgang and Gaesung areas) dominate
as shown in Table 2.3. Table 2.4 shows annual visits of South Korean residents to
Mt. Keumgang and to the Gaesung area. The overall tilt to the North in the ows
of both economic trade and human exchange are obviously the effect of the Souths
desire to have friendlier relations, the Souths higher income, and South Koreans
general curiosity about the Hermit Kingdom as well as weakening political and
military tensions between the two countries. It, of course, goes without saying that
DJ Sunshine Policy has helped to make South Koreans more sympathetic, while
their Northern brethrens have not yet changed their true face. The Souths provision of large economic assistance to the North during the last two decades has
apparently helped the Dear Leader hold a bold bargaining position in the nuclear
talks with the United States. Ironically, the Souths assistance has so far contributed
in some degree to the postponement of friendly diplomatic relations between the
United States and the Democratic Peoples Republic of Korea. But in 2008 when
Lee Myung-Bak, supported by anti-communist conservatives, took his presidency,
the SouthNorth relations as well as relations between the United States and North
Korea appears to have entered into a new phase. North Korea has been seeking military and diplomatic talks with the United States while excluding South Korea in the
issues.
Incidentally, the past two regimes led by Kim Dae-Jung and Roh Moo-Hyun
were believed to have poured more than US 11.0 billion dollars into the cooperation
projects for North Korea (Kim: 7.3 billion dollars in 19982002 and Roh: 3.7 billion
dollars in 20032006, and the latters 2007 budget amounted to 1.2 billion dollars.)
In return for their contributions, Kim Jong-Il invited both Kim and Roh to visit him
in Pyongyang in June 2000 and October 2007, respectively.
2.4 Comparison of the Inter-Korean Trade with the North

KoreaChina Trade
Since 2000, both South Korea and China have been two major trade partners of
DPRK. During the period 20002005, the marginal increase of North Korean external trade amounting to US 1.6 billion dollars was exactly equal to the increases in
both the SouthNorth trade (0.6 billion) and ChinaNorth Korea trade (1.0 billion
dollars).
A comparison of the inter-Korean economic cooperation with the bilateral economic cooperation between North Korea and China reveals some features on the
characteristics of the inter-Korean relations. First, the annual growth rates of both
Chinas and South Koreas economic cooperation with North Korea were about
30% before and after 2000, respectively. However, in terms of the contents, the
SouthNorth economic cooperation comprised a relatively lower share of pure commercial trade and a larger share in investment and aids versus the opposite in China
North Korea economic cooperation. North Korea has seldom provided either China
2.4
Comparison of the Inter-Korean Trade with the North KoreaChina Trade
23
or South Korea with any subsidy aids and direct investment which could be included
in its export statistics. Since the North exports (inclusive of its aids and investments
in both China and South Korea) are very insignicant, we can only compare its
imports (inclusive of aids and investments from China and South Korea) from the
two countries for the sake of simplicity. In the case of the inter-Korean economic
cooperation, the Souths aids and investments were US 184 million dollars (which
accounts for 67.5% of total South Korean exports to the North) in 2000, which rose
to US 349 million dollars (79.5%) in 2004 and US 635 million dollars (88.8%) in
2005. In contrast, Chinese aids and investments into North Korea accounted for US
104 million (23.1%) in 2000, US 163 million dollars (20.4%) in 2004, and US 290
million dollars (26.8%). China has kept its economic cooperation with North Korea
on a commercial basis rather than offering its war brother country free gifts
(namely, aids and investments). In other words, China trades with North Korea on
a much more reciprocity principle than the inter-Korean trade, which is based on
lopsided fraternity favoritism, although the two Koreas are still technically in a state
of war.
Second, South Korea and China are exporting intermediate inputs and materials to North Korea while importing mostly primary goods. But in terms of trade
items and kind, South Koreas trade is rather simple and few as compared with that
of the Chinese trade.5 Third, the portion of general trade in the inter-Korean economic cooperation has been less than the half while Chinas trade depends heavily
on general trade with only a 5% share of the commission-based processing trade.
South Korea has been red in its general trade with the North, while China has
kept blue. South Koreas pure commercial exports were merely about 1/50 of
Chinese exports to North Korea as of 2005. This explains that the Souths inuence
on the Norths markets has far less impact than that of the Chinese. According to the
Chinese Peoples Newspaper (2006.8.11 Internet edition), Chinese products account
for 70%, South Korean products 20%, and Russia and Japan 10% combined among
all commodities being imported into North Koreas markets.
Fourth, there are distinctively different patterns of direct investment into North
Korea from South Korea and China.6 South Korea has mostly invested in the Norths
special economic zones (i.e., Gaesung industrial complex) with the goal of utilizing low wage laborers of the North in CPT and other manufacturing. On the other
hand, China has concentrated in areas such as mining to obtain natural resources.
Recently, China has begun to diversify its investment in infrastructure expansion to
include manufacturing, circulation, and marketing areas. In short, South Korea looks
forward with a short-sighted view while China looks to the long term. The Chinese
road appears more promising in the long run, although the eventual outcome will
depend upon God, not on who takes what road today.
5 See
Lee Young-Hoon (2006).

Korea announced its measures (named as 7.1 action plans) on July 1, 2002, in order to
designate the Shineuijoo Special Administration Area (September 2002) and both the Gaesung
Industrial Complex and the Mt. Keumgang Tourism Areas (November, 2002) with its eye on
foreign capital inows.
6 North
24
2.5 The Determinants of Inter-Korean Economic Cooperation

2.5.1 The Brief Outline
The major determinants of inter-Korean relations involve both actors (participants) and environments on both sides. Actors include the Souths government,
the Souths enterprises, public and private organizations, and the North Korean government, which in broad context is the sole decision maker as well as the action
planner in the peculiar North. The internal and external environments involve various factors affecting the two parties; that is, the Souths and the Norths respective
relations with neighboring nations, particularly with the United States, as well as the
two parties economic, political, and military problems. Once we conne our discussion within the contexts of the motives of the inter-Korean economic cooperation,
it would be easier to trafc the respective interests of participating actors. Needless
to say, South Koreas private companies are mainly concerned with making money
while other social NGO groups approach from a humanitarian point of view to help
the people in the North. The Souths government inclusive of public organizations
has approached North Korea to help relieve the latters economic hardships with the
hope that the cooperation could contribute to easing the longstanding strains across
the border. On the other hand, the North is apparently learning that its relationship
with the United States will very much depend on its renewed relationship with the
South.
North Korean leaders have apparently learned that its countrys system risks,
its economic recovery, and a favorable international environment inducing foreign
capital and even inter-Korean economic cooperation all depend on what kind of
relationship it has with the United States.
2.5.2 Trade, Investment, and Economic Assistance

From the perspectives of South Korean business people, the motives for interKorean trade and investment into North Korea are manifold. These motives include
current and future protability, availability of low wage laborers, tariff-preferences,
the establishment of a bridgehead, contribution to government policy, and last but
not least helping their own or their parents native home. But the main incentive
lies in prot-seeking. From the North Koreans viewpoint, however, inter-Korean
economic cooperation must be no more or no less than mutual sharing of income
based on our own national fraternity. The North side does not generally take
into consideration the South businesss prot creation from the intra-Korean trade.
Nevertheless, North Korea has enjoyed a considerable benet in its exports of
marine products and raw minerals (including coal) to the South due to the relatively
short transportation distance and various favors (i.e., tariff exemption) extended
by the South. The impediment to the Norths indigenous tradable items is the
decreasing demand for such goods in the South.
2.5
The Determinants of Inter-Korean Economic Cooperation
25
The Souths investments into North Korea are largely in the form of joint investment or joint operation companies,7 except for the Mt. Keumgang project, which is
solely invested and operated by the Souths Hyundai. Most South Korean investors
build factories jointly with North Korean puppet companies. They import raw and
intermediate goods from the South to process nished goods using low wage workers in the North and then re-export them to South Korea and third countries via South
Korea. This intra-trade can continue as long as the overall cost (including plants) of
production for a particular product in the South exceeds the overall cost of production of the product in the North. The choice of production locations as well as
kinds of products depends on comparative costs of plants (including land and other
facility), wage and productivity differentials, and all transportation costs involved
between the two locations. Considering that the Norths average monthly wage ($36)
is currently about 1.5% of the Souths average monthly income ($2,360) in 2008,
there is good incentive for the Souths labor-intensive goods producers to look for
investment opportunity in the North. In particular, the investments in Gaesung complex are being subsided by the South Korean government in terms of provisions
of basic infrastructure layouts and electricity supplies in addition to the availability of a new road across the border. However, the short- and long-run success of
any investments not only in the Gaesung complex but elsewhere is likely to depend
upon the changing dynamism of comparative advantage structures among alternative investment locations and projects across the world. Everything is changing so
very quickly in this global and dynamic age.
Finally, the one-way assistance to the North has so far been inuenced by noneconomic and political considerations. The distinction is very difcult, but the
private sectors provide the North with somewhat humanitarian aids, while the South
government extends more or less politically implicative assistance. To date, the
South Korean government has attempted to induce both a change in the Norths
behavior and a sense of peace in the peninsula. To meet those objectives, the South
government has been willing to bribe as much as possible its unpredictable brothers in the North. Such a political position is related to the so-called commercial
liberalism, which believes that the inter-economic improvement will contribute to
enhancing the peace among the concerned parties. Beginning with Roh Tae-Woo
government in 1987, South Korea adopted its policy of functionalism to deepen the
intra-Korean dependency and the inter-Korean economic cooperation with a goal
of reducing the military tensions. The Kim Dae-Jung and Roh Moo-Hyun administrations aggressively advanced their policies on the basis of both functionalism and
liberalism. The functionalists basically move from humanitarian projects to economic projects to military and political appeasement stage. The neo-liberalism, a
hybrid of functionalism and liberalism, seeks to parallel the government policies
in economic and political areas as well using a variety of mutual contacts without
7A
joint investment company is one where two parties invest 50:50 each, but only one party is
solely responsible for managing the company. Joint operation (management) company is one where
two parties share equally their investment as well as the management of the company.
26
regard to ideological differences. Despite the Souths aggressively friendly gestures

toward North Korea in every respect, the North has maintained a very negative position with the South when it comes to talks about easing military confrontation, even
after the 6.15 joint declarations.8 Therefore, many conservative Koreans suspect that
there has been no real inter-Korean improvement for peace despite the enormous
amount of money poured into North Korea under the past two progressive regimes.
The return from the North has been too small compared with the Souths big aiddumping into the North. When the Dear Leader launched missiles in July 2006 and
when he stubbornly tested a nuclear bomb in October 2006, many people began to
see the need for reciprocity in inter-Korean economic cooperation. This awareness
by the majority of the Souths people led to the regime change in favor of the seemingly conservative Hannara (Grand National) Party candidate Lee Myung-Bak in the
presidential election held in December 2007, which ended the past ten years control by the leftist liberal party (which was renamed as the United Democratic Party)
in South Korea. However, the liberal (left-wing) factions had already proliferated
greatly in every corner of South Korean society during the last ten lost years from
the perspective of conservatives. Less than 3 months after President Lee Myung-Bak
took ofce, they were staging street demonstrations (under the slogan of candlelit
vigil cultural activities they avoided obtaining the legal permission for staging such
demonstrations) of which their core target was to oust the right-wing regime under
the pretense of protesting against the US beef imports. The leftist-prone civic coalition members and their supporters are using their internet news-medias and blogs
to spread groundless rumors to paralyze the embattled Lee government. The wild
wind may or may not be linked with the Norths denotative move, but it is likely to
get cyclically stronger across the landscape during the rest of Lees term in the Blue
House. If inter-Korean relations are waning for any reason, it is because the antigovernment movements can be seen and felt in a series of events occurring here and
there in the South whenever the incumbent government exposes any weakness, even
tiny, in its governance and overall policy. The ideological splits and old hatreds will
not end in the South unless the communist system of North Korea is dismantled.9
2.6 The Effects of the Inter-Korean Economic Cooperation

2.6.1 The Impacts on the South Korean Economy
It may be possible to evaluate that the policy of the inter-Korean economic cooperation has somewhat contributed to reduced military and political strains and tensions
toward North Korea, at least in the South. In particular, the DJs Sunshine Policy
has largely contributed to mentally disarming South Koreans against any remaining
8 Kim
Jong-Il and Kim Dae-Jung made a joint declaration on June 15, 2000 at their summit in
Pyongyang.
9 See Hwang (2008).
2.6
The Effects of the Inter-Korean Economic Cooperation
27
dangers from Kim Jong-Il and his communist regime. Furthermore, the post-war
generation no longer regards the North communists as an enemy. Instead, many
of them believe that the United States is their main enemy. They have been brainwashed by many liberal-minded teachers in elementary and junior high schools,
not to mention the inuences from Korean history books and periodicals written
by numerous leftist writers10 and circulated widely among youngsters without any
effective caution. Such a drift has been reinforced by the DJs radical policy shifts on
domestic issues as well as on North Korea. It is not yet clear if the Sunshine Policy
has ever worked in accordance with its proclaimed objective to undress the Norths
iron stance toward a free and exible world.11 Nevertheless, DJs Sunshine Policy
helped South Koreans, including business people and military soldiers to shake off
their worries about the renewal of war on the peninsula, particularly encouraging
many to visit North Korea either for sightseeing or for possible business opportunities. The aggregate inter-Korean trade occupies only 0.19% of the Souths total
external trade and 0.13% of its GDP, respectively, in 2005. Excluding the free supports to the North, the commercial trade (including pure trade and investment)
accounted for a mere 0.13% of the Souths total trade and 0.09% of the Souths
GDP, which is indeed not signicant from the perspective of South Koreas economy. South Korea has annual trade decits of about US 200 million dollars with
North Korea, which, of course, is not a big burden in terms of its current economic
strengths. South Korean economy is capable of providing the North with more economic cooperation and is willing to do so, if the North responded in a more friendly
and honest way for the benets of both its economy and people. The major obstacle now is related to the emotional issues involving the Souths suspicions that the
Norths leaders might be diverting the Souths money to build its nuclear and missile projects while leaving millions of its people to starvation. What is needed today
for the inter-Korean cooperation is the need for reciprocity. The reciprocity does not
necessarily involve the trade of goods and services with other economic commodities, but it can involve the transaction of economic supplies with such equivalent
payoffs as positive responses toward common interests in the political, military, and
international arenas (Table 2.5).
The South Korean government subsidies are made from the SouthNorth
Cooperation fund, which is classied into three categories: subsidies, investment,
and other expenses. The Fund had generated about US 2.98 billion dollars (equivalent to 2,987.9 billion Korean won) for the period 19912005, out of which about
US 262.0 million dollars (2,620.0 billion Korean won); that is, annual average of
10 Bruce
Cumings and his Korean students are responsible for having misled Korean youngsters.
Probably DJ may also be one of the followers of Bruce Cumings on the Origins of the Korean War.
11 Nam Sung-Wook shows that there is some positive correlation between the Souths stock price
index and the inter-Korean trade in his study made after the IMF crisis. But his research is based
on a too simple model with limited number of variables and observations, which do not guarantee sound results. See his paper titled The North-South Relations and Country Credibility
With Emphasis on Correlation between Stock Prices and Inter-Korean Relations, presented at the
Korean Political Association, July 9, 2007 (in Korean).
28
Table 2.5 The share of the Inter-Korean trade to the South Koreas economy (2005)
NS Cooperation
(Trade)
Trade Balance
(Investment)
(Subsidies)
Economic Cooperation
($ million)
Share in the Souths

Trade (%)
Share in the
Souths GDP (%)
1,055
420
194
270
365
0.19
0.08
0.04
0.05
0.07
0.13
0.05
0.02
0.03
0.05
Note: In 2005, South Korean total trade amounted to US 545.7 billion dollars and its GDP was
US 787.5 billion dollars
Sources: The ministry of unication and the bank of Korea
about US 174.7 million dollars (174.7 billion won per year) were used. This amount
is equivalent to about 0.1% of the Souths total budget of about US 2.1 trillion
dollars (2,123.7 trillion won) and about 0.04% of GDP of about US 7.3 trillion dollars (7,264.8 trillion won) during the 5-year period. This gure does not include
the money donated to KEDO projects. The expenditure in the Grain Management
Special Account is also excluded, because that aims to principally support the
South Korean domestic farm households through government purchase of rice at
the domestic price. But the government sent the purchased rice to North Korea as
part of its aid12 whereby the value was recorded at the international price, about
one third of domestic rice price. A precise accounting for all money used to assist
the North has never been clear and the accounting methods remain very elusive not
only because of dual prices like the rice case above, but also because of the lack
of information regarding private humanitarian aids provided through indirect and
roundabout delivery channels.
Out of the ofcial Cooperation Fund (19912005), the South Korean government
used US 1.68 billion dollars equivalent to 1.68 trillion Korean won (64%) to send
North Korea foods and fertilizers and about US 820.0 million dollars (31%) equivalent to 820 billion Korean won for the construction of railroads and roads as well
as for other aids, with the remaining US 490.0 million dollars (0.5%) for social and
cultural projects during the periods 19912005.
The aid provided by the Souths private sector was ofcially about US 600.8
million dollars (about US 54.6 million dollars per year), which was about one
third of the South government aids during the same period. However, the actual
amount handed over to northern relatives and various organizations (i.e., various
forms of church, Buddhist temples, orphanages, etc.) by the South residents is estimated to exceed the ofcial gures. Nevertheless, the governments share is much
larger than the money coming from the private business sectors in the inter-Korean
12 There
is some argument that a total of about 8.4 trillion won (that is US 8.4 billion dollars)
was given to North Korea for ten years starting from 1988 to August 2007. See The Reference
Data for Aids to North, the Ministry of Unication, October 13, 2006, and Records of the National
Assembly, October 2008.
2.6
29
cooperation. Many South Korean companies participating in the cooperation

projects have not been making prots, except for a few recent business activities
in Gaesung projects.13 Aside from that, it is not known if the South government
has ever clearly demanded any corresponding payoffs from the North in return for
its continued assistance. This point is the source of disagreements among the leftwing and right-wing South Koreans regarding the real nature and intention of the
inter-Korean economic cooperation advanced greatly by DJs Sunshine Policy. The
right-wing supporters believe that the Souths reckless pouring of aid into the North
has helped Kim Jong-Il to develop missiles and nuclear weapons that will target the
enemy in the South.
The total opportunity costs of both the public aid and private investments into the
North must include the non-prot-making investment times the compound interest
rates forgone plus the internalized social costs involving the portion of the money
from the South that the North might have diverted to develop its war weapons;
thus causing unrests on South Korean people, minus the positive contribution of the
cooperation to reducing the mutual tensions interalia. For the period 19892005,
annual public aids were about US 175 million dollars while annual private investments into the North were about US 55 million dollars of which about two thirds
(67%) was lost, as mentioned earlier. Based on these gures, for example, the quick
rule of thumb estimate shows that the annual opportunity costs of monetary values
given to the North amount to about US 245,325 million dollars in 2005.14 For the
last ten years as a whole, the total opportunity costs of the inter-Korean cooperation
is estimated to approximate US 2,453,250 million dollars from the perspective of
South Korea. If we add the external costs of those ideological conicts involving
the intra-Korean issues that would result in frequent anti-government demonstrations in South Korea, the internalized costs would be astronomical, even though
the nominal amount of intra-Korean trade is not so signicant in view of the current size of the South Korean economy. In passing, it may be worth noting that
the Gaesung industrial complex was approaching near the breakeven point in 2007,
according to a report by the Gaesung Industrial Complex Supporting Team of the
Ministry of Unication in Seoul. Beginning in 2004 until the end of August 2006,
total cash and material inputs for the Gaesung projects were about US 28,056,000
dollars, which included 16,000,000 dollars for land compensation (for 1 million
pyong = 3.3 million square meter of area), 7,218,000 dollars for wage and salary
for workers, 3,105,000 dollars for construction materials, 1,289,000 dollars for communication bills, and 444,000 dollars for tax payments. The exact cost-benet needs
13 According to Kim Young-Yoons study, about two thirds of the companies who conduct business
in North Korea are losing money in their business dealings. See Kim (2004) (in Korean).
14 It is estimated as follows: (public aids + private investment times 0.67 times (1 + r)) times 0.01
times one half of the total population in South Korea, where 0.67 is failure rate of the investment,
r is annual interest rate forgone assumed to be 0.05, and the number 0.01 indicates that about 10%
of total public and private investments are going to strengthen the military power in the North. It is
also assumed that only 50% of South Koreans are being affected with one US cents per person by
the potential threats from the North.
30
further analysis to estimate the overall effects of the investments on value added,
employment, and net exports of those South Korean participating rms.
2.6.2 The Impact on the North Korean Economy

The inter-Korean economic cooperation has increased the North Korean economys
dependency on the South. Generally, the inter-Korean trade statistics can be reclassied so that general trade is regarded as commercial trade while classifying the aids
as a transfer payment. Most of material-type investments are made for South Korean
branch companies in the North. Such investment in the form of input materials for
the South Korean branch rms in the North is problematic if we regard it as a part
constituting the North Korean GDP. Commission-based processing trade is related
to the transaction of labor forces, from which the North Korean workers take their
processing commission, which accounts for approximately 50% of the total cost of
CPT.15 On the other hand, we consider that the in-kind grants are no more different
from the free aids in view of the special relation between the two Koreas. So in this
analysis, we will simply treat it as a part of transfer payments from the South to
the North. Although the data sets are simplied approximations as such, the North
Koreas balance of trade from the inter-Korean economic cooperation, for illustration purposes, using the data of 2005 as a standard year, could be roughly estimated
as shown in the Table 2.6.
The North Korean income increase owing to the inter-Korean economic cooperation is equal to trade (commodities) balance + processing commission (CP
revenue), which constitute the parts of the North Korean GDP plus the current
transfer payments from the South to the North. The latter one (that includes humanitarian aids and foods grants from the South) does not belong to the concepts of
either Norths gross domestic products (GDP) or Norths gross national income
(GNI).
But the aids and grants (which are also de facto aids) constitute those items
contributing to the increase in the Norths gross disposable income (GNDI).
The net increase in North Koreas income in 2005 due to the inter-Korean
economic cooperation was approximated to amount to US 194 million dollars (commodity trade: balance 168.0 million dollars plus processing commission revenue:
26.4 million dollars) in terms of the concepts of both nominal GDP and GNI.
But it totaled US 559.4 million dollars in terms of the concept of GNDI (gross
national disposable income) for North Korean people as a whole. This net effect of
the inter-Korean economic cooperation (which was based on our very conservative
approximation) on North Korean GNI and total exports (the sum of imports and
15 In
the total costs of the processed goods being re-imported into the South side, the cost of raw
materials provided by the parent companies in the South, transportation costs, and processing costs
are included. The costs of commission-based processing goods would vary depending upon both
the kinds of goods and the companies involved. We consider the average cost to be about 50% of
the total trade balance related to the CPT goods, for simplicitys sake, in this analysis.
2.6
31
Table 2.6 North Koreas trade balance earned from the inter-Korean economic cooperation in
2005. (unit: millions of US dollars)
Type
Trade
General
CPT
Aids &
Grants
Humanitarian
Food
Grants
Investments
Light
Water
Mt.
Keumgang
Gaesung
Other
projects
Total
Exports
Imports
99.4
20.9
320.1
188.9
78.5
365.0
131.2
0
BOP
Composition
Trade
balance
Commission
Current
transfer
Credits
Liabilities
Balance
20.9
188.9
168.0
365.0
26.4
365.0
241.0
124.0
251.1
0.4
87.0
156.9
6.8
241.0
124.0
20.1
20.0
0
19.8
0.2
251.1
0.4
87.0
19.8
0.2
156.9
6.8
559.4
Sources: The ministry of unication. This table is based on Lee Young-Hoons The status and
evaluation of the Inter-Korean economic cooperation, a working paper, Bank of Korea, 2007.
p. 31 (in Korean)
exports) accounted for about 2.3% and 18.7%, respectively, in 2005. If we added
other omitted cooperation items such as fertilizer aids, infrastructure facilities, electricity supplies, medicines, and various fees and tax payments, and so forth, its share
of North Korean total trade rose from 13% in 1999, 26% in 2005 and most recently
to 61.2% in 2007.16
In sum, the inter-Korean cooperation has seemingly helped the North to considerably ll its external trade gaps with China and other countries. It is estimated
that North Korea has annually earned about US 180 million dollars from the interKorean economic cooperation. If other revenues from the visitors and relative
remittances from the South were added, the gure would exceed more than US
200 million dollars annually since 1998. Since 1998 South Korea has literally contributed to sustaining the regime in the North regardless of the latters constant bluff
to consume it with re.
16 Refer to both reports cited above on the inter-Korean trade and cooperation and The Estimation
of North Korean Economic Growth (Annual) by the Bank of Korea (http://www.bok.or.kr) (in
Korean). Also see KOTRA, The Trends of North Korea Trade. (http://www.kotra.or.kr).
32
2.7 New Policy Paradigm Under Lee Myung-Baks Leadership?

National unication is the main hope of 70 million Korean people. The relationship between
the South and the North must develop toward better productive ways more than ever before.
I will solve our national division problem not by the measuring rod of ideology, but by the
rule of pragmatism. Our goal lies in both helping the South and the North residents live
happily and providing the common grounds for reunication. (President Lee Myung-Baks
Inauguration Address on February 25, 2008)
With the new government in the Blue House being backed by South Korean conservatives, many people are demanding fundamental shifts in the policy paradigm
toward North Korea. The new President Lee announced that his administrations will
pursue the roads of both common survival and mutual prosperity on the basis of
pragmatism and productivity. In his remarks, he made it clear that his government
would not recklessly pour money into the North unless the latter correspondingly
responds to the benets extended by the South. This did sound as if he fully recognized the need of reciprocity in every transaction between the two Koreas. The
reciprocity could balance trade between the two Koreas, not necessarily in pecuniary
two-ways but in the form of formidable give-and-take alternatives.
The new government in the South announced its 2008 action plan comprising
three main objectives with twelve supplementary tasks that are considered necessary
for achieving both common survival and mutual prosperity.17 The new action plan
intends to carry forward the inter-Korean economic cooperation in line with the
Norths response to reducing its nuclear projects. The four new principles propose
that Lees government will cooperate with the North step by step if, and only if,
such preconditions as the Norths denuclearization progress, economic feasibility,
nancial capability, and peoples consensus regarding the inter-Korean economic
cooperation are met.
As usual, the North bluntly ignored Lees stance and began its criticism against
his conservative approaches. In an interview with reporters in late March, the
talkative President Lee said that his government would always leave the door open
to talks with the North, revealing his somewhat laid-back position. To make matters
worse in the South, the candlelight protests, namely against US beef imports, appear
to be surreptitiously targeting the conservative pro-American regime. Amid anti-US
17 The
2008 Action Plan has three objectives and twelve implementation tasks. The rst objective targets to facilitate the Norths denuclearization, which in turn consists of (a) achieving the
Norths nuclear dismantlement through the inter-Korean relation, and (b) inducing the Norths
denuclearization as well as its glasnost. The second objective aims to enlarge inter-cooperation
with eyes on common survival, thus contributing to economic progress in the peninsula. Toward
to this objective, it proposes (c) to reduce any barriers to the enterprises engaging in the cooperation, promoting (d) forestry area cooperation, (e) shery area cooperation, and (f) resource area
cooperation in addition to (g) the Na-deul island project. The third one aims to promote mutual
welfare of people in both the South and the North. Toward this, (h) reunion of separate families,
(i) POWs and kidnapping issues, (j) dissidents settlement, (k) transparency of the distribution
process of humanitarian aids, and (l) human rights in the North must be solved. (Source: Ministry
of Unication, The Status and The Directions of Policy toward North Korea, 2008. 6.)
2.8
Closing Remarks on Reciprocity Principle
33
beef and anti-conservative street demonstrations continuing in June 2008, the Lee
government appeared to bend to the liberal protestors whose core members appear
suspiciously linked directly or indirectly to the Dear Leader in the North. As long
as the liberal groups continue to harass the government, it will be hard to maintain
Lees initial policy direction. Unless the government strongly adheres to its policy in
accordance with the laws and the principles whatever the cost, all action plans will
fail. Lee Myung-Bak government appears to be trapped both by internal protests
and by the North Korean leaders constant plot to sabotage all talks of reciprocity.
2.8 Closing Remarks on Reciprocity Principle

Ever since he has occupied the Blue House in early 2008, Lee Myung-Bak has
offered to help the North improve its economy, education, infrastructure, nance,
and living conditions within ve years if the North shows that it will reduce its
inordinate nuclear programs. He also presented his inter-Korean policies that would
assist the North in raising its per capita income to US 3,000 dollars within ten years
if the North begins its denuclearization processes. Lees policy toward the North
reects the reciprocity principle so vividly different from the lopsided cooperation
of the past regimes. For ten years, the de facto policy of the administrations of
both Kim Dae-Jung and Roh Moo-Hyun has been to help the North communist
leaders to increasingly do less for their striving populace despite increasing more
aid. In our opinion, DJs Sunshine Policy was a serious mistake the product of
wishful and unrealistic thinking. Generous aid will not help beggars change their
begging mentality unless the aid is accompanied by the condition that the beggars
promise to stand on their feet. Furthermore, the Sunshine Policy has South Koreans
exposing themselves, while the North leaders are not giving anything in return. As
a result of this policy, the North could rebuild its military strength while leaving
many of its residents suffering under the shadow of economic shortage. Free aid
could demoralize the spirit of the beneciary unless he or she learns the lesson that
heaven helps those who help themselves. The rock bottom economy and the total
reluctance of the North Korean leadership to implement the most elementary and
necessary perestroika and glasnost methods has resulted in its leaders looking for
the easiest way to obtain aid by warping and blufng the South.
The Norths possession of nuclear weapons has made the rogue regime behave
more aggressively in getting more support from the South. That is one of many
reasons why the South must demand adherence to the reciprocity principle by the
North. Installing reciprocity in the inter-Korean economic relation will not be cheap,
but it is necessary. The benets will outweigh the costs in the long run for both South
Korea and North Korea.
As for the Lee Myung-Bak governments new approach, the North continues to
respond negatively as of June 2008 when the candle lights have kept burning every
night in Seoul. The North even turned down 50,000 tons of corn offered in June
2008 by the Lee government, although North Korea faces severe food shortages.
34
A recently obtained North Korean government document released by Good Friends,

which is working to help hungry North Koreans, calls for a redoubling of the Norths
campaign to increase this (2008) years crop production.18 This reveals that the
country is in a severe state of food shortage.
Anyhow, Lees earlier tough stance had infuriated the North, which considered
it an insult to the Dear Leader Kim who had negotiated and signed previous deals.
Lee soon to sense some kind of crisis ignited in the South by the resumption of
US beef imports in late spring 2008. The beef asco appears to have made him
reconsider, right or wrong, that he could not overcome the crisis by further isolating
North Korea. In a reversal of his hard line stance toward North Korea, President Lee
Myung-Bak offered to resume dialogue with the North during his rst parliamentary presidential speech on July 11, 2008. The president stressed that his government
was willing to engage in serious discussions with North Korea on how to implement
the inter-Korean agreements made so far, including the 1991 Joint Declaration on
the Denuclearization of the Korean Peninsula, the SouthNorth Joint Declaration of
June 15, 2000, and the October 4, 2007 summit declaration between the leaders of
the two Koreas.19 Lee expressed his wish to engage in inter-Korean humanitarian
cooperation. From a humanitarian and fraternal standpoint, the South Korean government is ready to cooperate in efforts to help relieve the food shortage in the North
as well as alleviate the pain felt by the North Korean people. Issues involving South
Korean POWs, separated families and South Korean abductees should be resolved
as well. Inter-Korean relations should transcend changes in administrations and
be pursued from a future-oriented perspective for all the Korean people, Lee told
lawmakers.20 There was no immediate reaction to Lees speech by North Korea,
which was considered a softening of his hard-line posture.21 Since his election, he
had said he would review the inter-Korean agreements, which promised projects
worth billions of dollars. He had during his election campaign ruled out expanding joint economic projects already under way, including the Gaesung industrial
complex north of Seoul (another symbol of reconciliation pursued by his liberal predecessors). Lees overture came amid a deepening chill in relations with the North
Korea, even as he recognized the need for reciprocity in the inter-Korean relations.
The need for reciprocity in the inter-Korean relations cannot be over emphasized. The reciprocity, that is, in other words, cooperate if, is benecial for
18 The
Korea Herald, p. 2, June 19, 2008.

Myung-Baks liberal predecessor, Roh Moo-Hyun and North Korean leader Kim Jong-Il
held the second inter-Korean summit in Pyongyang on October 2007 and signed a ten-point joint
declaration calling for establishing permanent peace on the peninsula and signicantly expanding
the inter-Korean cooperation in politics, the economy, denuclearization and other issues.
20 Quoted from Jong Ang daily, July 12, 2008 (No. 2,372) p. 1. http://joongangdaily.joins.com.
21 Earlier on July 7, 2008, Lee Myung-Bak said to reporters that he was willing to meet the North
Korean leader any time in order to speed up the Norths dismantling of its nuclear programs. North
Korea rejected any possibility of summit talks with Lee, saying that it is preposterous for Lee to
suggest such a meeting. The North accused Lee of suggesting a summit with the North Korean
leader in an attempt to evade the responsibility for having bedeviled the inter-Korean relations.
19 Lee
2.8
Closing Remarks on Reciprocity Principle
35
both parties. Above all, the cooperation if principle will help improve each economic policy efciently, providing both parties with better understanding about
economic functioning of the other system. Learning about the policy efciency
of the other-side party is one of the important gains that could be earned through
reciprocity deals. Likewise, paying the price is far more worthy in the long run
than free lunch for the parties involved as they learn how to build their economy.
The reciprocity deals will also allow both parties to complement one another on the
basis of the comparative advantage of endowments in both software and hardware
aspects. The reciprocity deals can also promote peaceful coexistence and strengthen
the inter-Korean cooperation in both directions. Reciprocity is the starting point of
a long-term joint effort toward inter-Korean cooperation as well as the building of
mutual trust and common prosperity under a peaceful environment. Of course, an
extremely isolated country like the DPRK must understand the long-term benets
from the reciprocal fair trade instead of beneciary trade. Getting used to a new
mode of mutual cooperation is something that requires a paradigm shift in the way
that the leaders accept reality.
The reciprocity can function well not only when the two parties agree to follow
the give and take game but also if each party can secure its internal consensus. Can
any leader maintain his or her strong political stance if he or she lacks full supports
from citizens?
The current ideological split among South Koreans is a staggering aw that is
dragging down the realistic reciprocity approach being pursued by Lees government. The Souths coalition groups bearing candle lights are demonstrating against
food, namely, the beef imports from the United States22 The candlelight turmoil in
the summer 2008 is apparently causing the Seoul government to back away from its
initial cooperate if policy toward North Korea. With the current Lee Myung-Bak
administration apparently bogging down and unready to face the opposing forces
sternly, further conict could arise inside the state. This would in turn cause the
administration to be incapable of pursuing straightforward reciprocal deals with the
North.
On the other side of the border, many hungry people are striving for food. A
country with chronic food shortages is also not in a position to take a reciprocity
stance at all. Pyongyangs stubborn refusal to embrace Lees offer also seems to be
driven by its distrust of the conservatives in the South.
22 On
April 18, 2008, South Korean and US negotiators reached an agreement on the sanitary
rules that Korea would apply to all beef (irrespective of age) imports from the United States. The
rules were expected to take effect in mid-May when Korea published implementing regulations.
However, continued strong Korean public opposition ignited via TV coverage of the issue and
internet-spread rumors on US beef infected with mad cow disease, or BSE (bovine spongiform
encephalopathy), has resulted in escalating protests. Behind the protests is the suspected inuence
from the North Korean leader or his followers in the South strongly suspected of plotting to undermine the standing of the South Korean President Lee and his conservative political party, which
holds a slim majority in the Souths parliament.
36
The Norths monolithic group of elites who share the same views, values, and
visions must move away from their closed mindsets and try to understand the outside
world if they want to go forward and overcome the vicious circle of economic and
political stagnation.
The comparative situations illustrated above reect the unsolved reality stiing
the two Koreas as of mid-2008. While the Six Party (South Korea, North Korea,
United States, China, Russia, and Japan) talks could barely persuade North Korea
to abandon its nuclear arsenal, the United States announced that it would remove
North Korea from its list of states that sponsor terrorism. Concurrently, President
Lee Myung-Bak said that full dialogue between the two Koreas must resume in
his speech at the newly convened National Assembly on July 11, 2008. But on his
way to the National Assembly, the president was informed that a South Korean
tourist was shot to death near the beach hotel of Mt. Keumgang by a North Korean
soldier in the early morning of that very day. Seoul announced it would temporarily
halt its tourism program as of July 12, 2008. The shot woman was one of some
1,500 tourists visiting the Mt. Keumgang area in the week of the accident. More
than 1 million South Koreans have visited the mountainous area since 1989 until
this accident. This shooting, whether intentional or not, would be a cloud over interKorean relations, at least temporarily.
On the other hand, so many liberals who were recently out protesting in the
streets with candle lights and loud voices against Lees policy of resuming US beef
imports remained strangely quiet about the shooting of an innocent tourist by a
North Korean soldier, not to mention their continuing silence about human rights
suppression in the North.
The future winwin outcome in inter-Korean relations will not only depend on
the removal of military, political, economic, and ideological barriers on the basis of
a reciprocal framework between the two Koreas, but also on overcoming the crashes
and divergences between conservatives and liberals in South Korea.
Chapter 3
The Strain Policy Versus the Sunshine Policy: A

Road to Korean Unification
The whole generation of those who had done evil in his sight
was gone.
The Numbers: 32: 13 (in The Old Testament).
3.1 Introduction
The two Koreas have gone their respective ways for more than 60 years since
both countries established their respective sovereign governments in 1948: From
the beginning the South was grounded on the free democratic and capitalistic system while the North was founded with the peoples democracy (that is, socialist)
and red ag. The US-backed Republic of Korea (ROK) was ofcially proclaimed
in the South on August 15, 1948. The Soviet-backed Democratic Peoples Republic
of Korea (DPRK) in the North was proclaimed on September 9, 1948. The South
inherited a larger population and more of the agriculture and light industry. The
North had more of the heavy industry, electric power, and other industrial basis with
mineral resources. Nevertheless, initial inherited industrial structures were reduced
to complete ashes in the 3 years of the Korean War (19501953).
Following the Korean War armistice in 1953, each antagonistic regime continued
to claim sway over the entire peninsula. Each regime has unsparingly consumed its
respective capacity and energy in its attempt to win over the other puppet regime.
Due to the division with ideologically different mindsets, the two Koreas have grown
to hate one another in spite of the fact that both people are same brethren with one
blood. This deep antagonism and mutual distrust still persists today, although some
appeasement gestures have been seemingly made on both sides in an on-and-off
mode during the last one or several decades.
In terms of economic competition, North Korea apparently achieved higher
growth in the rst two post-war decades due to the strong order-down way of organizing workers in its hierarchical communist system. The North had not yet faced
the problem of diminishing return to capital availability. Achieve assigned work
load or perish type policy proved effective only until every worker nally realized

37
38
3 The Strain Policy Versus the Sunshine Policy: A Road to Korean Unication
the egalitarian society with chronic short-supplies did not discriminate in the distribution process between hard-workers and less hard-workers. High quantity target
were often assigned beyond ones ability, which made workers learn how to achieve
the target only by neglecting the quality aspects of what they had to produce under
the given conditions of limited and aging xed capitals. Once the devastating process of such adaptation became entrenched in the society in less than two decades,
the Norths productivity began to erode rapidly, starting in the mid-1970s.
While the socialist way of per capita output in the North exhibited decreasing
return to scale of labor inputs, the incentive-based market economy in the South
began to surpass the sluggish North. This switch occurred in the 19751976 period.
By the mid-1970s, the Norths Juche (self-independent) economy began to fall
behind. North Koreas gross national income had quadrupled between 1965 and
1976, a highly creditable performance for the near zero inationary developing
economy. But at the same time, South Koreas ination-adjusted real GNP more
than tripled enough to pass the North in per capita GNP in 1976 for the rst time
since the division of the country. Ever since then, North Korean economy has not
been able to get out of the sluggish trap, which in part was a result of its very
heavy military spending purposes as well as its autarkic Juche (self-reliance) policy.
The Norths autarky has prevented its imports of badly needed advanced technology
from the outside world.
From the mid-1960s to the mid-1970s, the North devoted an estimated 2025%
of its economy to its military, while the South spent an average of 5% of GNP on its
defense budget.
The wild wind continued to blow unfavorably against North Korea toward the
end of the 1980s. First of all, the Soviet Union was able to dissolve its communist
bloc under Gorbachevs brave choice of glasnost and perestroika. The Soviet Union
had been North Koreas main source of external economic support since the creation
of the DPRK.
Any internal and external policy shift in the Soviet Union had a big effect, good or
bad, on North Korea, regardless of the ups and downs of political relations between
the two countries. In 1989, a dramatic change in the internal and external politics,
namely glasnost and perestroika, of the Soviet Union resulted in dramatic events in
the landscape of the hitherto cold-war ridden world. The Union of Soviet Socialist
Republics (USSR) went swiftly insolvent. Following the fall of the Berlin Wall in
late 1989, many Soviet satellite states and bloc countries proclaimed their independence and sovereignty and reformed their economic and social policies in the early
1990s.
The fundamental change in the communist bloc was a tremendous blow to the
change-resistant Hermit Kingdom in Pyongyang, as it lost most of its friendly trade
partners as well as political supporters.
To make matters worse, during the 1990s, bad weather conditions with a yearly
switch of a drought and then a ood continued to deteriorate the North Korean economy. Economic growth rates for the decade starting in 1990 were negative in almost
every year except for a 6.2% increase in 1999, thus reducing per-capita income
3.1
Introduction
39
over time. Again in both 2006 and 2007, its growth rate was negative with 1.1%
and 2.3%, respectively.
Mikhail S. Gorbachevs rise to the summit of the Soviet government and the
changes he instituted in the communist bloc and international relations in 1986 gave
rise to the opening of the Nordpolitik euphoria in South Korea, while the diplomatic and economic environments of North Korea deteriorated further on all fronts.
Where a longstanding prohibition on cross-recognition had isolated Seoul from
Pyongyangs allies and Pyongyang from the West, the 1988 Summer Olympics
(the 24th Olympiad held on September 17October 2) in Seoul gave South Korea a
valuable opportunity to meet the Socialist countries in transition.
South Koreas move toward relations with Pyongyangs communist allies in
Moscow, Beijing, and other central and eastern Europe and Africa was an increasing turn for the worse in terms of North Koreas relations with them as well as in its
economic isolation away from the rest of the world. In response to such changing
winds, North Korea could well utilize the chance to pursue its policy shift toward
improving relations with the United States and other western countries. In fact, following the Seoul Olympics that resulted in South Koreas policy reversal, the United
States moved to open a modest initiative to North Korea with a new policy not only
of encouraging unofcial, nongovernmental visits by North Koreans to the United
States, but also of permitting limited commercial export of American humanitarian goods, such as food, clothing, and medicine, to North Korea. These US moves,
though refrained, would offer North Korea a chance to trigger a positive, constructive response. The door was literally open for the DPRK to pursue an improvement
of relations with the United States, if the DPRK abandoned belligerence, confrontation, and terrorism in favor of dialogue. The diplomatic meetings between the two
countries to search for one another were subsequently made in Beijing, in which
messages were exchanged but with little progress, between December 1988 and
September 1993. Amid new conicts between North Korea and the United States
on several issues including the kickoff of the ROK-US joint Team Spirit exercise
and the demand for the IAEA special inspections on the Norths nuclear projects,
North Korea angrily announced its intent of withdrawal from the Nuclear NonProliferation Treaty (NPT) on March 12, 1993. When it became effective on June
12, 1993, this action by North Korea would be the rst withdrawal by any nation
from the NPT.
The world reacted with shock and dismay, with North Koreas nuclear program
suddenly becoming the top issue on the international agenda. In an effort to stop the
Norths withdrawal, negotiations quickly emerged in an effort to persuade the North
to remain in the NPT including an exchange of key points on the American security
assurances, an agreement to continue both countries ofcial dialogue, and in return,
North Koreas suspension of its withdrawal as long as it considers necessary. The
US-DPRK talk, however, did not lead to the abandonment of the Norths nuclear
program.
Since the early 1993 encounter, DPRK had been using its nuclear card as a bargaining chip in exchange for security and economic benets from the United States
40
and South Korea. The isolated trouble-maker had become skilled at brinksmanship,
increasing its leverage by playing close to the edge of the precipice; the problem was
that it wasnt always clear just where the edge was.1 This nuclear card gambling
by North Korea resulted in the United States and its allies-backed U.N. Security
Council economic sanctions against Pyongyang in 1994. North Korea repeatedly
declared that sanctions are a declaration of war. And since then its live 5-megawatt
reactor at Yongbyon as a backdrop, the Juche (self-reliant) Kingdom has voluntarily
chosen not to regain its chance to assimilate with the west. Nor has the Norths deteriorating economy reversed. Nevertheless, it has become increasingly evident that
political and economic sanctions are not effective in forcing the ideologically armed
North Koreans to reverse course: The isolated Juche country is relatively invulnerable to outside pressures, since it has so little international trade and few important
external deals of any sort. Therefore, they have little fear of sanctions from the U.N.
Security Council, quite contrary to their rhetoric that sanctions are a declaration
of war. In fact, they regard the then mounting starvation as being caused by plots
of both the American imperialist and its puppet allies. In the mid-1990s, the North
appeared to have only an option to either starve or get killed in a war. Being forsaken by everybody, North Korean leadership was about to choose to get killed in
a war if necessary a desperate situation.
At that time a great rescue effort by liberal politicians and humanitarians in the
South was extended to help the forlorn brethrens trapped in the self-imposed nuclear
curse. Those newly emerged liberal politicians led by both former Presidents Kim
Dae-Jung and Roh Moo-Hyun, in succession, aggressively defended for the Norths
stance, explaining the Norths nuclear program as self-defensive necessity.
3.2 How Long Will the Red Flag Fly with the Souths Subsidy?
During the last decade beginning in the mid-1990s through the mid-2000s, it is
reported that more than 1 million North Koreans have either starved to death or
ed their country in search of food. From 1996 to 2006, a total of 8,675 from
an unknown number of North Koreans eeing their country have been ofcially
received by South Korea,2 while many other defectors are still in hiding or being
kept in custody elsewhere in China, Vietnam, Thailand, and other countries. Most
defectors said they risked their life to escape poverty as well as human rights suppression. The majority of people, excluding some chosen elite classes in the North
Oberdorfer (2001, p. 305).

Ofcial numbers are 56 (in 1996), 312 (in 2000), 583 (in 2001), 1,139 (in 2002), 1,281 (2003),
1,894 (in 2004), 1,387 (in 2005), and 2,023 (in 2006). Some unidentied numbers among them are
suspected to come to the South disguised as defectors for the purpose of espionage in the South,
as evidenced in the case of a 34-year-old young woman named Won Jung-Hwa, who was caught
by the South police in August, 2008, supposedly spying on the Souths military camps since she
ofcially defected in 2004.
3.2
How Long Will the Red Flag Fly with the Souths Subsidy?
41
are poor. The political nature of the state is undemocratic and has been badly governed for more than a half century, which means in normality that the state is likely
to invite internal rebellion and violence. Despite the known fact that many impure
elements are being placed in either isolated prison camps or forced labor houses,
the North Koreans yet appear quiet and undisturbed. In the midst of rumors that
they are starving, North Korea, however, managed to rank number 33 (with 2 gold,
1 silver, and 3 bronze medals) out of 202 participating countries in the 29th World
Olympiad held in Beijing in August 924, 2008.3 Instead of attempting to x its
economy and politics where everything is in short supply, the North has been mobilizing all efforts to develop nuclear and war weapons. What is behind such riddles?
What do we need to know in order to unravel the mysterious state? How long will
the Juche red ag y at all?
An answer to one of the riddles may be found in an old saying that one will
stick at nothing if cornered. Once the people know that they are unintentionally in
a x, they tend to stand up to tackle the matter in the only life or death manner open
to them. This kind of individual bravery and ethos, when everything has become
desperate, makes the survivors unite to the last. Those survivors who will not give
up their dim hope and dreams are usually those, and descendents of those, who
have already gone through their lives full of tears, pains, and poverty. Many have
no alternative options for survival but must stick with the system even if they are
aware that they are still being misguided by their leaders. On the choice between
life and death, they have no alternative but to do anything in order to survive. These
hard-core mindsets are indeed the pillars that have allowed North Korea to remain
on the world stage. Most North Koreans cannot escape as their own fate and their
families are intertwined. Some may still seek to ee from the hell at the risk of their
own and their familys lives.
Many people are still being starved to death. Nevertheless, the Norths regime
mobilized all its resources to have its red ag y in Beijings Olympic stadium and
the United Nation plaza in New York. As such, the North leaderships are breathing
their last breath to win at the nuclear bargaining table with American imperialists,
while threatening the South with sea of re if the South ceases to please the North.
Most North Korean are indoctrinated to believe that the existence of their
brethrens in the South is nothing but a trembling blink to fatherlands unication
and that the Souths regime is the whole cause of national tragedy.
The North Korea has its raison detre because it confronts its deep-rooted enemy
in the South. The two gutsy half brothers have despised each another for so long
time that it would be better lose everything if and only if one can get rid of the
other. Such antagonism keeps the North stronger whenever the re of hatred ares
up. Ironically, the South has supported the Norths brinking economy with dollars
and in other ways in international affairs.
South Korea ranked number 7 with 13 gold, 10 silver, and 8 bronze medals at the Beijing
Olympics.
42
In between the Nordpolitik euphoria and due concerns about the Norths sea of
re threats, South Korea has prevailed upon the North to accept economic cooperation since the late 1980s. The Special Declaration for National Unication and
Prosperity made by the South Sixth Republic President Roh Tae-Woo on July 7,
1988 was the rst aggressive gesture made to North Korea. In fact, changes in the
Soviet Union, China, and Eastern Europe as well as South Koreas economic miracle and enhanced national condence, gave rise to South Koreas initiatives to build
mutual trust by promoting contacts and dialogues with North Korea. But the actual
pouring of money into the North did not occur until liberal President Kim Dae-Jung
took ofce in 1998 with his priority Sunshine Policy. The ofcially book-recorded
value of inter-Korean cooperation in 1998 was US 221.9 million dollars which rose
to US 1,797.9 million dollars in 2007. During the past decade (19982007) with
the two liberal presidents Kim Dae-Jung and Roh Moo-Hyun in the South, the two
Koreas were seemingly in the state of harmony. The inter-Korean economic cooperation, which is ofcially equal to the intra-trade balance plus commission-based
processing revenue accrued to North Korea, is roughly estimated to account for
about 23% of North Korean GNI annually in the 2000s. In terms of North Korean
total trade, its shares rose from 13% in 1999, to 26% in 2005, and to 61.2% in 2007.
If various NGOs and the private transfer of money, as well as undisclosed monetary trade involving high levels of political deals, could be accountable in addition
to the ofcial trade windfalls gone to the North, the gures would probably reach
astronomical numbers.
This money from the South might have helped the North sustain its political system, develop nuclear projects, test inter-continental ballistic missiles, feed its army
and loyal class people, and help run the money-laundering business internationally. 4
The North has probably put money aside in prosperous years like the past decade
in order to spend in lean ones that implies the regime can survive for a couple of
more years, although prevailing winds now blow against it.
But the question is how long can the savings last if nothing happens to change
the ruling system? Meanwhile, more North Koreans will starve unless the economy
improves. These common people are, in fact, reserve forces who will have legitimate
grievances to exacerbate latent tensions.
As the Norths state budgets and off-budget accounts greatly supplemented with
the windfalls from the South are unusually opaque, this could eventually lead to corruption in the North and reduce peoples condence in the state. The sure way for
the North to keep alive is, therefore, to change its political paradigm and economic
Kim Dae-Jung regime provided a total of 1,331.05 million (US dollars) to North Korea during
19982002. This included money aids related to inter-Korean commercial trade, payments for
development of both Mt. Keumgang sightseeing and Gaesung Industrial Complex. Meanwhile, the
Roh Moo-Hyun regime supplied a total of 1,571.17 million dollars during 20032007 periods. For
the 10 years, the South aided the North with a total of 2,902.22 million dollars to the North. This
statistics was revealed by President Lee Myung-Bak in his interview with Euro News on July 7,
2009 when he visited Poland. (See Choseun Il-bo, July 9, 2009, p. 1.)
3.3
What About the Sunshine Policy?
43
system fundamentally. Otherwise, it will soon be confronted with both internal turmoil and hard external pressures. No one can help it unless it helps itself. How long
can the isolated undemocratic regime in the North maintain its longevity without
changing its political and economic system into democratic and free market one?
The North Korean leadership must now learn from the Chinese and Vietnamese
policy of openness and reform, pursued since the early and mid-1980s, respectively.
Both ex-communist countries have suffered some up-and-down cycles in their transformation, but they are not the ones of the past and nothing can stem, let alone
reverse, the growing tide of openness and market functions. Both countries still
keep a reformed communist political system but they are not the same as during the
cold war era. Change in economic systems will result in change in political systems
and vice versa.
The problem with North Korean communists is that they have incessantly
repeated their rhetoric since 1962, propagandizing that their Juche (self-reliant)
system is the only way to provide people with rice, meat soup, silk clothes, and
tile-roofed house. In proven failure, they are currently facing the big dilemma of
either denouncing their proud socialist system and/or admitting their lies. They have
to recognize that they have literally failed to feed their people and provide enough
consumer goods to avoid privation. The leaders of North Korea should probably
apologize for both the failed system and their incompetence, and if they are still
leaders at least of some good heart and conscience, they should nish with their
suicide.
3.3 What About the Sunshine Policy?

Some newly wealthy people and left-ideological sympathizers in the South have
been pouring money into the North in an effort to save the North leaders faces and
to support the communist regime for the last decade. Their excuse for extending aid
to the failing regime in the North is to keep peace and national reconciliation in
the peninsula. Ex-Presidents Kim Dae-Jung and Roh Moo-Hyun and many political liberalists have pursued this line, insisting that DJs Sunshine Policy is the only
option in which to induce North Korea to unclothe her garments. A decade of
the Sunshine Policy only teaches us, however, that it has greatly contributed to disarming the southerners instead, while it has not unclothed the northerners at all.
A good example is the real-life story about a female spy named Won Jung-Hwa
(34-years-old) who had settled in Seoul under the legal status of defector from the
North. She was ofcially employed by ROK army to collect troop information and
offer educational lectures in many of the Souths military camps. In due course,
it was discovered that she had collected condential information in exchange for
sexual favors from dozens of army ofcers for several years.5 Contradicting the
Souths news report, North Koreas spokesman for the National Peaceful Unication
5
Refer to footnote 2 above.
44
Committee said in its statement on September 3, 2008 that the story is a blatant lie
manufactured by the South.6 The North further denounced the spy not as a North
Korean agent but rather as human garbage who abandoned her fatherland to engage
in indecent sexual relations, sex, blackmail, and deceitful behavior in the rotten
South. The incident, whether a true spy story, illustrates that even the military sector has been mentally eroding in the South. Not surprisingly, this case is the only
espionage case ever investigated in the past 10 years in South Korea.
When a theatrical drama title The Aquariums of Pyongyang: Ten Years in the
North Korean Gulag,7 was performed in 20062007 in Seoul, telling a lively story of
prison conditions, not many people went to see the play, quite contrary to attendance
expectations. This reects that most South Koreans are no longer interested in the
Norths human right issues and other bad realities about the North. They would
rather look for relaxation at the Mt. Keumgang hot spa8 and watch young North
Korean girls mass gymnastics games as occasionally demonstrated at the Kim IlSung square.
In recent years, virtually every major media outlet has surveyed young South
Koreans opinions on who-is-our-national-enemy only to nd that more than 60%
regard the United States as our nations number one enemy. More surprisingly,
nearly one third of freshmen at the Military Academy responded similarly. This
reects a notable shift in the young folks wonky national security perception that
has evolved greatly in recent years. Many innocent young students are surely inuenced by fake doctrine teaching of many pro-leftist teachers in secondary level
schools. Many adults who are rather indifferent to this new thought tide may tend
to comfort themselves, thinking that everything is permissible as long as it is not
immediately and directly related to their own interests. With their wealth and economic security in hand they may think themselves secure, proud, and great, while
at the same time, the North Koreans and the Souths leftists look down on them as
senseless dullards and obsoletes. Will it be too much if we say all such realities
are more or less a result of a decade of Sunshine Policy? The South Koreans will,
hopefully, change soon with a new national philosophy as the new leadership takes
the nation in the right direction and corrects wrongs made in the former regimes.
The Sunshine Policy has helped, somewhat, to keep the red ag ying in the
North. Pouring money into the North did surely prolong the life of the recipient. Is
the ultimate objective of the Sunshine Policy, which is a synonym for strengthening
inter-Korea economic cooperation, a realization of the dream for national reunication? Then a question arises: Is it better to shorten the life of a fading patient or
to prolong the patients longevity by the injection of outside blood into the weak
See Meil-Kyung-Jae (daily), September 4, 2008.

See Kang and Pierre (2001).
8 The Mt. Keumgang sightseeing business is being operated by the Souths Hyundai Corporation,
but tourists are completely isolated from any of North Koreas civilians during their visits. North
Korea makes money by the limited opening of sightseeing places to the southerners.
7
3.3
What About the Sunshine Policy?
45
body? Certainly the Sunshine Policy, or alternatively inter-Korean economic cooperation attempts to help the other side grow at best or stay intact at worst, was a hope
to maintain a balance of power and stability on the peninsula. An extreme critical
view on this policy is that the Sunshine or strengthened cooperation intends only to
perpetuate the two Koreas forever.
So far, inter-Korean economic cooperation has been mainly lopsided aid from the
South to the North. This has only fed North Koreas demanding mentality. Whenever
the North is dissatised with the South, it always comes up with driving-to-the-edge
tactics, sometimes with the bluff of turning Seoul into a sea of re.
The economic gap between the two Koreas is comparable to the situations
between the two divided Germanys before their reunication in 1989. For illustration, many foreign banks were reluctant to extend loans to then needy East Germany
in the early 1980s, because of decreased external credit worthiness and worsening economic conditions in the country. The latter faced a serious stability crisis.
International political environments were also deteriorating when the Soviet troops
invaded Afghanistan, while new conicts between the United States and Soviet
Union erupted with the US deployment policy of nuclear missiles to NATO members. West Germany had to accept NATOs nuclear weapons reinforcement decision
while keeping close contact with the Warsaw Pact members in accordance with
earlier line of the Brandts neu ostpolitik (new eastward policy). This is the socalled famous West German Doppelbeschluss (double-decisions). However, West
Germany provided the East with a total of 1.95 billion deutsche marks in terms of
grants and loans in 1983 and 1985 under the conditions of payments over 5 years
with interest rate of LIBOR + 1%.
It must be pointed out that West Germany requested the East not only to ease
restrictions against mutual visits across the border but also to stop the East guards
shooting along the border line, which was the precondition for the grants and loans.
In addition to such preconditions, the West also demanded the increase of human
and communication exchanges between the two Germanys, as well as reopening talks on environmental, cultural, and educational issues pending at that time.
Another point is that the West insisted on the need for the reciprocity principle for
promoting inter-cooperation by constantly suggesting that East safeguard the freedom and human rights of people. West Germany persistently requested that the East
release its political prisoners as an implicit price for aid from West Germany. West
Germanys focus was to plant the recognition among East Germans that Western
democracy is superior to the Easts communism in all aspects of life. Such persistent
efforts by the West German government could result in the East Germans accepting the reform and change the inferior communist system. The past inter-German
cooperation, based on such a give-and-take approach, is in contrast to the lopsided
inter-Korean economic cooperation, which mainly runs from the South to the North
until President Lee Myung-Bak took ofce in February 2008.
As of this writing, the new government in the South led by Lee Myung-Bak
appears to be seeking a more conditional and logical approach, which may be a
new deal on the basis of reciprocity. However, President Lee might have reached an
impasse as his two predecessors, Kim Dae-Jung and Roh Moo-Hyun, had provided
46
North Korea with only incentives. He must prepare himself to brook strong and
lingering deance and hostility from inside his own country as well as from North
Korea.
The inter-German exchange and cooperation based on the spirit of reciprocity
did indeed provide both states the cognition of the benet of one nation and in
learning about the importance of concessions and cooperation. On the other hand,
lopsided inter-Korean exchange has only led the recipient to keep thinking as if
it well deserves to collect more from the giver. The North has demanded that the
South should pay it even more, rst for the price of national division and second for
all the evil doings committed by the South in damaging the self-praised egalitarian
paradise in the North.
Supporters of the Sunshine Policy in the South may argue that the haves should
help the have-nots build the latters economy. By providing the North with as much
aid as possible, they argue that unication cost would be reduced to the extent that
North Korean economy improves. Though this sounds plausible, the theory is just
to perpetuate the two Koreas. If the Norths economy gets better with unconditional
support from the South, will the two Koreas approach toward national unication be
that of a democratic market economy? It may be possible only if the closed economy
takes on an actual and practical system reform and changes, either through a big
bang or process gradually. However, that possibility is doubtful, unless the Norths
system does a complete reversal. The improvement of the Norths economy with the
Souths unconditional aid may only assist in sustaining the undemocratic regime for
a prolonged period to come.
Unless the North changes its Juche socialist economic and political system, it
will never catch up with the Souths market-oriented economy in terms of per capita
income and its peoples welfare. The widening gap in per capita income means that
the unication cost is getting greater over time. Then, how long will the red ag y
in the sky of the North with the continuing inows from the Souths Sunshine Policy
supporters? It may depend on many internal and external factors. One important
internal factor is the limit of tolerance for the ongoing system from the grassroots
populace in the North, while external factors involve the conicting interests by
China, Japan, Russia, and the United States.
But if South Koreans and all the world nations unite to sanction against all money
going into the hands of the North leadership, the Norths red ag will inevitably be
pulled down. But it is a more desirable albeit less likely option as long as there are
still many former communist countries that will not join in such concerted sanctions
against North Korea. The option imperative here is to stimulate the Norths internal
strains to oust the regime.
3.4 What Exacerbates Internal Tensions?

North Koreas Kim Jong-Il has witnessed how the old Soviet Union disintegrated,
how the Berlin Wall fell to the capitalistic West, and how his fathers special
friend Nicolae Ceausescu, who was a maverick Romanian communist leader, was
3.4
What Exacerbates Internal Tensions?
47
overthrown and executed. The roots of the fall of communism in East Europe and
changes in China have long been his major area of study, from which he might
have reached his own conclusion: Never allow ies to come into the room with the
changing air. The ways of unique Juche Kingdom is my inheritance, not the way of
China under Deng Xiaopings leadership.
Kim Jong-Il is well aware of the differences of social environments between
North Korea and China.9 Kim Jong-Il made it clear that the North would never
accept both reform and open policy when South Korean President Roh Moo-Hyun
made a courtesy visit to Pyongyang in October 2007. Kim Jong-Il highly praised
Chinas remarkable achievements when he toured Shanghai and other parts of China
in January 2005. Nevertheless, he made it clear that he was not interested in both
reform and open policy, fearing that such changes will inevitably be accompanied
by internal pressures for change.
He is forgoing change for his personal safety. He must be very fearful or an
extreme egoist who ignores the well-being of his people for his own sake, or both.
Fifteen years after publicly taking power from his father who suddenly died on July
8, 1994, Kim Jong-Il remains at least outwardly in full control of the mysterious
Hermit Kingdom. He is now reportedly being supported by the military heads of the
Peoples Army and core elites who might feel cornered and understand that unity is
the only condition for their survival. Thus, they have continued to support him with
little regard for the plight of most North Koreans.
But in September 2008, extraordinary rumors surrounding Kim Jong-Ils personal health and his incumbent power structure began to circulate throughout the
world. Speculation about the Dear Leader Kim Jong-Ils health intensied throughout September after he failed to show up at the communist states 60th founding
anniversary parade held in Pyongyang on September 9, 2008. Subsequent reports,
claiming both US and South Korean Intelligence agencies as sources, have described
Kims health to be somewhere between recovering from emergency surgery due to
a stroke and/or nearing death. In the past, Kim Jong-Il would disappear from public
for a while but only to reappear when any suspicious rumors would arise about him.
In recent years, however, his public activities have rapidly reduced from 123 times
in 2005, 99 times in 2006, and 86 times in 2007 to less than one digit number as of
October 2008. But he has begun to reappear before the public since late September
2009, although one of his arms appears somewhat paralytic.
In his proposition of Chinese economic reform and open policy in 1979, Deng Xiaoping said that
ies could be caught once fresh air was introduced. His famous note paved the way to subsequent
growth of Chinese economy through its rapid opening to outside world. Deng was born in Sichuan
Province in 1904. Although a dedicated communist and Leninist, Deng was never dogmatic. When
China was experiencing economic recovery during the early 1960s following the disastrous Great
Leap, Deng said, It makes no difference if a cat is black or white so long as it catches the mice.
Considered a pragmatist, Deng Xiaoping who advocated the line of prot-in-command, rather
than Maos dictum of politics-in -command, is now called the Great Father of Chinese Economic
Development.
48
His absence at the Norths state founding ceremony increases suspicion about
his health, although the Central News Agency of Pyongyang reported on October 4,
2008, that Dear Leader Kim attended the Norths collegiate soccer game celebrating
the 62nd founding anniversary of the Kim Il-Sung University, but without releasing
a photo of his presence at the game. He had been out of sight from the public or news
media for more than 50 days since his last visit to a military compound on August
14, 2008. It may be plausible that the North regime would release such news of
his robustness to nullify the worsening unrest of the North Korean populace amid
severe food shortages.
Meanwhile, despite loud paeans to Juche (self-reliance), the North Korean economy has barely survived thanks to both Chinese and South Korean subsidies and
assistances under the name of mutual economic cooperation, just as it lived off
Soviet aid during the Cold War era. So far there has not been much pressure from
Beijing or Seoul to persuade the North leaders to change its system. Even if they
attempted to urge Pyongyang to adopt reforms as Deng Xiaoping did successfully
for China in the late 1970s, it is most likely that Pyongyang will shy away from
them.
In fact, China and South Korea have tried to exhort North Korea to open up its
economy, by explaining that North Korean economy may take off once she replaces
the Juche stance with economic opening. The Chinese motivation is rather pragmatic. China has poured a few hundred thousand tons of grains and other aids such
as oil into the inefcient North Korean economy. It has advised the North to follow
the Chinese style of reform that involves opening its economy with limited gradual political change. But North Korean leadership would not adopt Chinese style
reforms because it knows that a market-oriented economy would spread information about the much higher standard of living enjoyed by their kindred people in the
South.
South Korea also hopes to maintain North Koreas stability while encouraging
economic growth in order to gradually close the gap between the two Koreas,
which has been the main goal of the so-called Sunshine Policy or alternatively
inter-Korean economic cooperation. Implicit in this policy is the conviction that
narrowing income gaps between the two Koreas should be viewed as an investment
that in time will reduce the daunting unication costs.
Despite the leverage both countries have with North Korea, neither China nor
South Korea has succeeded in persuading the North to change. Nor is it likely to persuade Pyongyang to reform unless a fundamental political shakeup to the regimes
domestic status quo is attempted anytime soon in the North. Indeed, if South Korea
and China took a rather stern position to keep out North Korea from outside economic assistance, the nearly impoverished Hermit Kingdom will come to collapse
unless it chooses positive reform. Thus, cold-war style strain policy or isolation
policy toward North Korea will contribute to either forcing the North to change or
shortening the life of the regime. In other words, the strain policy is a sure and shortcut method to bring forth quick national reunication instead of a rapprochement
(Sunshine) policy that aims to induce a gradual change in the North over extended
period of time.
3.4
What Exacerbates Internal Tensions?
49
One possible big bang or self-implosion in the North may come, however, from
inside its own power base when it is widely known whether Kim Jong-Il is indeed
dead or near death. In such a situation some high-ranking elites and military ofcers
may attempt to secure their survival, recognizing that further lock step with Kim will
only end with their demise. A coup within Kims Pyongyang palace will be highly
possible, although the mass demonstration against the regime is not unimaginable
in the immediate North Korea.
However, there is no assurance that a dissident group will replace its heretofore socialistic system overnight. Nor can the economy improve enough to help the
grassroots either in the transition or for many years ahead.
Then what possible option is left for bringing fundamental change to the system in the North? An uprising by the people may be a less likely and highly costly
option, if not impossible at all, in the North. When people are faced by starvation, corruption, and suppression, they will be forced to stand up and ght, which
may take a form of uncontrollable rsistance and violence as already evidenced in
the Romanian Ceausescu example. If such a day like this comes to the North, the
supreme ruler Kim Jong-Il and his faithful followers, as well as the remnant communists who might have seized new power by betraying Kim Jong-Il, will learn one
last but important lesson that everything is vain in the world of communism. The
real question is, however, whats next? Where will North Korea go with such an
internal upheaval? Will it, in fact, lead to a new crisis that still threatens the peninsulas security and stability? Will new power elites rule North Korea independently
with a new paradigm on politics and system? Will it be placed under inuence of
a third country? Will the two Koreas be united under one ag soon, no matter the
cost?
The answer to each of the above questions depends on the complexity of both
internal and external conditions again surrounding the Korean peninsula. One pukka
signal foretells above all things that Kim Jong-Ils empire is nearing its end. Sooner
or later, Kim Jong-Il may confront the collapse of his regime and even his life either
through illness or due to a palace coup staged by Pyongyangs inner power circle.
The rst round of regime change may be followed in time by mass uprisings that
will eventually bring down the communist system in the North. But the success of
mass demonstrations against the socialistic system is not to be guaranteed unless
South Korea takes very timely and prepared action fully supporting its hitherto
ally. There will be many entwined games among the nations that have stakes in the
Korean peninsula.
Under various scenarios of events that could develop in the North, what contingency measures should be considered? In 1999, the US-ROK military circle jointly
formulated the so-called 5029 contingency plan10 as a measure for the sudden fall
10
South Korea and US military sectors jointly formulated the so-called 5029 concept plan in
1999 as a contingency measure against the possible development of ve emergency situations
in North Korea. The ve situations included (1) coup detat or uprisings of armed civilians that
would re up an internal war in the North; (2) uncontrollability of fatal weapons management;
(3) mass exodus of people; (4) hostage problem of South Koreans and foreigners; and (5) natural
50
of the North Korean regime. The conceptual level of the plan has not been further
developed since then because of strong opposition from the then leftist President
Roh Moo-Hyun in the South. The reason for the Roh administrations opposition to
the important plan was that the Roh government did not like US involvement in the
inter-Korean affairs. Apparently, the Roh Moo-Hyun administration and his supporting group known as the 386 Generation (young ofcials mainly in their 30 s, who
attended college during the 1980s and were born in the 1960s) generated a period of
dissonance and even mutual repugnance to the United States. The alarming gaps in
North Korea policy, threat perceptions, and geostrategic mistrust during the Roh versus Bush administrations also contributed to the dissolution of the traditional South
Korea-US alliance. The climate is now changing at both governmental levels with
the new President Lee Myung-Bak. However, lingering anti-Americanism among
the 386 generation (if not majority) in South Korea and US citizens increasingly
negative impression of Korean people (because of ever increasing anti-American
slogans in South Korea) remain a stumbling block to mending relations.
If an emergency situation develops in the North, a large ow of refugees, as
well as armed North Koreans, will surely cross the border into China. This situation would most likely immediately involve Chinese armed forces into the area.
The deployment of Chinese soldiers may or may not be accompanied with ofcial
approval from the United Nations. The United States may concede the presence of
pro-Chinese regime in place of nuclear weapons in the North. In either case, the
Korean peninsula will enter into a very delicate and uncertain phase with the possible new birth of a pro-Chinese regime in the northern part. This is the important
subject to further explore in this work. But before we consider alternative contingency situations in the peninsula, we need to consider a shortcut to changing or
ending the inglorious regime in the North. Whether pushing North Korea further into
a corner or providing further aids to prolong her longevity is the question preceding
her eventual collapse.
3.5 Conclusion: Shorten the Regime on the Brink

As already explained elsewhere, Kim Jong-Ils regime has owed its longevity to
generous economic assistance from both the Souths Kim Dae-Jung and Roh MooHyun regimes in the past decade. From 1998 to 2007, the two regimes in the South
had poured about US 7.5 billion dollars as ofcial aid to the North. If the unrecorded
money shipped to the North by many NGO groups and religious groups in the name
of humanitarian support was included, money handed to the Kim Jong-Il regime
has amounted to astronomical numbers. With the money from both South Korea
disasters such as droughts, oods, and earthquakes. It is just a conceptual plan that is short in
any practical applicability. A careful follow-up consideration of transforming the concepts into an
operational plan was rejected by the Blue House where Lee Jong-Suk was a main security player
under President Roh Moo-Hyun. The move to develop it into an operational plan was completely
scrapped in 2005 by the Roh regime.
3.5
Conclusion: Shorten the Regime on the Brink
51
and other free world nations, Kim Jong-Il has enjoyed his luxurious lifestyle at the
expense and neglect of more than 3 million North Koreans starving.11 In addition,
he is suspected of having allocated part of the aid money to build nuclear and chemical weapons and missiles targeting the South. North Korea was reported to have
extracted a total of about 50 or 55 kilograms of weapon-grade plutonium as of the
end of 2005. The quantity is enough to make about 810 nuclear bombs of average size with 20 kilotons of nuclear explosive power. In addition, Kim Jong-Ils
regime has produced numerous short (300600 km range such as DF-61, SCUD-B,
SCUD-C), intermediate (1,3002,500 km range such as Nodong-1 and Daepodong1), and long range (3,00011,000 km range such as BM-25 and Daepodong-2)
missiles.
With possession of such formidable weapons, Kim Jong-Il has so far played a
skillful push-and-draw game of politics and pressed advantages with South Korea
as well as with the United States. For example, there have been six rounds of the SixParty Talks (North Korea, South Korea, the United States, Russia, China, and Japan)
since the rst meeting on August 2729, 2003, until its last held in July 1012, 2008.
The goal of the Six-Party Talks has been to develop a comprehensive package relative to North Koreas denuclearization and the verication protocol. During its fth
round of meetings held in Beijing on February 813, 2007, North Korea agreed to
shut down and seal for the purpose of eventual abandonment the Yongbyon nuclear
facility, including the reprocessing facility. In return, the parties agreed to provide
emergency assistance up to the equivalent of 1 million tons of heavy fuel oil (HFO)
to North Korea in the initial phase to commence within next 60 days. In early 2008,
an initial shipment equivalent to 50,000 tons of HFO and humanitarian food was
provided to the North. But many doubted that North Korean leader Kim Jong-Il
would be willing to relinquish the eight to ten nuclear weapons he probably already
has one or two dating back to the rst Bush presidency, the rest presumably built
over the last 5 years (20022006). The Bush administration consistently demanded
that North Korea permit spot verication of the Norths nuclear facilities before
the country would be removed from the United States State Sponsors of Terrorism
list (2002 axis of evil brand) and before the lifting of the US trade embargo on
the DPRK. Instead, Pyongyang abruptly denounced the United States and further
announced on September 19, 2008, that it would immediately resume its production of plutonium. Angered by the postponement of the blacklist removal originally
expected on August 6, Pyongyang began to work to restore the Yongbyon nuclear
complex. The North argues that the verication protocol the United States demands
is an infringement on North Korean sovereignty because it provides inspectors with
far too much access. The North insists that if it opens its door to inspectors, then
South Korea as well as other Six Party countries must be concurrently open to
joint investigators on their respective nuclear facilities. Above all, North Korea was
angry that the United States did not keep its promise to remove North Korea from
the blacklist after the North destroyed its Yongbyun nuclear cooling tower (whose
11
See www.Chosun.com, October 9, 2008.
52
inside real contents were already eliminated on November 28, 2007) on June 27,
2008 based on the Six-Party Agreement made at their fth round of meetings on
February 13, 2008.
Making situations worse whenever the necessity occurs and the irrational oneway violation of any agreements with the other party or parties has been part of
North Korean longstanding strategies and tactics. The wily North Koreans are quite
capable of knowing when to take a hard-line or a soft-line and how to manage time.
The basic nature of the North Korean regime is to use all ways and means in its ght
for survival. There are some points to note here.
First, in order to get out of a corner, the North leadership knows that it has to
stir up concerted hostility in the masses against South Korea and the United States.
In the face of such hostile enemies, they cant die. Second, it has tried to persuade
its own people to be more patient by swaying them with such dreams for rice,
beef soup and a nice house, although this injection of such fake dreams is losing
ground over time. Third, the novelty is that North Korea is getting the advantage
by typically fermenting unrest with South Korea, Japan, and the United States. To
soothe the irreverent mentality, South Korea offered to extend huge amounts of aid
with no conditions during the so-called Sunshine Policy decade. North Korea also
managed to lose nothing in deals negotiated with the Six Party Talks. The North
Korean leadership appears to also know how to exploit its situations, as seen during
its nuclear negotiations, the 2008 Wall Street money crises, as well as leadership
changes coming in the United States.
Apparently the Bush administration had become too impatient in not removing
North Korea from its State Terrorist list before the end of its term. It is reported
that during a meeting on October 1, 2008, in Pyongyang between Christopher Hill,
US Assistant Secretary of State for East Asian and Pacic Affairs, and Kim Gye
Gwan, North Korean representative to the Sixth Party Talks, the deal was struck to
remove North Korea from the American list of terrorism-sponsoring nations by the
end of the month.12 And surprisingly, the US State Department quickly announced
on October 11 that it was effectively lifting North Korea from the blacklist. Thus,
North Korea was relieved of the yoke of the brand of a terror-sponsoring nation after
20 years and 9 months when the United States rst listed it in January 1988; just two
months after North Korean agents exploded a South Korean civilian airliner on route
to Seoul from Baghdad just off Thailand. North Korea was added to the ofcial
list of countries supporting terrorism because of its implication in the bombing of
KAL 858 on November 29, 1987, which killed 115 persons.
Many observers of North Korea had serious doubts that the resumption of talks
for the complete disablement of the Norths nuclear programs would be faithfully
implemented. Whether it was speaking from the heart, North Korea appeared ready
to assure Washington of its intent to allow verication of the Norths nuclear programs on the condition of receiving food and other humanitarian aid along with
the deal to be removed from the blacklist. South Korea and Japan were not directly
12
See The Japan Times, North Korea cuts deal to get off blacklist, p. 1, October 11, 2008.
3.5
53
included in the talk for the blacklist removal deal made on October 1 in Pyongyang
between the United States and North Korea. The United States also asked Japan
to consider joining the US program to provide food aids, humanitarian assistance to
Pyongyang, and removing the North from the terrorist blacklist effective on October
11, 2008. But Japan had decided a day earlier to extend its ban on port calls by North
Korean-registered vessels and all imports of goods from the country for another six
months, citing the lack of progress in denuclearization and its failure to come clean
on its past abductions of Japanese nationals. Japan imposed unilateral sanctions after
North Korea red ballistic missiles into the East Sea13 in July 2006. Japan expanded
the scope of the sanctions to include banning entry for all North Korea-registered
ships after the North conducted a nuclear test in October 2006. The Japanese position is more stern and solid than that of the United States which is very pragmatic
in its stance.
There are also differences of opinion, not only between the Americans and South
Koreans but also among the Chinese, Japanese, Russians, and others, which the wily
North Koreans are more than capable of exploiting in their favor. Nearing the end of
its term, the Bush administration had become obsessively concerned with the problems of both the Norths nuclear proliferation and the suspected transfer of nuclear
technology to the third world countries; it, however, failed to see beyond North
Koreas opaque strategies. The deal between the United States and North Korea is
most likely to end up with eventually allowing North Korea to earn the membership status of nuclear weapon possession.14 At the same time, the United States
and other affected countries will seek to keep the status quo of the two Koreas policy. The North Korean leadership has seemingly won in its positioning and tackling
game with the United States. South Korea must shake its longstanding illusion that
the United States would remain as a permanent strategic partner to South Korea.
As shown in the blacklist deal, the United States can at any time break with past US
policy, leaving the South cold and perhaps sooner or later openly acknowledging
North Korea as a legitimate nuclear power. The two countries may soon strike a new
deal for a far-reaching new strategic partnership, just as China and South Korea
jointly declared a new strategic partnership during Chinese President Hu Jintaos
visit to President Lee Myung-Bak in Seoul just after the Beijing Olympics. On the
other hand, South Korea with the cooperation from Japan has taught the United
States that the carrot effect cannot work with North Korea for long.
Nevertheless, this shift in US policy toward the North cannot turn the tide against
the fates of Kim Jong-Il and his followers, as they are at the brink of both economic
bankruptcy, a would-be leaderless state, and their peoples mounting unrest. For the
13 Koreans
call the sea between the Korean peninsula and Japan Islands as the East Sea, while
the Japanese prefer to call it the Sea of Japan which is the source of continuing issues between
Korea and Japan.
14 Despite the deal, there is likely a long road to travel before dismantling the Norths plutoniumbased nuclear program and its alleged uranium enrichment. In the end, a weary United States would
concede North Koreas nuclear position under the condition of no technology or nuclear exports to
Middle East states by the North.
54
Table 3.1 Major qualitative index of North Korean systems
Index
Rank/Surveyed Countries
Survey Agency
Democracy Index
Freedom of the Press
Political Right
The Failed State Index
The World Worst Leader
167/167
195/195
One of worst 8/193
15/177
2/177
Economist: The World in 2007

Freedom House, Freedom Press 2008
Freedom House, Freedom World 2008
Foreign Policy, July/August, 2008
Foreign Policy, July/August, 2008
Norths system has been too rigid for too long to evolve into a better one, as revealed
in its overall index of idiosyncratic records shown in Table 3.1.
The worst states only option is to decline even further. Some may still argue
that continued pressure and containment policy will lead North Korea to start a new
war against the South. But North Korea is at a point where it is no longer capable
of committing to a suicide war against the South. The past years of sunshine and
engagement policy have not been able to open and change a wary North Korea. The
leaders in Pyongyang have seen the chaos that can occur when such a transition is
attempted. This is why the North leadership just pulls back whenever the outside
world pounds on the door. Otherwise, opening its doors after spending 60 years in
the dark will take a long, long time, perhaps a dozen decades, to adapt and to adjust
to the bright light of the outside world. If the Koreans want to see their country
reunied, they must nd a denite solution to their conicts with one another.
The military or coercion option is not feasible, because this course of action
does not rule out the Norths continued irresponsible retaliation threats to place the
South into the sea of re. A desirable option is to stand down North Koreans to
out the regime. The North Korean regime could be shortened by the option of
malign neglect, which would isolate and contain the regime further, and at which
time the North Korean peoples ultimate choice would be to starve to death or stand
up against the evil leadership. This implies that halting aids from the South would
facilitate early termination of North Korean communist regime. Once engagement
and appeasement has been proven a failure, this strategy rallies South Korea and its
allies to maintain vigilant containment of the Norths military threat and its WMD
and missile proliferation instead of unfruitful bargaining with the North. This would
mean an effective quarantine on arms and other transfers in and out of the North.
Seoul, Washington, and Tokyo would guarantee safe haven for all North Korean
refugees and would offer incentives to Russia and China to do the same.15
As the Sunshine Policy has not contributed at all to narrowing the per capita
income gaps between the two Koreas, the cost of reunication dened as marginal
investment needed to make the per-capita income between the two Koreas equal is
indifferent to the two alternative approaches (the Sunshine Policy versus the Strain
Policy). The Sunshine Policy would only extend the period of division by allowing
15
Cha and David (2003, p. 98).
3.5
55
the longevity of the North, which involves rather higher opportunity cost of delayed
unication in terms of time.
In conclusion, the Strain Policy will be a better option than the Sunshine (engagement) Policy in quickly relieving the North Koreans from the bondage of Kim
Jong-Ils regime. History will tell us that the sticks approach could work not only
for complete elimination of North Koreas nuclear weapons capabilities but also for
eventual demolition of the rogue regime.
Chapter 4
What if a Big Bang Occurs on the Korean

Peninsula?
The day will close on you unexpectedly like a trap. For it will
come upon all those who live on the (peninsula). Be always on
the watch and pray that you may be able to escape all that is
about to happen.
Luke 21:3436.
4.1 Introduction: What if North Korea Falls?

History tells us that many nations, whether large empires like ancient Rome or small
tribal states documented in the Old Testament, have risen and fallen over a long
period of time. But the evidence of the past is almost always too varied to single out
the hard and sole reason for the rise and fall of each nation. The success and
failure of a nation might be linked to the leadership not to mention the economics
and politics of the nation. As Paul Kennedy pointed out in the introduction of his
book The Rise and Fall of the Great Powers (Lexington Books, 1987), there simply is too much evidence pointing to various factors, including geography, political
power struggles, corruption and national morale, betrayals by inner power circles
to the enemy, military organization, the alliance system, war, and many others that
all affect the relative power or fundamental existence of the members of the states
system. However, the more recent record suggests that both the failure of economic
policy and the overhang of long political dictatorship with human rights suppression were undeniable crucial factors among others that were observable in the fall
of East Germany and other former communist bloc countries in the late 1980s. Until
a few months before the Berlin Wall fell down toward the end of 1989, most western political scientists and experts could not even foresee the big bang fall of the
Berlin Wall (November 9, 1989) or the imminent insolvency of the Soviet Union,
although they remotely began to sense the gradual transition of the socialist system
when Mikhail S. Gorbachev began instituting the new waves of both glasnost and
perestroika in the communist bloc and international relations in 1986. When I was
teaching at Muenster University under the exchange program nanced by the West
German Ministry of Education during JulySeptember, 1989, most German scholars
told me that German reunication, if possible, would come far later than the Korean

57
58
What if a Big Bang Occurs on the Korean Peninsula?
reunication. They all appeared to have given up hope that their split nation would
be unied into one again. Their rationale seemed grounded on the presumption that
no country1 having monetary stakes surrounding the divided nation would want to
see the country reunited, and that was their sole reason to believe so. There is no
arguing that East and West Germany, in an effort to maintain their sense of national
integrity, did interact, although the two countries had totally different and political
economic systems. There had been a steady expansion of intra-trade and economic
cooperation between two Germanys since the German surrender, at the end of World
War I (May 8, 1945) and subsequent division. Inter-German trade was a mere 103
RM (reichsmark)2 for the three trusteeship years (19461948), and 745 million DM
(deutschemark) in 1950, which rose to 15,306 billion DM in 1989.
The inter-trade and economic cooperation can play an important role in keeping intact national homogeneity and integrity among people articially divided. The
results would, however, end up differently depending on the political and ideological characteristics of respective regimes. In the inter-German transactions, West
Germany had consistently paid attention to improving both the human rights and
living standards of the East Germans, not to mention improving its relationship with
the East, while the latter had only sought to overcome its economic backlash. Everincreasing inter-German interactions over time contributed to exposing the East
Germans to the Wests news media including television shows. This led to the dramatic collapse of the Easts communist regime, which had survived for nearly 40
years since 1949. The relatively quiet grassroots revolution within the East and the
subsequent German unication were, of course, greatly attributed to Gorbachevs
perestroika policy. The Soviet Union declared its immediate intention to discard
the so-called Brezhnev Doctrine3 at the Warsaw Treaty Organization (WTO) in
Money used as a means of payments (Verrechnungseinheit = VE) under occupation of France,

England, the Soviet Union, and the United States.
2 Based on the Dyson agreement (January 1946) made between the United Kingdom and the
Soviet Union in order to help the people secure their basic necessities, Germans were allowed
intra-transaction within two areas occupied by England and the Soviet Union, respectively. This
transaction was further extended to cover all regions occupied by England, France, Soviet Union
and the United States via the Minden accord (January 1947), but trade between the western regions
and East Germany came to complete stop on August 4, 1948. The Frankfurt agreement (September
1949 through June 1950) reopened trade between the west-occupied area and Russian-occupied
area. The Berlin accord (September 20, 1951) was the rst ofcial agreement for economic
cooperation and trade signed independently by the West and the East German governments. The
Berlin accord was interrupted from November 1951 to February 1952 due to the dispute on East
Germanys suspension of trafc between two Germanys, but reactivated effectively in May 1952.
This Berlin accord laid the legal basis, on which monetary, economic, and social integration
between two Germanys came into birth effective on July 1, 1990, after the Berlin Wall fell in
November, 1989.
3 Leonid Ilyich Brezhnev ((1906) November 10, 1982) succeeded Nikita Khrushchev as the Soviet
rst secretary (1964) and then General Secretary of the Communist Party in 1965. Brezhnev was
the mastermind behind the Soviet decision in 1968 to invade Czechoslovakia in the event known
as the Prague Spring. In a speech justifying the move, he spelled out what came to be called the
Brezhnev Doctrine, asserting Moscows right to intervene in the affairs of other socialist states.
4.2
Historical Evolutions of the NorthSouth Korean Relations
59
October 1989. This new policy paradigm pursued by Mikhail S. Gorbachev in 1986
led to the dramatic changes in the political, economic, and social landscape of the
East European communist bloc countries, which provided a momentum for German
unication as well.
The above illustrates that any event that is completely beyond human comprehension can unexpectedly happen. Just as it was in the case of German unication
in late 1989, so may the collapse of North Korea come at any time now or in the
future. Of course, the process and mode would be quite different and accompanying shocks and tremors may move in a way unwanted by the majority of Koreans.
The most plausible event will likely be that Kim Jong-Ils heredity power is nearing
its end.
If North Korea faces a big-bang scenario with a sudden end to the now ailing
Kim Jong-Ils reign, what would happen in the Korean peninsula? How will the
neighboring countries respond to the situation and what options will South Korea
have? These are questions that must be addressed.
In the following sections, we will explain the post-war historical evolutions
of the NorthSouth Korean relations. Second, we will review the implications of
Gorbachevs perestroika and glasnost policies and the ensuing dramatic changes
in the East European landscape in the early 1990s. Third, we will consider some
plausible scenarios for the future model and/or the fate of incumbent North Korean
regime and its consequential effects on the entire landscape of the Korean peninsula.
Finally, the diagnoses will be followed by analysis on the hypothetical positions
of neighbors as well as the political and military responses expected from those
countries having a stake in the affairs of the peninsula.
4.2 Historical Evolutions of the NorthSouth Korean Relations

Two states, the North and the South, have maintained bilateral interactions
chronologically through different stages consisting of mutual conict, mutual competition, mutual collaboration, and mutual cooperation ever since the division of the
nation in 1948. The so-called buttery effect, which explains the initial small different move can result in a completely different big consequence, has consistently
worked on every path of bilateral relations in the Korean Peninsula. Ideological
divorce, that is, hardening of ideological and political lines from the beginning,
has remained the core factor of the antipathy lingering in the relations and hindering full harmonization of the two separate states. Nevertheless, the two states have
attempted from time to time during the last half century to narrow the gap of the division separating the two states. Excluding a slight warming in relations in early 2009,
Pyongyang has recently stepped up its hostile rhetoric against the South saying it is
fully ready for war. To briey introduce the historical stages of the two Koreas
relations, we will express the relations in terms of four different denitions. First,
conict or clash relation is meant when the two states interact with each other
seeking mutually different goals with mutually different means. Second, when the
60
two states interact but target different objectives with the same means the relation
is called collaboration. Third, if the two pursue a common objective but interact
with each other employing different means, respectively, the case is competition.
Fourth, if the two pursue the same goal with mutually the same means, the bilateral
relation is expressed as cooperation.
The rst example represents the stage of hostile relation while the other three
examples can be lumped into a relation of peaceful coexistence, for simplicity.
With such denitions in mind, the evolution of the relationship between the two
Koreas over the last 50 years can be largely classied into four stages.
The rst stage was the period of hostility from 1948 to the early 1970s, when
the Norths Kim Il-Sung antagonized the Souths Presidents Rhee Sung-Man and
Park Chung-Hee. During this stage the two Koreas were swirled into a 3-year war,
which broke out on June 25, 1950. After the war, the lips and teeth never tried
to talk to each other.
The second stage was the period of mutual competition from 1972 to 1985.
In 1972, the South President Park Chung-Hee, who took power in 1961, sought
initial contacts with the North. Both Koreas entered into competition between
Parks Yushin regime and the Kims Juche regime for building peaceful coexistence, maintaining Red Cross contacts (started in 1971) and political talks to reduce
tensions against one another. This mutual effort during the early 1970s was a turning
point in the cold war on the Korean peninsula, holding out the possibility of both
mutual cooperation and the dream for eventual peaceful reunication. The relationship had ickered into life in a tangible and tantalizing fashion with the light switch
permanently on since then.
The third stage (19871997) began with the collaboration among the Norths
regime under Kim Il-SungKim Jong-Il and the Souths two governments under Roh
Tae-Woo and Kim Young-Sam. During this stage, the South, which passed the North
in the economic race, offered inter-Korean trade to the North, which at this time was
falling behind as it had put its priority on the Juche economys sustainability. The
two Koreas perceived the bilateral collaboration, in terms of non-aggression principle, human exchange and economic cooperation (trade), very benecial in important
ways from standpoint of coexistence. Their ultimate goals differed from one another,
but they adopted common means named bilateral collaboration for the sake of
their mutual survival.
The fourth stage was the age of so-called sunshine to enhance rapprochement
and cooperation between the Norths Kim Jong-Il and the Souths Kim Dae-Jung
(19982002) and Roh Moo-Hyun (20032007). It was during this period that the
South Koreans poured money and brotherly sentiments in favor of the North, overlooking the fact that the battle of ideology and the struggle for control of the
peninsula was still the ultimate concern and objective of the Norths leadership.
But during this period, South Koreas leadership (Kim Dae-Jung), by agreeing to
pursue confederation in 2002, adopted a road map to unication that was rst proposed by Kim Il-Sung and that had become part of the progressive agenda in the
South. Kims successor, Roh Moo-Hyun, attempted to implement it and also pushed
for political change that would harmonize the Souths politics with those of the
4.3
The Spillover Effects of Perestroika and Glasnost
61
North. Meanwhile, North Korea announced in February 2005 that it had developed
nuclear bombs. More important, it attempted to launch a ballistic missile on July
5, 2006, and it experimented with an underground nuclear test on October 9, 2006.
It is suspected that the Souths aid money was used to develop nuclear weapons
and long-range missiles in the North. If so, the Sunshine Policy for inter-Korean
cooperation must have felt like a tremendous failure for the overcondent South
Koreans.
President Lee Myung-Bak, who has occupied the Blue House in Seoul since
February 2008, has adopted a reciprocity principle in inter-Korean relations.
Concerning this realistic shift of its northern policy by South Korea, North Koreas
state media have been churning out near-daily criticism of Lee, calling him a
traitor and human scum. In the rst two months of 2009, the Norths main
Rodong Shinmun newspaper accused Lee of driving the Koreas to the brink of
war. While Lee has kept relatively calm despite the Norths irritation, North Korea
has, in fact, been beeng up its navy, bolstering submarines, and developing new
ground-to-ship and ship-to-ship missiles and torpedoes amid speculation that it has
longer-range missiles capable of hitting Alaska and the U.S. West Coast. North
Korea is believed to have secured about 40 kg of plutonium, which is thought to be
capable of making six or seven nuclear bombs, all amid reports of mass starvation
in the isolated country.
4.3 The Spillover Effects of Perestroika and Glasnost

The history of the last two decades has shown that most heretofore communist
bloc countries have unavoidably faced the necessity of adopting and reforming
their respective policies in economic, political, and social spheres, which in turn,
have contributed signicantly to the life mode and well-being of each nation. For
example, the Soviet Union went through a turbulent big-bang reform, ignited by an
ideology of perestroika and glasnost, while China has been taking a gradual reform
limited to introducing partial market incentives in its economic management, keeping the socialistic structure of politics intact. The main cause of the socialist systems
fundamental reform, whether the Soviet Unions model or Chinas model, can be
attributed to the socialist systems loss of advantage in speed of economic development, backwardness in life-related new technology, and the increase in a variety of
both deprivations and limits inherent in communisms top-down ordering system
with wrong-done egalitarian principle. This condition originated in the deviant foundations of the social structure based on the fundamental ideas of MarxistLeninist
theory. The dream for building an utopian society with socialistic egalitarian consumption has failed in almost every country, including the Soviet Union, China,
Hungary, Poland, Yugoslavia, Czechoslovakia, Bulgaria, Romania, Vietnam, and
Algeria and Libya in North Africa, all former allies of North Korea. After half century long experiment with MarxistLeninist ideology, all of these countries have
62
now shed their old failed systems to assimilate into the market-oriented free competitive one. However, this is not saying that the inuence of Marxism has been
completely wiped from the world. Many people living in former communist society
for many decades may longingly look back to it whenever they face difculties
in job markets and the income gaps become greater after reform. In fact, when
the 2008 nancial crisis began in the United States and spread across the borders
of all countries, some people in Eastern Europe which became racked by high
unemployment and income disparity began to ock back to the founding father
of communism, Karl Marx. They may still admire socialism more than capitalism
because they think the latter is the right system for the survival of only the ttest.
But it doesnt mean that free market aspirations are less than egalitarian socialism
aspirations in todays world. Even the Libyan leader Colonel Muammar-el-Qadda,
a socialist dictator, who was always a headache for the American government, has
been rapidly becoming a member of the free market system since 2003. Qadda had
already criticized his own socialist economic system as not functioning efciently,
and opened Libya to a more exible socialist system working with the international
community.
The only remaining stubborn socialist state is North Korea, which is staunchly
refusing to follow its former allies as well as its friend Libya. Now whenever
change in Libya is mentioned, however, North Korea is brought up. In 2003,
Libya announced it would quit developing nuclear weapons as the second North
Korean nuclear crisis was unraveling. North Korea strongly refused to adopt Libyas
model of rst giving up nuclear development and then improving relations with
the west. It has been almost 5 years since the two allies, North Korea and Libya,
have taken different paths. Qadda is now friendly with the United States and
other capitalist countries despite the United States bombing his presidential residence in Tripoli in 1986, killing his adopted daughter. Libya gave up nuclear
weapons and accepted US inspection. In 2006, it was removed from the terrorism
list. Libyan economy is now almost in the realm of a market functioning system,
although politically it is still under the control of one mans power much similar to Kims North Korea. North Korea recently claimed, we are different from
Libya. Nevertheless, the retiring Bush administration unexpectedly removed North
Korea from its terrorism list on October 11, 2008, without North Korea keeping its
promise to disable its nuclear weapons. If North Korea would follow the Libyan
path against its heretofore rhetoric, the country would have a similar outcome, as
both North Korea and Libya have very common and comparable politics in many
similar ways. As Libya began to open itself to the international community, foreign
investment has been owing into the country since 2003. And it was not surprising for the world to see that Qadda had face-to-face talks with the US Secretary
of State, Condoleezza Rice, on September 5, 2008, the rst time in 55 years, at
the same residence that the United States had bombed. Every worldly thing can
change, indeed. The future of North Korea may evolve depending on its own mindset and paradigm shift, as well as, among other things, US foreign policy under
the 44th president, Barack Obama. This will answer an important question. Can
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63
North Korea remain on the world map, with two unharmonious Koreas in the same
peninsula?
If the super powers that have very high stakes in the Korean peninsula do not
expect the two countries to reunite, then the current external conditions will be
maintained with the North and the South remaining separate as respective sovereign
states within the United Nations. Tragically, Korea is the only nation in the current
world that remains divided even after 60 years and following its 36 years under
Japanese occupation. This situation does not, however, rule out the possibility that
if the North undertakes a dramatic policy paradigm change, there is yet hope for the
two countries to be reunited as were the two Germanys in 1989. Here the paradigm
shift is meant by North Korean reform and opening to the outside world. We have
noted that the economic reform and more openness in former communist countries of the Soviet bloc have resulted in a dramatic change in peoples lives in the
respective countries. Such adoption of new reform policies has either changed the
economic and political landscape of most of the former communist countries or
led to national reunication and economic development if the state was formerly
divided. In case of North Korea, if the regime would adopt reform and more openness, it may likely result in either gradual economic growth with its political system
intact like China of the 19701990 periods or an abrupt implosion, an event which
the Norths leadership is afraid of happening. If the latter happens, does the Norths
collapse mean its automatic absorption into the South? The answer will depend on
many internal and external factors. Before we address this issue, it may be worth
reviewing the effects of Mr. Gorbachevs radical reform policies in the late 1980s
on most Soviet bloc countries.
4.3.1 Gorbachev Phenomenon and Communist Bloc Change

Mikhail S. Gorbachevs rise to the General Secretary of the Soviet government
in March 1985 and the changes he instituted in the worldwide communist bloc
countries (excluding North Korea) since 1986 was historically unavoidable. In all
communist East European countries (with North Korea no exception), including the
Soviet Union itself, growth rates had fallen steadily, and the technology gap with
the West was increasing. The worsening conditions of the economy threatened to
hold back the military sector. Even more importantly, the majority of people in the
bloc countries were increasingly frustrated by the economic stagnation, the corruption, and the growing sense of hopelessness and cynicism about the future society
in general. As Gorbachev consolidated his power, he became more radical about
the nature of the reforms that he insisted were essential. The need to concentrate
resources on domestic economic development probably drove him to abandon the
Soviets communist allies in the fall and early winter of 1989. After the Berlin Wall
was breached in November 1989, a new Prague Autumn burgeoned (corollary
64
to the Prague Spring4 ), and old dictators in Bulgaria and Romania fell.5 The East
German youth stood up and demonstrated against the Berlin Wall in 1987 by invoking Gorbachevs name. Perhaps Mr. Gorbachev was then too preoccupied with other
home matters to do more than ask East German leader Erich Honecker to change
his orthodoxy. But the wind of change emanating from Moscow and Gorbachevs
divorce from the Brezhnev Doctrine forced East Germany to approve the policies
of perestroika and glasnost, which resulted in big-bang German unication in 1989.
Perhaps Gorbachev might have had a different concept of how to pursue different policies toward Eastern Europe during his rise to power in 19851988. Charles
Gati describes in his book, The Bloc That Failed, that Gorbachev was giving the old
theory of separate roads to socialism a new lease on life. He was telling the communist leaders of Eastern Europe to take charge of their own affairs. The countries
of Eastern Europe were not (yet) on their own, but the regions communist parties
were granted far more autonomy than they had before; it was not primarily their
responsibility and not the Soviet Unions to improve economic performance under
(if at all possible) stable conditions. Gorbachevs apparent intention was to accelerate the blocs decentralization that had begun after Stalins death. All in all, the
words emanating from Moscow did not yet point to a radical break with the past;
they suggested a gradual evolution in Soviet thinking. On the one hand, Gorbachevs
afrmation of the socialist states common interests was a sign of continuity in the
Soviet perception of Eastern Europe. On the other hand, his emphasis on the autonomy of the regions communist parties was a hopeful sign of the fading of Moscows
imperial mentality.6
Whatever Gorbachevs early intention was, his new mindset denitely contributed to bringing radical political and economic changes to the landscape of
all Eastern European countries. Above all, the breaching of the Berlin Wall on
the watershed date, November 9, 1989, offered indisputable proof that the Soviet
Union would not use military forces to maintain the EastWest divide and nothing could remain the same in the East Europe and other communist bloc countries.
This does not imply that Moscow has since then completely given up its hegemony
over Eastern Europe and would fully respect the principles of sovereignity and nonintervention of its former satellite states. Under certain circumstances, Gorbachevs
successors still resort to the use of military force on behalf of its real or perceived
4 In 1968, communist reformers in Czechoslovakia appealed to the government to follow democratic ideals that were deeply rooted in the countrys pre-World War II history. Alexander Dubcek,
the leader of the Czechoslovak communists and the symbol of the Prague Spring, personied
hope for democratic evolution, real pluralism, and a peaceful way to a state governed by law and
respectful of human rights.
5 In mid-1988, the Bulgarian Communist Party leader, Todor Zhivkov, who had his personal
stake in continuity rather than change, was abruptly dismissed, and the Romanian communist
dictator Nicolae Ceausescu who strongly opposed Gorbachevs call for change brought only a
massive, bloody civilian revolution in December 1989 that nished the tyranny and this tyrant,
on Christmas Day.
6 Gati (1990, p. 78).
4.3
65
ethnic, economic, and security interests, but no longer on behalf of its real or perceived ideological interests, as the world learned from the Red Armys overnight
invasion into ethnically split Georgia during the Beijing Olympics in the summer of
2008.
The important point is that Gorbachevs foreign policy with its well-disciplined
tolerance contributed to the socialist blocs rapid decentralization that has since
driven them to assimilate into the free market system. Indeed, nations are reshufing today their relations with others as the old environment of the Cold War era
is replaced by the emergence of a new economic regionalism, globalization, and
mutual cooperation. As Su Tung-Pao, a renowned writer from the ancient Sung
Dynasty of China, once said, Everything is changing when we perceive the world
from the perspective of a constant process of change over time.7 But the only
exception in the world today appears to be the Hermit Kingdom of North Korea,
which remains largely untouched and undisturbed at the time of this writing. If Karl
Marx, Friedrich Engels, and Kim Il-Sung were alive today, would they advise the
North leadership to remain intact and wait and see if South Korea will fall rst as
a result of mounting inside leftists uprisings and ongoing anti-government strikes
that could fundamentally shake the Souths system? Indeed, some outside Korean
observers including this author worry that South Korea is more vulnerable today
than the strictly controlled, unchanging North Korea. There are many pro-leftist elements lurking in every corner of free South Korea mainly emerging during the last
decade under Kim Dae-Jung and Roh Moo-Hyun. However, this book will focus,
above all, on shortening the life span of the dictatorial communist regime in the
North.
4.3.2 Why Does North Korea Refuse Fundamental Change?

Richard Holbrooke properly described in his 2008 article that History is not
immutable. But there is one pattern that comes very close to being a law of history: in the long run, the rise and fall of (great) nations is driven primarily by their
economic strength.8 Earlier, Paul Kennedy also clearly pointed out the same logic
by saying that the historical record suggests that there is a very clear connection
in the long run between the individual (Great Powers) economic rise and fall and
its growth and decline as an important military power (or world empire). This, too,
is hardly surprising, since it ows from two related facts. The rst is that economic
resources are necessary to support a large-scale military establishment. The second
is that, so far as the international system is concerned, both wealth and power are
always relative and should be seen as such. Whether a nation be today mighty
and rich or not depends not on the abundance or security of its power and riches,
7 Su Tung-Pao, A Thought in Front of Red Wall (Jun-Jokbyokbbo), Sung Dynasty of China: AD

10361101.
8 Holbrooke (2008, p. 4).
66
but principally on whether its neighbors possess more or less of it.9 As compared
with South Korea, North Korea has remained poor since the mid-1970s, and endless economic competitive struggles for nearly 60 years between the two Koreas
have ended up fostering per capita income disparity: The North with only half the
population of South Korea has per capita income of about 1/20 of the South as of
2008. North Korea is extremely poor, undemocratic, and poorly ruled, which means
that it is likely to experience serious backlash in its political security and military
strength as well. As pointed out by Paul Kennedy, the economically near-bankrupt
Kim Jong-Il regime is likely no longer capable of matching South Koreas military strength, albeit its possession of nuclear warheads is mostly due to its people
being forced to work on such projects. The number of service men and women in
the North is about double that of the South, but the latter is outpacing the former
in terms of sophisticated weapons and striking capacity, as well as military support
from the United States. North Koreas state-run economy of heavy military-oriented
industry is nearly dead. Nevertheless, Pyongyang has survived this long since 1948,
manifesting seemingly loud paeans to its self-reliance and its supreme ruler.
Indeed, what makes the world not ratiocinative is that North Korea is the last
Stalinist regime and it has not imploded so far, and it keeps surviving with a selfimposed information blockade apparently unparalleled anywhere in the world today.
Once the command economy performed well, even exceeding the Souths unstable economy, but since the mid-1970s the Norths vehicle has been on a rough
unpaved road enough to fall far behind the South. Although the self-reliance isolation policy was the main source of binding its economy, the North leadership did
not want to admit to its inherent bottleneck or to change its misguided doctrine.
They could not afford to put money aside in prosperous years in the event of need
in the lean years. Even during the Cold War the North Korean economy survived
only because of both Soviet and Chinese subsidies and it came to near collapse
as soon as Moscow and Beijing discontinued their free aids in the early 1990s. To
make matters worse, in addition to the Norths self-imposed isolation, severe natural
disasters such as yearly oods and droughts hit the lives of North Koreans particularly hard for nearly a decade starting in 1990. A disastrous famine from 1996 to
1997 reportedly caused the death of between 600,000 to 1 million people, followed
by continuing famine in recent years. If not for the windfalls from the sentimental
brothers in the South as well as Chinese benevolence, the North Korean economy
could have further unraveled as a result of decades of isolation under the Juche (selfreliant) policy. From the mid-1990s to date, the North is increasingly dependent
upon aids from the South to partially escape poverty. The private coffers from the
leftist-leaning people emerging from both the Kim Dae-Jung and Roh Moo-Hyun
administrations, the South NGO, (including some Christian churches and Buddhists
as well), businesses, former North Korea residents now living in the South have all
been already overowing for more than a decade since the mid-1990s. This wealth
transfer from the South is now suspected of making it possible for North Koreas
Kennedy (1987, p. xxii).
4.3
67
opaque national budget to divert it to use for its nuclear program. However, many
younger people, as well as a considerable number of nationalistic-minded residents,
do not seem bothered by such a hypothesis posed by some conservatives today in the
South.
These private coffers, in particular, may have facilitated corruption among hungry ofcials and traders and thus eventually reduce public condence in the state of
North Korea. But diffusion of such information is not likely to exacerbate too soon
or slow down too long the controlled society to a condition that would tend to breed
uprisings.
North Korea is often described as the worlds last controlled Stalinist regime
and it has remained resolutely closed off from the world. Over the past 60 years,
it has deed various predictions of its imminent downfall, stood aloof throughout the turbulent reform rush sweeping across all former Soviet bloc countries,
and gained an outsized place among global concerns due to its pursuit of nuclear
weapon projects. Most former communist allies opened their economies and began
to prosper. A decade later, in July 2002, North Korea announced its package of
economic measures in which most commodity prices (including rice and staples)
were raised for the rst time in more than two decades. The so-called farmers markets where peasants and public employees came together to trade were
brought one step closer to legitimacy. The public distribution (rationing) system
was suspended a major blow to the population who for decades had relied on
government-subsidized grain rations as its main source of food. The North also took
some dramatic measures such as inviting South Korean tourists to Mt. Keumgang
and later to Gaeseong, not to mention its providing lands for the development of the
Gaeseong Industrial Complex with South Korean investment money. These very
limited openings were mainly intended to obtain hard currency from the southerners, which intrinsically added a future sense of uncertainty because the North
could never abide by any bilateral agreements and laws. The North never hesitated
to abrogate any agreement or treaty if it faced any such necessity. Above all, these
measures were very minimal ones like the visible peak of an iceberg. The main body
of the iceberg remains hidden and North Koreas tactics are not likely to melt down
soon.
North Korea remains a dark and little known state as of the end of 2008.
In this information age, North Korea guards its secrets tightly. As an example, North Koreas approach is, know thy enemy, but dont let them know us.
Since early September 2008, many outsiders have speculated that the 66-year-old
Kim Jong-Il has been sidelined by a stroke; however, North Korea continues
to release undated photos showing an active Dear Leader, sporting his trademark bouffant hairstyle at public events. The question of Kims whereabouts
underscores the difculty of knowing anything conclusive about what goes on
in North Korea. Further isolating itself, North Korea announced suddenly on
November 24, 2008, that it would stop the use of two railroads running across
the Demilitarized Zone (which was connected only a year ago) and it would
shut down tours to both Mt. Keumgang (so-called Diamond mountain) and
the city of Gaeseong (old capital city of Yi Dynasty) in the North, starting
68
December 1, 2008. This angry announcement placed the blame solely on the new
conservative Lee Myung-Bak regime in South Korea.10 Both ambitious projects
were developed by the Hyundai Asan Corporation of South Korea with an astronomical amount of investment during the last decade. Coincidentally, President
Lee was the former CEO of the Hyundai Group where he had worked for many
years.
The Mount Keumgang (Diamond) tourism project came to a halt in July 2008
when a South Korean woman was shot to death by a North Korean guard at the
scenic mountain resort. The suspension of the Gaeseong city tour project for South
Koreans and the rail services signals the Norths intended return to Cold Warstyle brinkmanship tactics. Pyongyang has been demanding that the conservative
President Lee Myung-Bak government in Seoul implement agreements made during the two inter-Korean summits, the rst one in 2000 and the second one in 2007.
The North was apparently attempting to get unconditional economic aid from the
South while sealing its populace from exposure to the prosperous South Koreans.
Nonetheless, the North is not likely to completely expel all South experts and businessmen from the Gaeseong Industrial Complex since it is the biggest cash cow
for the famine-stricken North and the North is still learning how to manage and
operate the money box.11 When Pyongyang squeezes South Korea with a border
clampdown, Pyongyang knows well that the squeeze will in turn affect the Norths
economy.
But Pyongyang always manages to shy away from real peace and security with
its brothers in Seoul despite its often rhetorical stance: Lets Go Together as One
Nationality.
10
A month earlier, North Koreas Ro-Dong Shin Mun (North Korean Ofcial Newspaper) reported
in its October 16 (2008) edition that the North is seriously considering suspending all fronts of
NorthSouth Relations because the South Lee Myung-Bak regime insult denounced North Koreas
dignity with its anti-communist posture. See http://blog.Yonhapnews.co.kr/king21c/.
11 On November 24, 2008, the Norths Army announced via KCNA (Korea Central News Agency
in Pyongyang) that it will halt tours of its historic city of Gaeseong and stop train service to and
from South Korea because of Seouls confrontational and betrayal policy toward the communist
North. Furious with the South for its sponsorship of the U.N. General Assemblys human rights
committee resolution on November 21 by a vote of 95 to 24 with 62 abstaining, North Korea
announced on November 24 that it would begin banning South Korean tourists from the city of
Gaeseong and that it would selectively expel South Koreans who work in the joint industrial complex and limit the activity of South Korean managers there beginning December 1. However, it will
guarantee the South Korean business operation, though the number of company staff allowed to
remain in the Gaeseong Industrial zone will be cut to about 880 persons, a fth of the 4,200 with
permits for the enclave. As of December 1, 2008, there are 88 South Korean companies that run
factories in Gaeseong using about 35,000 North Korean workers. The North also sent a message to
Hyundai Asan Corporation, the main operator of Gaeseong city tours and Diamond (Keumgang)
Mountain and other joint projects, that the most of Souths staffs will be expelled in early December
and that any resumption of joint tour and other projects depends on Seouls attitude. The North said,
the fate of the inter-Korean relations entirely depends on any changes in Lee Myung-Bak who is
branded as a traitor, a pro-American sycophant, and despicable human scum.
4.3
69
Despite its failure to tackle a famine that is costing many lives, why does the
North Korean leadership refuse to reform fundamentally and often employ bullying
tactics to turn back the clock by causing an inter-Korean crisis?
In short, the North leadership does duly recognize the fact that it has lied, cheated
its own populace, and failed to compete with its hostile brethren in the South.
When the country nally opens to the outside world, it would be the very end day
for both the reclusive leader and his close followers now in power. In the early 1990s
when former communist bloc countries adopted reforms and openings, few outside
observers expected Kim Jong-Il or his regime to survive this long. But he has persevered, thanks to his ruthless leadership, his gift for political manipulation, his use
of brinkmanship diplomacy, and his awless control of the military power elites.
Nepotism and inherited power, as well as the fact that no other member of the top
leadership is able to challenge him, ensure Kims dominance in the well-sheltered
society. North Koreas elites do not dare to challenge Kim, and they, feeling cornered, understand that unity under Kims leadership is the only reason for their
survival. Thus, they continue to support their leader with little regard for the plight
of most North Koreans.
The only way for both the supreme ruler and his elite followers to survive is
to keep their country tightly closed, thus ensuring the North Koreans neither hear
nor see what is going on in the outside world. By guarding its secrets, the North is
remarkably able to keep foreigners as well as its own people uninformed about its
internal affairs even in this age of information. Of course, the question is how this
sheltered policy would do more good than harm or vice versa to its leader groups as
well as its people at large.
This does not mean that North Korean economy has not changed at all in the past
decade when the North faced near economic collapse and accordingly depended
largely on aids from South Korea and China. Until the early 1990s, the North strictly
controlled its state collective economic system. However, things have inevitably
changed to allow for various unofcial private markets run by the local people
who would have probably starved to death in the state where the public distribution system no longer worked. Various transactions in terms of barter or pecuniary
exchange have intrinsically been developing as the only way to survive for a vast
majority of the people. Even bureaucrats, knowing that the state has no resources
to reward their loyalty, are increasingly looking for the secondary market opportunities. The secondary markets are inbreeding both legal trading (small plots of
private farming and individual side businesses, and so on) and illegal trading (corruption, bribing, smuggling, and human trafcking, etc.). The increasing diffusion
of the secondary market activities is also contributing to weakening the economic
control of the central government, which in turn drives the bureaucrats to cooperatively secure public distribution at lower prices to sell them at higher prices, to
submit false reports, and to make possible many other things that were previously
unthinkable. The Norths leadership apparently has responded by reiterating its old
anti-market rhetoric and has staged frequent, but only partly successful, campaigns
against the so-called subversive, anti-socialist, and dirty capitalistic activities. North
70
Koreas suspension of both the Gaeseong tours for South Koreans and the rail services on December 1, 2008, could be seen as a measure to backpedal on its further
exposition to the Souths market economic elements.12 But not long after, the North
shall learn that its near term economic survival is greatly, if not totally, dependent
upon the money out of the Souths tourists and enterprises purses. The regime in
Pyongyang is doing its best to resist reform and maintain the self-imposed reclusive
status quo for as long as possible to prolong Kims regime. North Korean leaders
must be afraid that ushering in reforms would likely jeopardize their standing. In
the past, the North leadership often used a form of confrontational strategy toward
South Korea and other extramural enemies to keep its own people alert and united.
But Pyongyang must now realize that its continued isolation and increasing tensions
on the peninsula will only do more harm than good to the famine-stricken economy.
China and South Korea have for years tried to exhort North Korea to open up
its economy more so for their own respective and pragmatic reasons. The Chinese
government would not want to see North Korea implode anytime soon, which would
bring refugee ows into China. Instead, China would want to implant its own style
of reform in Pyongyang: that is, gradual economic liberalization while maintaining
the basic principle of socialist political system. China may further prefer to keep the
Korean Peninsula divided in order to maintain the North as a strategic buffer zone.
South Korea also has its reasons for preaching reform. If Pyongyang were to
change and improve economically and politically, the cost of reunication would
be much less. The South Korean governments support for and private investment
in North Korea is mainly to help the North Korean economy reach a productive
level over an extended period of time while maintaining peace and security in the
peninsula. Development of North Korea could also provide good potential input and
output markets for the Souths economy.
But neither China nor South Korea has so far succeeded in coaxing North
Korea to change. This is not because North Korea is ignorant of the successes of
both Vietnam, which suffered a famine in the mid-1990s, and China, the onceimpoverished but now economic miracle, but because North Korea is well aware
that market reforms and openings would unavoidably undermine the self-imposed
isolated kingdom.
As briey mentioned earlier, this does not say that North Korea has never
attempted to implement any internal and external change. In July 2002, the Juche
nation announced its package of economic measures, rst in the history of the
DPRK. Ofcial commodity prices were raised for the rst time in more than three
decades. Rationing formally known as the Public Distribution System was cut
12
In addition to the Souths sponsorship of the resolution of the U.N. Human Rights Council in
Geneva in October 2008, North Korea has vehemently protested against President Lee administration for not stopping the Fighters for Free North Korea from sending helium balloons into North
Korea in their efforts to educate the people of the North. The leaet dissemination proves that such
efforts are an extreme irritancy to the Norths regime. Making North Korean people know about
the truth constitutes a hostile challenge to the North leaderships dignity.
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71
way back. The farmers markets were made legitimate, and the secondary markets began to activate wherever needed by unofcial traders. In 2000, North Korea
embarked on a diplomatic offensive that included the normalization of relations with
many European Union countries. North Korea was rather cooperative in reaching
the unprecedented June 2000 NorthSouth summit between Kim Jong-Il and Kim
Dae-Jung.
Pyongyang dared to exchange visits of high-level envoys with the United States
by sending its General Jo Myong-Nok to Washington in August and inviting US
Secretary of State Madeleine Albright to Pyongyang in October. Pyongyang invited
Japanese Prime minister Junichiro Koizumi to Pyongyang in September 2002,
attempting to achieve a breakthrough in relations with Japan and expecting a big
transfusion of assistance from that country. During this summit in Pyongyang, Kim
Jong-Il acknowledged that his country in the 1970s and 1980s had abducted 13
Japanese nationals who were used to train North Korean spies. In the midst of
this rare gesture for some change in its foreign policy, a secret nuclear weapons
program was revealed in October 2002 in North Korea, which was in violation
of the non-proliferation agreement. This event set North Korea back in the direction of brinkmanship. On the other hand, Pyongyang also began to sense that
economic reform and increasing contacts with South Koreans would expose its
people to the Souths prosperity. Sooner or later, the population would come to seriously question the North Korean regimes legitimacy, unless Pyongyang clamped
down again. It would need to employ such switching tactics as a cold bath
(tight grabbing) or hot bath (loose grabbing) for the purpose of the regimes
survival.
For decades, Pyongyang has managed to sustain its legitimacy by injecting a
sense of paranoia in its people that their system could only provide the best paradise
for the mass. But many North Koreans who have been recently exposed to South
Koreans already have begun to suspect their leaders and know the extent of the
governments lies. This fear makes it impossible for the Norths morose leadership
to embark on further reform and liberalization.
The North Korean Central News Agency tells its readers how they should think
about reform: The South Koreans want to use their pitiful humanitarian aid to
lure us into openness and reform in order to destabilize our system from within.
In March 2007, an editorial in the ofcial daily Rodong Shinmun warned against
the consequences of contact with the outside world: Imperialists mobilize their
spying agencies and use schemes of cooperation and exchange through various
channels in order to implant the bourgeois ideology and culture within the socialist and anti-imperialist countries. The elites in Pyongyang believe, seemingly with
good reason, that they must all hang together or else they will surely be hanged
separately.13
13
Lankov (2008, p. 15).
72
4.4 Can Kim Jong-Ils Regime Last Much Longer?

For decades, both father Kim and son Kim have discouraged any number of predictions about their regimes sustainability. The North Korean economy has been
unproductive since the late 1970s. The Norths economic landscape was rendered
completely desolate in the 1990s because of the systems inherent inefciency coupled with natures wrath. During the last decade, the state was incapable of meeting
its most basic needs, including feeding its people. The North is keeping aoat for
nearly a decade largely thanks to aids and assistance from South Korea, as was also
the case in the 1970s and 1980s when it received aid rst from the Soviet Union and
then from China. Nevertheless, the leadership in Pyongyang has managed to retain
its grip for decades and appears still secure and robust. What are the secrets behind
this puzzle?
The answer to the query above may lie in two sources: One is related to internal
policy and the other to external policy. First, North Korean leadership had classied
people largely into two groups. One group belongs to people close to Kims relatives
and the elites who stay near the ruling class. They are a minority in numbers and
mostly reside in Pyongyang.
The rest of the people are simply the common people or peasants. During decades
of food shortages, Kim has put priority on the ruling class to receive food rationing,
while distributing only a marginal share to the rest of the populace. So the latter have
long suffered from malnutrition, which has hindered their physical body growth
and development. Not surprisingly, foreign visitors can easily notice that most average people in rural and remote areas, as well as most soldiers, are short and small
as compared with the elite class of people in Pyongyang and also average South
Koreans.
The ever-supreme ruler is concerned with feeding well only a limited number of
people and military cadets around him at the cost of the majority of North Koreas
health and even possibly their starvation anywhere that is remote from Pyongyang.
The tactics also serve to make the majority of people remain poor and helpless,
so that the weak can never really stand up against and challenge the ruler and ruling class. Second, the leaders and elites have used their skillful diplomacy to lure
much aid from the South and international NGO groups, sometimes with the bluff
of putting the South into the sea of re and sometimes with tactics to arouse
sympathy from benevolent outsiders.
More recently, however, the juxtaposition of the failing Juche system with newly
embedded secondary (so-called black) markets appears to be helping the economy
to partly reboot so as to hang on in the country where everything is a choice.
Some cash is also coming from drug and weapon trafcking conducted by its agents
abroad.
North Korean leader, Kim, who appears to be well aware of the consequences of
spreading the wake-up call for survival from the bottom, is trying his best to keep
his kingdom cut off from the wake-up, but it is increasingly likely unsuccessful
unless he can feed all his people adequately.
4.4
Can Kim Jong-Ils Regime Last Much Longer?
73
Some outside observers of North Korea like Marcus Noland argue that the
hardship of North Korea during its 2002 economic reform was due to faulty implementation rather than bad intentions.14 This theory might be extracted from the
evidence about the Norths 2002 July price reform initiatives and the reforms eventual frustration. Perhaps many North Korean technocrats do not understand both
basic economic principles and markets. But the frustration was rather caused by
the leaderships lack of condence (or doubt) about the would-be impacts of the
reform if implemented more extensively, not to speak of the shortages of physical and human resources to successfully support the reform process. Kim permitted
the reform package hoping to invite foreign capital. In that package, he intended to
eliminate price and wage controls and devalued the currency. That proves that he
did well understand the markets and his intentions were also correct largely, if not
all. The problem was, however, situated deeply in his selsh mindset. He has been
obsessed with the lingering worry about the risky outcome on his leadership and
power structure once the society begins to open up. Economic reform and opening
will not necessarily translate into political restlessness, but Kim and his close followers must nonetheless be concerned about the social changes taking place around
them. After all, they believe it was the grassroots middle classes that pushed change
in Eastern European states, the Soviet Union, and Romania. They are afraid that
their own starving people, if awoken, would follow the Tiananmen Square uprisings of June 1989 in neighboring China. The drag of the reform was thus largely
associated with Kims fear and bad mindsets.
Today, North Korea is indeed trapped in a dilemma. If it pursues reform and a
greater openness in order to give vitality to its ill economy, the population would
begin to realize that they have been deceived by the Kim family in a fake paradise
for more than a half century. This will lead people to seriously question the North
Korean regimes legitimacy. If the North maintains its state control and self-imposed
blockade with the outside world, the economy will not be sustainable any longer.
However, Pyongyang is still managing to survive despite its economic hardships
due to unconditional aids from both South Korea and China. And yet the North
Korean leadership does not show gratitude to its benefactors in Seoul and Beijing.
China cannot tell North Korea what to do with the plausible excuse that if we tell
Kim Jong-Il to do something, he doesnt listen. If we threaten him, he listens even
less. Nevertheless, China keeps the constant ow of aid, whatever Kims regime
does or does not do. Chinese strategy is mainly to keep the North as its political and
ideological ally because of its geopolitical importance to China. The Norths coldly
rational leader knows this too well and thinks he deserves to receive Chinese aid
with no gratitude in return.
Pyongyang has also been able to keep aoat thanks to many benevolent South
Koreans who are both congenial and not stingy toward the North communists. For
more than a decade, Kim Jong-Il utilized, though reluctantly, the Souths Sunshine
14
Noland (2002).
74
Policy15 in his favor until the South Koreas new conservative Lee Myung-Bak government began to demand both reciprocity in inter-Korean relations and human
rights improvement in North Korea. It must be noted in passing that Kim DaeJungs sunshine approach was to convince South Koreans that the life-and-death
confrontation between the two Koreas was not necessary when in fact North Korea
never ceased to be hostile to South Korea. The cool heads in the North have had no
reason to refuse lucrative and unconditional offers of all possible hard currencies,
technology, and plants from the overly condent southerners, but they have always
deliberately calculated when to take actions to expel all the corrupt and dangerous
capitalistic elements from their so-called pure paradise. The Lee Myung-Bak government provided the cool heads with a good excuse to stop all existing inter-Korean
relations when Lee cast yes on the North Korean human rights violation at the
U.N. human rights16 resolution on November 21, 2008. Lees two predecessors used
to abstain from the U.N. voting on North Korean human rights issue. International
advocacy groups say North Korea is among the worlds worst abusers of human
rights. Among other things, the North is known to run a network of prisoner labor
camps believed to house more than 300,000 political detainees, with many subjected
to torture and summary execution.
Restricting inter-Korean trade and trafc through its border with South Korea
effective from December 1, 2008, Pyongyang said that it will never pardon the
traitors in the South. This kind of throw-back tactic has been often employed by
the North from the ticking-off time of the NorthSouth transaction. South Korean
side did, however, tolerate the Norths unreliable behavior, still hoping with a good
will that the North would return to normality if the door across the barbed wall
began to gradually open wider. In June 2000, Kim Dae-Jung volunteered to go to
Pyongyang to make-up with the ever-victorious Kim Jong-Il by shaking his hand.
This factual event radically changed perceptions of the North monarchic and communist regime in the South. For most South Koreans it was a startling experience
to see the enigmatic Kim Jong-Il shaking hands with Kim Dae-Jung on television
and on the front pages of newspapers. Former dissident Kim Dae-Jung had skillfully
discredited the previous governments views of the North, causing many of his fellow South Koreans to now regard Kim Jong-Il not as a perpetrator of crimes of an
autocrat but as the respectable leader of the other Korea. And to that extent, many
leftist-prone South Koreans began to view North Korea more as the victim of the
anti-North Korean policy by the United States and its hunting dogs the extreme
15
The Sunshine Policy was initiated by former President Kim Dae-Jung in 1998 who insisted that
Seoul must help northern brothers by all means possible in order to achieve harmonious prosperity
while keeping peace in the peninsula.
16 The U.N. human rights declaration was rst adopted in Paris on December 10, 1948 by 58
countries at a meeting of the U.N. General Assembly with the absences of the Soviet Union, Eastern
Europe, Saudi Arabia, and South Africa after a tortuous debate in which communist countries held
up real economic and social rights against the bourgeois cultural and social principles defended
by the West. Article 1 of the declaration proclaims that All human beings are born free and equal
in dignity and rights.
4.4
75
conservatives in the South. The growing sentiment in favor of the North after the
June 2000 meeting was matched by widespread anti-Americanism sparked by proleft leaning news media coverage, which mainly focused on negative situations
involving American troops in Korea. The pro-North Korean sentiment continues
to gain ground while the SouthSouth conicts (between leftists and rightists) on
the issue have become acute everywhere in South Korea. This change is what the
North expected and calculated when it opened trade with Kim Dae-Jung. The North
leadership knows that young generations in the South are rather curious about overthe-border ideology and supposedly egalitarian society, which is somewhat different
from their diverse economic classes in the South. Older Koreans remember and are
generally wary of the unforgettable scars of the Korean War (19501953), which
began with the Norths invasion of the South. But the young generation, the socalled 386ers those in their thirties, who were born in the 1960s, and came of
age in the 1980s, are now in important positions of power and are displacing older
conservative elements in general. They insist on supporting the North Korean economy in all ways. Even many Catholic nuns, Protestant clergies, and Buddhist monks
are actively participating in sending money and all sorts of aid to North Korea, and
they frequently visit North Korea to help build North Korean economy and maintain regime longevity. A well-known large Presbyterian church in Seoul is known to
have supported the North with billions of dollars to build the Pyongyang University
of Science and Technology, which may be used as a main center for developing
deadly weapons, not to mention training the Norths political cadets. Surprisingly,
a South Korean (namely, Christian) working for the Pyongyang project (on behalf
of the missionary objectives) writes in his book that Christianity is the complete
achievement of communism.17 There are those who believe that his perception is
not compatible with being a Christian. Just as it is impossible to mix re and water,
so is it impossible to intermingle Christianity with Communism. Unfortunately,
there are a number of people in South Korea who are increasingly trapped in such
perceptions.
Indeed, the outpouring of resources such as money and strategic goods from the
South are enabling Kim Jong-Il to stay aoat. The North is apparently diverting considerable portions of the money coming from the South to its military sector with
intention of not only strengthening its own power structure but also subjugating its
surrounding rivals. The monarchic regime may live longer than the fast eroding and
split and disharmonized South Korean regime. Perhaps Kim Jong-Il will now think
he does not need to use his nuclear weapons or military power to crush South Korea:
He can accomplish the same goal by nurturing the ongoing split between the major
liberalists and the minor conservatives in the South, while at the same time beneting from their aid. Indeed, there are many volatile factors such as the increasingly
favorable perceptions of North Korea, growing anti-Americanism among the middle class, a push to dismantle internal security mechanisms, and ideological split,
17
Chung, J.-H (2003).
76
and so on, in South Korea.18 Even a rather neutral-leaning newspaper in Seoul carried an editorial comparing the US President Barack Obama with the South Korean
President Lee Myung-Bak with a thinly hidden criticism of President Lees conservative posture toward North Korea. It said that what Lee preached for a year as
only an empty slogan, Obama has practiced in just one month after his election. The
difference between Seoul and Washington in governing ideology and administrative
style will likely become even clearer in their foreign policies, particularly regarding
North Korea. Obamas emphasis on cooperation and partnership in foreign policies
means closer ties with China and Russia, two of North Koreas biggest allies. If and
when the increasingly unpopular Japanese Prime Minister Taro Aso is replaced with
a more future-oriented leader, Seoul could be left alone in the new diplomatic wave
sweeping this part of the world.19 This progressive editorial suggests in a roundabout way that Lee must work hard to win the favor of North Korea by providing
dont-ask aids (or aids without conditions) as did his former two governments.
Many progressive journalists in the South seldom criticize North Koreas hostile
policies toward the South. Instead, they direct the fault to the Souths hawks and
conservative government for any deterioration of the North and South relations. To
make matters worse, the so-called conservative ruling party, as well as the current
political leadership, misperceives the danger and avoids even to enforce existing
laws that would control those growing leftist elements in the South.
Nevertheless, South Korea has been growing in the right direction as its democracy matures and it experiences strong economic expansion. It is now developing a
new equilibrium with a political system that is nely balanced between progressive
18
All social conicts began to explode in the South since Kim Dae-Jung (called DJ), the longtime ghter against Seouls military regimes, took ofce in 1998 and immediately promoted his
Sunshine Policy intended to take off North Korean coat. In his presidential inaugural address in
early 1998, DJ laid down three principles: (1) No armed provocation between the two Koreas,
(2) no intention to undermine or absorb North Korea, (3) pursue reconciliation and cooperation
between the two Koreas. In his 2000 June summit with Kim Jong-Il, DJ agreed to accommodate a
slightly modied version of Kim Il-Sungs confederation approach as a road map to unication,
which lay a stepping stone for the progressive or leftist agenda in the South. His successor Roh
Moo-Hyun vigorously promoted DJs version of the Sunshine Policy, which is a prelude to a union
of two equals. Furthermore, Roh was pushing political changes that would harmonize Southern
politics with those of the North. Roh intended to abolish the Souths National Security Law, which
dates back to 1948 and was used by military governments to stie dissent. Even more controversial
was his announced hope to legalize communist parties in South Korea. After a decade of these two
leftist regimes, South Korean political and social landscape has completely changed. Now there
are leftist political parties that occupy several seats in the National Assembly and that ofcially
and publicly propose the confederation of the North and the South under the socialistic political
and economic system. The National Security Law is yet alive, but is no longer in use at any time
in South Korea. Many progressive elements can freely speak regardless of their ideological colors
and with no constraints. It may sound a complete democracy, but it is now often the source of
social turmoil that drags down the economy and productivity in South Korea. It is hoped that all
this tension and turmoil will be worked out eventually.
19 The Korea Times, New US Administration (editorial, December 4, 2008).
4.4
77
and conservative elements. And South Koreas democratic system has an autogenous capacity not only to overcome internal strains but also to prevail despite a
variety of panic missteps. The democratic society of the South is completely distant from the monarchic dictatorial state in the North. And we do know that in all
things, freedom and democracy in the South work for the good of those who love
them while a failing totalitarian regime in the North could not absorb a vibrant and
prosperous democracy.
The autocratic communist ruler Kim Jong-Il, who has above all failed in feeding
his suppressed people while developing costly nuclear weapons, must be eroding
now despite recent reports from the Norths ofcial KCNA about Kims several
public appearances amid of widespread rumors of his serious illness. Kim reportedly
suffered a stroke in August 2008 and underwent brain surgery, but North Korea has
denied any illness. North Koreas ofcial efforts to show Kims robustness reveals
that once the leader shows any illness or weakness, his impoverished country is
not sure what to do. However, his days seem numbered, as his regime. Of course,
it cannot be predicted when this will happen but the clock is now ticking, and his
regime will end too.20 It is a time for all neighboring countries South Korea, the
United States, Russia, China, and Japan to prepare contingency plans, individually
as well as jointly.
4.4.1 Some Scenarios on North Korean Regime Collapse

In recent decades, observers thought the DPRK had only months to survive. Yet
the government in Pyongyang did not fall when Kim Il-Sung died in 1994 or even
during the devastating famine and economic malaise under Kim Jong-Il. Experts
on North Korea were mistaken before, and of course they could be mistaken now.
For one thing, the normal rules of regime stability do not seem apply to North
Korea, and the countrys nepotism-centered governance has a hidden resilience that
dees outsiders prediction. From the stance of both the NorthSouth relations and
dynamic regional relations among stake-holding powers, the situation in the Korean
Peninsula will evolve on the diverse possibility space. The situation on the peninsula may be resolved in one of the following ways: (1) Prolonged hostile rivalry
relations, (2) peaceful coexistence, (3) absorption by the North of the South via war,
(4) absorption by the South of the North via war, (5) confederation unication, (6)
European Union integration-type unication, (7) reunication by all Korean ballots under the U.N. supervision, and (8) unication following a sudden collapse
of either the North or the South. From the standpoint of the Korean people, the
best unication option must be one of those peaceful approaches listed in points
(5), (6), and (7) rather than military war. The most favored approach appears to
a gradual unication model that presupposes sustaining peaceful coexistence until
the two systems converge to similar level of per-capita income and economic and
20
Refer to A Time for Everything, The Old Testament, Ecclesiastes 3: 18.
78
social environment. But this model foretells that the process could yet take many
decades even if the incumbent North regime bravely adopts reform and an openness policy soon. Depending on political developments, however, the division may
perpetuate maintaining the status quo instead of eventual reunication. Perpetuating
the division is not what Koreans would like to do. Peace keeping on the peninsula is
important, but this policy does not give priority to national reunication at all. In
this work, the author places more weight on the unication approach assuming possible collapse of the Norths regime any time now. We regard the Norths leadership
as incapable of accomplishing the very objective that justies its existence.
We will hypothesize a few scenarios of the Norths regime collapse and consider
expected responses from neighbors immediately following the collapse as well as
the responsible measures the Koreans must take.
The failure of the North Korean economic formula and the failure of ailing Kim
Jong-Il to nd a suitable candidate for succession among his young incapable sons
mark the approaching end of any positive sustainability of his family-centered and
military-dependent control. Of course, the resilient dictatorship may defy our hopes
again. In either case, however, we must be prepared. The preparation is more urgent
as the possibility of regime collapse grows greater.
Scenarios regarding the Norths sudden collapse may be approached in three
ways. The rst one is a collapse due to mass revolts against the leadership. We
like to think that people dont put up with atrocious leaders and failed forms of governance despite the fact that North Koreans at large have been made very passive by
brutal oppression for long periods. The North leadership has for so long trampled
on its peoples ability to endure hardship, but there will be a critical time when
they will not be pushed any longer. If the masses think they can no longer endure
the political, human rights suppression and economic hardships, they may stand up
against the regime. Of course, in the North where military forces are controlling the
system, it is very rare for people to organize concerted demonstrations. But most
soldiers are also the sons and daughters of long-suffering parents, which makes it
hard for them to retaliate when these soldiers see that their fellow Koreans face
severe punishment and even execution for the acts of revolt against the leadership.
Larger scale demonstrations by the general masses created a greater possibility that
a dynamic implosion would occur within the military camps. A larger-scale exodus
of people from the borders of North Korea will also help re up both implosion and
internal instability of the regime, which will eventually lead to the regime collapse.
The recent history of the Soviet Union and East European countries proves this.
The second scenario relates the regime collapse due to internal dissolution
(implosion) among the ruling power groups. Regardless of Kim Jong-Ils health or
death, there could be a new situation where a power struggle within the core groups
in the near-end stage of the shaky regime would lead to the collapse. There could
have accumulated conicting and diverse interests among political factions, perhaps
hidden and self-constrained for now. Amid reports that Kim Jong-Ilss health is not
in good shape and that his succession is in question among family factions, conict
may erupt on the issue of selecting an heir among the power elites. The success of
power succession will result in some stability of the new communist regime, while
4.5
What Will Neighboring Nations Do if North Korea Falls?
79
any failure of power succession after the death of Kim Jong-Il will likely lead to
political turmoil or to the state of anarchy in the North. In the latter case, there is
also possibility for a new political power to emerge and control the society over
time.
The process of the collapse of the existing system is the most important concern
for the South Koreans. The evolution can be either a peaceful process or internal ghting could break out among rival factions that would invite external forces
into the North. This would be the worst-case scenario that will be another seed for
conicts in the Korean peninsula.
In the next section, we will consider the would-be responses of stake-holding
neighbors around the Korean Peninsula when and if the North undergoes its sudden
collapse.
4.5 What Will Neighboring Nations Do if North Korea Falls?

Neighboring countries have been directly involved in the so-called Six Party talks on
North Koreas nuclear proliferation issue since the rst meeting in August 2003. The
talks have stalled over nding an acceptable procedure through which to verify the
Norths June 2008 declaration of its nuclear demolition programs. The United States
removed North Korea from its terrorism blacklist in October 2008. In return for its
agreement to denuclearization, Pyongyang was to get the equivalent aid of one million tons of fuel oil or energy. About half had been delivered so far by mid-2008. In
removing North Korea from its blacklist, United States claimed that the North had
agreed to the use of scientic procedure, including sampling and forensic activities. The North, however, denied the US claim, stating there is no documented
proof of such agreed-upon language. The North said the main task of the Six-Party
talks would be to speed up the aid delivery under common understanding on its
denuclearization plan. In dealing with North Korea, Japan-US relations have suffered slightly because of Japans strong position on the negative effects of giving
aid to North Korea (not to say downright Japanese worries about the US delisting
of North Korea from the terrorism list) without resolution of the Japanese abduction issue.21 In an angry reaction, North Korea said (on December 6, 2008) it would
not recognize Japan as a member of the six-nation nuclear disarmament and aids
package talks due to resume in the second week of December 2008 in Beijing
because Japan refuses to provide its share of energy aid to North Korea. We will
neither treat Japan as a party to the talks nor deal with it even if it impudently
21
A Japanese poll result released by the Cabinet Ofce on December 6, 2008, said that a recordhigh 28.1% of the public thinks Japanese-US relations are not good or not so good. The number
is the highest since the question was added to the annual interview-based survey in 1998 and
eclipses the previous gure by 7.7 points. Only 68.9% the lowest percentage ever regard relations between the two countries as good or relatively good, down 7.4 points from the previous year.
The results may reect Japanese worries over the US policy changes over North Korea. (See The
Japan Times, December 8, 2008, p. 2, for further detail coverage.)
80
appears in the conference room, lost to shame, a Foreign Ministry spokesman was
quoted by the Norths ofcial Korean Central News Agency (KCNA) as saying. Did
the furious rhetoric imply that other countries (either China or the United States
or countries outside the ve-nation group) were willing to provide Japans share of
the aid to the Norths blackmailing or that the impoverished nation stands desperately near bankruptcy? Or was the Norths anti-Japan complaint anticipating that the
Six-Party talks would be futile once again22 since North Korea would never open
its remote land to foreigners inspection? If foreigners come to verify the Norths
nuclear project sites, perhaps they would nd something else, namely, poppy farms,
which the North does not want to be exposed. North Korea is known to have operated the white bellower project to produce heroin in several hill farms controlled
by its military since the 1960s.
External aid and cooperation as well as occasional exchanges with the outside
world has begun to undermine North Korea internally. The rumors about the good
life and social freedoms in South Korea are already spreading quickly, even in the
strictly controlled society. Someday the people in the North may be tempted to rise
up and rid themselves of the political liars and the disastrous regime. This change,
however, may not arise overnight or may evolve in very slow motion, for North
Koreas leaders are doing everything to weather-proof all its windows.
Whatever the situation with the regime at the edge, nations with a stake on the
peninsula must be prepared, despite their mutually different perception or blue
print in case Kim Jong-Il collapses. Discussion of both contingency planning and
life after Kim Jong-Il has been ramping up signicantly since the last quarter of
2008. In fact, the Chinese military has already been increasing troop numbers along
the border with North Korea since September 2008. While China has declined to
publicly discuss contingency plans with the United States, the Peoples Liberation
Army has deployed more soldiers on the border to prepare for any emergency connected with North Korea. The two giants must have different and conicting views
on contingency planning, although they agreed at the high-level Sino-US Strategic
22
North Korea, which tested a nuclear bomb in 2006, partly disabled its Yongbyon nuclear complex in June 2008 in a disarmament-for-aid deal, but the Six Party talks held in Beijing during
December 811, 2008 failed again to agree on a protocol to verify if Pyongyang was abiding by
its agreements. Chief US delegate Christopher Hill said all Six-Party members had to see what
the reaction was to a draft offered on December 9 by China (prepared in prior consultation with
North Korea), but Hill was quoted to have said, I think the key thing is to gure out whether this
is a draft that everyone can work or not. Apparently, US and Japanese delegates were similarly
downbeat with regard to the Chinese draft (outlining a way to verify the Norths nuclear information) that does not have the word sampling but instead uses the phrase international standards
that include scientic procedures. The so-called Six Party talks, which have stretched over the
years with very little to show, are only likely to help North Korea to buy more time to complete
its nuclear weapon project so as to become one of nuclear power nations in the world. Actually,
on December 11, 2008, the multilateral talks failed to break an impasse on checking Pyongyangs
nuclear declarations, scuttling the Bush administrations hopes for a diplomatic success before it
handed over to the new President Barack Obama who took ofce on January 20, 2009.
4.5
81
Economic Dialogue held in Beijing on December 45, 2008, to promote prosperity

and growth of the world economy and trade.23
The neighbors, rst of all, have a common concern about the danger of nuclear
weapons if they are stolen or placed in the hands of international gangsters. Keeping
the nuclear football from passing over to any bad guys will be the top priority of all nations that are concerned with possible global holocaust. Regarding any
possible inux of refugees or internal riots due to regime changes in North Korea,
China and South Korea will duly worry more than other nations. Securing inuential pre-occupation positions for stability and security would also be important as
the collapsed state will need to be reorganized into a new economic and political
system depending on whose sphere of inuence Korea would be placed if reunied
into one. There will be many interests on this peninsula eyed all differently among
nations when the big bang occurs.
Before considering the neighboring countries dynamics or responses when a big
bang occurs on the peninsula, it would be in order to briey look at how a big bang
would explode on the Korean Peninsula.
4.5.1 Big Bang and the After Scenario: Dynamite-Implosion

Model
Here a big bang implies that North Korea would collapse unexpectedly due to either
external forces or internal causes. In fact, the current North Korean regime has two
dangerous dynamites that could explode sooner or later. The rst dynamite is its
nuclear weapon brinkmanship for which the countries active in the Six-Party talks
have struggled to peacefully solve since 2003, but without any remarkable results as
already discussed elsewhere in this chapter.
The Bush administration evidently considered at one point to attempt a preemptive strike to remove the Kim-Jong-Il regime, but the option was given up in favor
of alternative carrot policy to persuade the North to return to IAEAs NPT (nonproliferation treaty) in exchange for energy and other humanitarian aids as well
as an offer of normalization of Pyongyang (DPRK)Washington (US) diplomatic
relations. Unless the Norths denuclearization is settled, Pyongyang cannot avoid
international economic sanctions, which shall drive the already broken economy
into a corner. The North will also nd it is increasingly difcult to trade its nuclear
weapons for foods with the rest of the world.
The second dynamite is closely related to the Norths extensive state controls of
the masses along with the Kims ruthless ruling. A vast majority of people, including even bureaucrats, must rely on various transactions in the secondary (black)
23
US Treasury Secretary Henry Paulson and Chinese Vice Premier Wang Qishan inked an agreement with the two countries export-import banks to make $20 billion available in trade nancing
to boost commerce and economy at the meeting in Beijing, held against the backdrop of the worst
global nancial crisis in decades.
82
markets to feed themselves because the state distribution system no longer functions
normally. The North Koreans will gradually learn that their brothers in the South
enjoy afuence and individual freedoms that would be unthinkable in North Korea.
The people will be tempted, sooner or later, to join in the Souths prosperity. The
majority of soldiers and even bureaucrats would be no exception.
Once such a big bang occurs in North Korea, the next big question is what situation will evolve on the peninsula to affect the future shape of a unied Korea. The
issue may be considered in terms of two hypothetical scenarios related to an implosion (and explosion) model. The rst one is the case of uncontrolled implosion,
which is dened as regime collapse without producing an alternative government.
This could follow such events as large-scale rioting, assassinations and the executions of communist leaders and cadets, large unemployment released from the
dissolved military, attempt of military coup, oods of unsettled refugees within
and across the border, and weapons disposal problem as well as lethal weapons
trafcking. The second one is controlled explosion, which means an alternative
regime steps in immediately, probably being supported by the existing military
power groups. This alternative regime may or may not seek a unied Korea with the
South. This second scenario will lead to a new problematic complicated situation
on the peninsula. There are, of course, many possible scenarios that t in between
these rough indicators, such as explosion cum implosion and incomplete explosion
and implosion.
In this writing, we will take the model that assumes not only an uncontrolled
implosion in the rst short duration, but also an absorption by South Korea over a
short period of time. Of course, the absorption model will strongly depend on South
Korean foreign policy overtures. Hoping that this model works, we will examine
below the respective perceptions of neighbors on the Korean Peninsula.
4.5.2 Chinese Perceptions of the Korean Peninsula

From the historical and geopolitical perspective of the Peoples Republic of China,
the combined area of North and South Korea remains one of the most important
areas of consideration for Chinese foreign policy, not only in military and political terms but also in economic terms. Economic relations with South Korea only
since the early 1990s have signicantly beneted Chinese start-ups in the stages of
its primitive absorption of advanced technology as well as market-oriented development strategies. One-time foes have thawed their antagonistic past to open pragmatic
new paths of relations with one another. Today, China is the largest economic and
trade partner of South Korea, followed by the United States, and then by Japan.
Military and ideological relations with North Korea have been rather long and
irreversible since China came to rescue North Korea in the Korean War (1950
1953). China poured more than a million troops in the Korean battlefronts to help
push the U.N. troops back to the vicinity of the 38th parallel. To save Marshal Kim
Il-Sung (19121994) for the Democratic Peoples Republic of Korea, Chairman
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Mao Zedong (18931976) of the Peoples Republic of China (founded on October

1, 1949) unsparingly sacriced about 921,836 Chinese soldiers (deaths: 184,128,
wounded: 715,872, missing: 21.836) on the Korean Peninsula. One of Maos sons
died in the Korean War. On November 25, 1950, the Peoples Liberation Army of
China entered the war with initial some 300,000 Chinese volunteer troops led by
General Peng Dehuai. Chinas intervention placed North Korea in the role of a junior
brother tied to the elders power. One-time comrades remained mutual helpers in
consolidating socialism in both countries, even if Beijing and paranoid Pyongyang
often differed in both understandings and approaches to contemporary world
affairs.
Indeed, as an economic and military powerhouse today, China has succeeded in
winning the two Koreas under its inuence whereas US-Chinese and JapanChinese
rivalries are ever increasing. Nevertheless, China will not want to see North Korea
united with South Korea. The Chinese government would prefer to keep the Korean
Peninsula divided and to maintain the North as a strategic buffer while keeping
the South as a trade and strategic partner. The Chinese government must look to
the future that if the two Koreas were to unite, the Korean Peninsula would serve
as a jumping ground for the United States and Japan to advance militarily to the
peninsula border with China. Therefore, Chinas primary concern is most likely to
maintain the two Koreas divided in rivalry. For all practical purposes, it would be
much easier to deal with divided Koreans than with united Koreans in all aspects of
KoreaChina transactions. But ofcially, the Chinese say that they have no reason to
oppose Korean reunication if that is what the people of the divided states choose.
The Chinese say that it would be happier to have an enlarged friendly market on the
peninsula rather than continuing to provide North Korea with material and diplomatic support with no gratitude in return. But word is one thing and real mind is
another.
4.5.3 Chinese Response to the Norths Collapse Due to Implosion

If Chinese government is to strictly keep its pronounced stance about its own foreign
policy that clearly states that it will not interfere in others internal affairs, China is
not supposed to intervene in the North Korean implosion even if the Norths situation does not t Chinese tastes. But it is very doubtful that China would keep away
from its old ally when the Norths implosive turmoil is to be managed by South
Korea or other third parties in favor of their interests. More important, China will
likely not stay away if a war breaks out on the peninsula.
If North Korea were to face either a system collapse or an anarchy state, the
United Nation could volunteer to maintain order in the North. Alternatively, four
plus one (United States, China, Japan, Russia plus South Korea) or ve plus one
(United States China, Japan, Russia, EU + South Korea) collaboration may be considered to reinstall order and security in the disturbed state. China will surely be
willing to lead such collaborated measure and to work to turn the outcome toward
84
its own interests, of course. Said differently, China will never tolerate being pushed
aside if South Korea or South KoreaUnited StatesJapan in a trilateral cooperation
attempt to clear the way in distorted North Korea.
If the North is swirled into its own military break, its military forces may split into
pro-South Korean group, pro-Chinese group, pro-Russian group, and pro-American
group. There is high probability that each faction will ght against one another. In
such case, the United Nation must step in to coordinate the interests. Otherwise,
this can turn the Korean Peninsula into a new proxy battleground for each factions
back-up country. If a single pro-Chinese military regime were to be established in
the North, China will probably accept the situation. This means a new division on
the peninsula into two states unlike any seen before. On the contrary, if a single proSouth Korean regime were established rst and then unication would follow on the
Korean Peninsula, China would not recognize it at the beginning but it will gradually
accept the reality over time. This may be the best option that South Koreans could
hope for. South Korea must prepare to draw Chinese cooperation in favor of a united
Korea.
4.5.4 China and North Korea at the Crossroad

To date, Pyongyang has not shown any gratitude to its benefactors in Beijing, partly
because the latter does not expect reciprocity each and every time. The former
knows that Beijing supports her for the sake of the latters long-term interests.
The current relationship between Beijing and Pyongyang is just as complicated
as it is important for historical and geopolitical reasons. It was China that came to
the aid of North Korea during the Korean War. China is still the provider of 80% or
more of the Norths requirement for crude oil as well as almost half its food. Beijing
could enforce somewhat more leverage over Pyongyang than any other country.
However, Beijing may avoid applying too much because doing so could result in
losing its inuence over Pyongyang, not to mention breaking regional stability. In
return, Pyongyang is also careful not to exhaust Beijings patience too far as revealed
in the Pyongyangs attempts to often comply with the latters exhortations (that is, to
return to Six-Party nuclear talks) under the right circumstances.24 This implies that
China can make Pyongyang change if it sees the need desperately. China, however,
will not do any of these things now. Beijing may think Kim Jong-Ils regime very
useful for taming the capitalist neighbors (including the United States) functionalism. Most important, China may not want to destroy its long-time ally, the DPRK,
over the issue of nuclear weapons, which would complicate its position with its
prime rivals, the United States and Japan. Chinese policy has been very careful and
24
Beijing, anxious to start rst negotiations on North Koreas nuclear projects, once cut off oil
for three days in February 2003 as a warning. Pyongyang agreed to sit down for multilateral talks
shortly thereafter. This proves that China could force Pyongyang to act when it really sees the need.
But China refrains from exerting the force to bring Kim Jong-Il to act.
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tactical, though, to not take sides in the discussion in the Six-Party talks in Beijing
since its beginning in 2003, endeavoring to nd common ground between North
Koreas position on one side and the United Statess position on the other. In this
regard, Chinese positions were close to those of South Korean ofcials who also
sought a balance and stressed the need to reduce confrontation, avoid pressure, and
preserve peace, mainly by giving unconditional favors, if possible, to North Korea.
However, the juxtaposition of these internally mismatching and face-saving foreign
policies must not last long. Yes, yes and no, no must be clearly declared soon in
the trajectories of multilateral dialogue. Any attempt to concurrently satisfy two
differently motivated rivals, namely the United States and North Korea, will only
consume time in vain.
ChinaNorth Korea relations appeared to have been enhanced as China showed
its strong support for North Korea in welcoming Kim Jong-Il who visited China in
2004 and again in 2006, and Chinese President Hu Jintao made his rst ofcial visit
to North Korea in 2005.
Chinese primary concern is to maintain its long-term relationship with
Pyongyang, of course, while it assesses the longer-term consequences of failure
to resolve the Norths nuclear possession, which could result in Tokyo developing a
nuclear weapon program. China prefers to keep the Six-Party talks going to facilitate sure life-line for North Korea in exchange for Pyongyangs deadly weapons,
which will prevent any further proliferation in East Asia.
And should the North Korean regime fall overnight, China has so far been
preparing for it with all possible measures. Back in the early 1960s, the Chinese
government instituted a policy whereby ethnic Koreans could freely relocate to other
provinces, such as Liaoning, Jilin, and Heilongjiang provinces from their inherited
eastern regions. These provinces once accommodated about 60% ethnic Koreans.
However, Chinese government had subsidized and encouraged ethnic Chinese to
move into those regions. Today, the composition of Korean ethnicity in these three
north-east Chinese provinces is no more than 45%. This population relocation policy
was made by the Chinese government as a strategic tactic in advance of a possible territorial dispute between China and Korea when the two Koreas would reunite
someday. In more recent years as North Korean situation becomes vulnerable, China
has more troops deployed along the border to cope with a possible large number of
refugees from the North. More importantly, China has recently invested much in the
Norths major and active mineral mines. To protect its interests, large numbers of
Chinese troops are ready any time to cross the border into Korean territory.
It is worth noting that China has recently put into effect efforts to form sets of
cooperative multilateral mechanisms that do not include the United States, while
the latter has been toughening its approach to North Korea and Middle East countries. One of the most interesting, but little known, efforts of this kind in Asia is
the Shanghai Five Process.25 The Shanghai Five process consisting of China,
25 Bates Gil, Shanghai Five: An Attempt to Counter U.S. Inuence in Asia? Brookings Institution
(http://www.Brookings.edu/opinions/2001/0504china_gill.aspx?p=1)
86
Kazakhstan, Kyrgyzstan, Russia, and Tajikistan has quietly, but steadily, built up its
economic, military, and diplomatic relations since 1996 and seeks to present itself
as a more viable counterweight to US inuence in both Central and East Asia. They
have stuck together and issued increasingly tough statements in opposition to what
they see as US hegemony. This will give Beijing and Moscow strategic partnership in which to assert themselves more effectively in a world they see as dominated
by the United States. This process will involve issues related to North Korea as it
shares borders with both China and Russia.
While Beijing wants to keep on reasonably good terms with the concerned powers,26 Chinas key concern is to keep its strong leverage politically and economically
on the Korean Peninsula because of the peninsulas geopolitical importance in
safeguarding Chinese top national security and regional stability. The Chinese leadership may seriously consider if it would be better toppling stubborn Kim Jong-Il
and installing a new communist leader in North Korea who is more subservient
to China than allowing the two Koreas to unify under US-Japanese umbrella. This
would be a second best choice for China if it wants to continuously maintain its
leverage at least in part on the Korean Peninsula. From its security standpoint as
stated above, China always prefers a divided Korea on which it can exert its military
inuence more readily, while keeping some distance from the advancing American
Japanese hegemonic ventures into the mainland. China will contribute to the North
Korean regimes security based on their Treaty of Friendship, Cooperation, and
Mutual Assistance of 1961. Most probably, China is considering contingency plans
from many different perspectives, including deployment of troops to the border as
well as deep into North Korea itself if necessary. In the event of a sudden crisis, or
a replacement of Kim Jong-Ils regime, or a change in its political system becomes
inevitable, China will denitely make an effort to put in place a pro-China government in North Korea in order to sustain its buffer region from the US-Japanese joint
hegemony. If the Korean Peninsula were swirled into any turmoil with the North
South division wall deteriorating, there is no question that it would be China that
will attempt to promptly, decisively, and unsparingly advance deep into the peninsula. The leaders in Beijing will never let the United States or the Japanese replace
Beijings inuence on the peninsula.
4.5.5 US Policy and the Korean Peninsula

The Korea-US relationship has existed for more than 100 years since the United
States rst established diplomatic relations with a Korean state in 1882. Today, the
majority of South Koreans and Americans are proud of a centennial celebration
of sorts, but some Koreans, including the Norths communists, do not think too
26
Beijing has very carefully not only averted any confrontation with Washington in the U.N
Security Council over the Iraq War but has also hoped to avoid a setback in relations over divergent
approaches to resolving the North Korean nuclear issue.
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highly of the history of the relationship which, they perceive, rst led to American
acquiescence in Japans oppressive colonization of Korea, and second supplied all
negative sources to deter national unication. The adversarial relationship between
the two halves of Korea has indeed something to do with the lingering ambiguity
of the Korean love and hate toward Americans, Russians, British, Chinese, and last
but not least to the Japanese; all parties were connected with the Yalta and Potsdam
conferences.
Two ideologically different regimes in the North and South had already begun
to emerge by the end of 1945. During the next 2 years, the process gained momentum, while US and Soviet representatives in the Joint Commission of the Moscow
Conference27 squabbled in vain over how to carry out the trusteeship agreement.
Meanwhile, the division was under way and it became more permanent.
US combat forces withdrew from the South in 1949, leaving only a military
advisory group of about 500 men to continue training South Korean armed forces
consisting of about 98,000 men. The withdrawal of the US combat forces from
South Korea indicated that the United States did not place any further relative strategic importance on the peninsula. If President Harry Truman had not decided to
re-engage militarily in Korea with the U.N. support soon after the North invaded
the South on June 25, 1950, the current US-Korea relations would have been a
completely different picture, not to mention the general American perception of the
peninsula. It was the United States that came to save the Souths democracy from the
attack of the North communists. It was the United States who helped South Koreans
to rebuild their economy with individual freedom from the vicious circle of poverty
the rst several years after the Korean War. It is the United States where millions
of Korean young people have received advanced education and training with which
they could contribute to their nations remarkable economic growth and social stability in the past half a century. The close ROK-US military alliances had served
to the security of South Korea, which did, in turn, contribute to the miraculous
economic development in the South during the past decades.
Both Kim Dae-Jung and Roh Moo-Hyun regimes were already pursuing a rather
radical, but favorable, paradigm shift toward the North, while the Bush administration had differences of opinion regarding North Korea policy and other military
defense-related areas with South Korea. In particular, under those liberal regimes,
many changes were already under way in the South Korean society. The young generations, the so-called 386ers, have no particular love for the United States, which is
perceived to be the ally of the old military and authoritarian governments that were
27
At the Moscow Conference rst held on the eve of December 1945, the United States and the
Soviet Union agreed that their respective Korean commands were to meet promptly to resolve
urgent administrative and economic problems. The two commands were to formulate recommendations in consultation with Korean democratic parties and social organizations, for the
establishment of a provisional Korean democratic government; namely a form of trusteeship.
The Moscow agreement brought a massive protest from all political groups in the US Zone,
though later the Korean Communist Party in the South reversed its position and lined up with
the Soviet-dominated Communist Party in the North.
88
believed to be responsible for both political suppression and the Kwangju massacre
in 1980. The June 2000 summit between Kim Dae-Jung and Kim Jong-Il ignited
an outpouring of sentiment in favor of the North among many South Koreans,
which also made them view North Korean economic predicament more as the victim of sanctions imposed by the United States and its past puppet regimes in the
South. A torrent of anti-Americanism was reinforced when a pair of American soldiers accidentally killed two high school girls in a tank run-over during training
maneuvers.
Yet when ve South Korean sailors were gunned down by a North Korean guard
vessel in southern territorial waters in the same month, there were no noticeable
expressions of outrage in Seoul. Similarly, in the summer of 2008, large groups
of demonstrators protested every night in Seoul streets against US beef imports,
while they kept silent when a South Korean tourist was shot to death by a North
Korean soldier in the Keumgang mountain resort. Nor has any strong message
been expressed by most news media in the South when the North shut down both
the NorthSouth train trips and Gaeseong tourism effective December 1, 2008.
Instead, most progressive news media in Seoul poured criticism on President Lees
government for its conservative stance toward the North.
A surge of anti-Americanism matched by favorable sentiment toward the North,
as well as rapid China rapprochement in South Korea, not to mention Roh MooHyuns power equation,28 led in turn to a round of Korea-bashing or sense of
betrayal in the United States. Amid mutual distrust and pique, the ROK-US military alliance rapidly underwent a major redenition whose effect expanded into
other areas. When Roh Moo-Hyuns progressive government volunteered to take
over the American control of the joint ROK-US military operation from the year
2012 (which most Souths conservatives regard as a dangerous plot to dismantle
internal security mechanisms), the United States readily agreed, as if it had wanted
to have such an excuse, thus absolving it of its future and automatic military involvement in the peninsula. A number of recent US military engagement changes in the
rest of the world reected the Bush administrations redesign of Korean military
posture, yet in-depth consultation between Washington and Seoul on future shifts
in the US defense strategy was conspicuously absent. Of course, US overseas military engagement policy depends on many multi-factors such as US overall security
and foreign policy perspectives, US domestic economic and political situation, and
regional and bilateral security ties with other nations.
The former Korean President Rohs political aspiration to obtain independence
and sovereignty in its national defense was well synchronized with the Bush
administrations need to radically reduce the ground presence on the Korean peninsula due to US mounting strain in the Iraq battle. But it must have hurt Americans
in general that South Korea chose US military withdrawal as if the United States
28
President Roh Moo-Hyun advocated that South Korea should play a balancing role, switching
sides on an issue-by-issue basis between the northern alliance (namely, Beijing and Moscow)
and the southern alliance (namely, Washington and Tokyo). He said that the power equation in
Northeast Asia will change depending upon the choices we make.
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has infringed on South Koreas sovereignty, while Americans think they have fought
to help South Koreans defend their democracy and freedom for over a half of the
century. With mounting anti-American sentiment in Seoul during the 20032008
periods in particular, the cleavage appears to be getting wide.
When the United States sat down with the North to discuss removing North Korea
from the terrorist blacklist in October 2008, Washington did not include Seoul in the
talks in Pyongyang, reecting the climate change in the ROK-US relations.29 Amid
mutual pique and bashing, however, the two governments agreed on principles of
redened military alliance and that the implementation process would begin in 2005
lasting until early 2007. The two governments seemingly were further cooperative
after the February 13th agreement in the third session of the fth round of the Six
Party Talks during February 813, 2007,30 that they even concluded the KORUS
FTA; that is, the Korea-US free trade agreement in April 2007, which is still pending
for respective congressional approval in both countries as of the end of 2009.
The February 13, 2007 agreement contains the participants long-run objectives
on the Korean Peninsula beyond the denuclearization of North Korea (see footnote 30 below). This shows that the United States perceives current North Korean
issues as broader than simple non-proliferation terms, which would be related to
the peninsula security as well as the bridge role in accessing the mainland. The
Bush government considers the ultimate question of trying to work with the other
four parties China, Japan, Russia, and South Korea when a contingency occurs.
Perhaps, the US administration correctly looks to solve any future Korean problems
by working closely with other countries as responsible stakeholders. In particular,
the United States is positioned to work closely with China to deal with both the risk
and possible collapse of North Korea.
The Bush administration began with the goal of making a regime change in
the North, but as President Bush neared the end of his second term his concern
shifted to attempt diplomatic success amid his historically low approval rates in
20052008, although his chances of success were very low in any left-over deals
29 The George W. Bush administration made rather a hasty decision to remove North Korea from
the list of state sponsors of terrorism, based on Pyongyangs oral commitment to a verication
plan. But since then, the Bush administration made no progress on a so-called verication protocol
with Pyongyang despite an earlier shipment from the United States of a half of some heavy fuel aid
promised to the North in 2008. Pyongyang must have intended to thwart the fading Bush administrations hopes for a last diplomatic success and it wanted to wait until the Obama administration
took over the US Oval Ofce. Yet it is too early to predict if the Norths denuclearization process
will enter a bridge of no return or if it will normalize North Koreas diplomatic relations with the
United States and Japan, cementing two Koreas system in the peninsula during the Obama era.
30 In the February 13, 2007 Joint Agreement, the six countries established ve working groups and
one separate forum. The ve working groups are for (1) the denuclearization of the Korean peninsula; (2) the normalization of DPRK-US relations; (3) the normalization of DPRKJapan relations;
(4) economy and energy cooperation; and (5) a Northeast Asia Peace and Security Mechanism.
(See Appendix) The separate forum is for establishing a permanent peace regime on the Korean
peninsula. Indeed, their objectives go beyond the denuclearization of North Korea, and are for
cementing two legal countries on the peninsula.
90
with North Korea.31 Perhaps, Americans have not read correctly the mindset of the
North Korean leadership. North Korean leaders are aware of this fact and, therefore,
they have used the nuclear card to secure decisive benets such as security of the
regime and economic assistance, while aiming at external propaganda-effects that
heighten its status and assure its internal solidarity. Kim Jong-Il regimes lifeline
would be its nuclear program. For North Korea, abandoning its nuclear program
would be like abandoning its life. Therefore, North Korea attempts to repeat goand-stop strategy to gain benets and time through dialogue, suspension, and
renegotiation cycle with the United States and other concerned parties.
Mainstream US foreign policy is usually pragmatic and rather steady over time,
but the actual course differs very much depending on which party, Republican or
Democrat, controls the White House. The US policy toward the Korean Peninsula
may not be too big a deal to the American people, but it is a life-or-death matter for
Koreans who are still ideologically divided.
Therefore, what most concerns Koreans, both the North and South, is how the
new US President Obama will reshape his countrys Korean Peninsula policy and
manage conicts and strategic calculations concerning other countries in Northeast
Asia.32 Will the Obama administration choose to concentrate its policy priority on
mostly domestic affairs in the face of the US nancial and real estate crisis, shying
away from such troublesome issues such as a rogue regimes nuclear weapon programs? If that happens, North Korea will emerge as a member of the world nuclear
club. If something unexpectedly happens to the power structure in North Korea,
the power equation in Northeast Asia will change depending on the choices the
United States makes. When Americans no longer have any further stakes in making
alliances on the peninsula, the world will soon see that Koreas ship will sink soon
after that dramatic change happens within the Norths regime. Otherwise, the whole
Korea would unavoidably enter Beijings orbit in the new geometry of international
politics.
Older Koreans remember the sacrice of the United States during the Korean War
and are generally in favor of American military presence on the peninsula, contrary
to younger generation. But they are increasingly wary of the American pragmatism
and functionalism in its foreign policy. As one can see, it is an undeniable fact that
the United States is overly concerned about the dangers of North Koreas nuclear
weapons that could be exposed uncontrollably when a sudden change occurs in
31 See Pritchard (2007, p. 162), which reads: Unless the president of the United States makes
a clear, strategic decision to accept the current North Korean regime as it is rather than wish for
its demise; decides how to proceed; communicates his vision of what the relationship between
the United States and North Korea would look like to Pyongyang following a negotiated nuclear
settlement; and then instills the discipline in his staff to work toward the goal, with one voice,
it is unlikely that a satisfactory resolution will be achieved during the remainder of the current
administration.
32 Mr. Barack Obama is known to favor talks to reactions in dealing nuclear proliferation
issues with North Korea and Iran. But he must understand above all if the other party intends to
cheat and to deceive with talks.
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the North. Just as the United States views a nuclear North Korea as unacceptable,
it would also view a nuclear reunied Korea as equally unacceptable for obvious
reasons. A nuclear reunied Korea may well push Japan down a road toward nuclear
weapons development that China will not tolerate. The United States may not object
to Korean reunication on a nuclear-free condition if the United States does not fear
the fact that China will be the sole power in East Asia. If it were not a primary area
of contingency planning for the US policy makers to be concerned about, and if the
Chinese and Americans compromised solidly in achieving ever-lasting equilibrium
in their relations,33 the United States might have no reason to increase its taste on
the Korean Peninsula in reshaping its new world strategy. Nevertheless, the United
States may still consider using the united Korean Peninsula as an important land
bridge for its future trade expansion with China, Mongolia, Russia, and the Middle
East nations.
If the new US government is unconcerned about the Korean atlas, the United
States would not only lose its leverage in Northeast Asia but will also become
a nation that is less powerful and non-inuential in world affairs. Instead, China
will emerge as a major player politically and economically, which will lead to new
paradigm shift in Japanese policy as well. If Kims regime is dismantled in the North
and if the United States kept off on the peninsula, Japan would have to look to China
to secure its survival within Northeast Asia. This suggests that the United States
should not repeat the Achesons error in drawing a line to retreat from Korea.34
4.5.6 Japan and the Korean Peninsula

Korea has endured ve major occupations and about nine hundred invasions during
its history of more than 5,000 years. The harsh and painful occupation began at the
wake of the Russo-Japanese War of 19041905, in which the Japanese humiliated
Moscows forces. As a result of US President Theodore Roosevelts peace brokerage, Japan won control over Korea. Japan occupied Korea in 1905 and annexed the
country outright 5 years later. And this was the beginning of all kinds of tragedies,
pains, tears, despairing poverty, and hardships that Koreans have endured until
33
The United States is wary of Chinas growing power, but American pragmatism is increasingly
viewing China as strategic partner rather than strategic competitor. China, for its part, also
views the United States as practically helpful as a major demand market for Chinese products,
not to speak of their common objectives of achieving a nuclear weapons-free Korean Peninsula.
Chinese-US cooperation helps China to maintain its ultimate gain of Chinese leverage over both
Pyongyang and Seoul. American and Chinese interests in Korea may not overlap completely, but
they do so considerably on evolving problems in Korea.
34 In 1947, Dean Acheson, the post-war US secretary of state, drew a US defense line outside of
the Korean Peninsula, from Japan through the Ryukyus to the Philippines, that invited the Norths
Kim Il-sung to start the so-called Great Fatherland Liberation War, which lasted for three years
and one month, only leaving numerous casualties on both sides and no liberation. The withdrawal of the last remaining US combat forces from South Korea was an indicator of the relative
unimportance of the peninsula in US strategic thinking.
92
today; to list a few, they include complete obliteration of national integrity, family
separation, ideological conicts, unforgettable war, and mounting feeling of mutual
distrust and hatred and adversary among the same race. Actual Japanese occupation
ended on August 15, 1945, but the scars of the occupation and many after-effects
have erstwhile lingered in the minds of most Koreans who were born, grown, and
educated in the unfortunate peninsula.
Both North and South Korea perceive Japan as an old evil that derived from the
past colonial rule as well as a repeated denial of Japanese wrong-doings of any
sort.35 Japan has so far never acknowledged the importance of World War II comfort women as a painful and emotive issue in Korea. Up to 200,000 women from
Korea, China, and other countries were forced to work as sex-slaves in military
brothels used by Japanese troops during World War II, but Japan denies responsibility for running a system of military brothels. The dispute on the unsettled
sexual slavery issue as well as the territorial dispute over Dokdo (or Takeshima),
a set of rocky islets about halfway between Korea and Japan, still remains major
impediments to enhancing reconciliation between the two neighbors.
Koreas division is owed to three main causes: First, importantly, it is an outcome
of Japanese colonial rule, and second, a byproduct of post-war power game developing between Moscow and Washington, and third, a result of ideological hegemony
struggles among Koreans during and after the independence movement.
South Korea has steadily improved its relation with Japan since the early 1960s
in coping with common interests and objectives in economic, political, and cultural
cooperation as well as in various regional and international issues. But for North
Korea, Japan is yet a major hostile country that irritates Pyongyang with an issue
of the Norths kidnapping Japanese citizens to train its spy-terrorist agents in the
Japanese language.
For Japan, North Korea is a nuisance that blatantly expresses its anti-Japanese
sentiment that is deeply rooted in its historical relationship. Until the eighth normalization talks in 1992, Japan tried to normalize its relationship with North
Korea through a dialogue. Even if Japan began to seriously recognize the North
35
For example, Japanese former Air Self-Defense Force chief of staff Toshio Tamogami justied
Japans aggression in China and colonial rule of the Korean peninsula both in his war essay and in
his unsworn testimony in the Upper House made on November 18, 2008. He said, Japan was never
an aggressor nation. The army advanced into China and what is now South Korea because Japan
stationed its military in those areas based on accords and treaties, and Japan was a victim that
was drawn into Sino-Japanese War with repeated terrorist acts and provocations by Chiang KaiSheks Nationalist government. He also said that Japan was entangled in the mesh of a plot hatched
by Franklin D. Roosevelt and carried out the Pearl Harbor attack. A total of 78 Air Self-Defense
Force members submitted essays among a total of 235 essays to the same writing contest which the
Apa Group, a hotel and condominium developer, organized under the theme of the True Modern
History in 2008. The Japanese Defense Ministry is known to defend Tamogamis theory and
other similar conspiracy theories advocated by some hawkish organizations such as Atsushi
Fukuchi of the Atarashii Kyokasho o Tsukuru Kai (Japanese Society for Textbook Reform) in an
excuse of providing a balanced historical view to the young Japanese people. (See The Japan
Times, November 9, 2008, Editorial: Remember Pearl Harbor, and November 12, 2008, p. 2, and
November 22, 2008, p. 2, on the related articles.)
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Korean threat after Pyongyangs Taepodong missile test in 1998, the prime minister
Junichiro Koizumi (who took ofce in 2001) had his rst meeting with Kim Jong-Il
in Pyongyang in September 2002, and he learned about the abduction of the 13year-old Japanese school girl named Megumi Yokota on November 15, 1977 just a
few short blocks from her home in Niigata, Japan. At the dinner table, Kim JongIl remarked by blaming the blindly motivated patriotism of a few of Megumi
fathers runaway employees who abducted her to North Korean soil. It was not clear
why the Japanese prime minister was so eager to establish diplomatic ties with the
unpardonable country by having his second summit meeting with Kim Jong-Il
in May 2004. But Koizumi could secure both the release of ve children of the
abductees and the Pyongyangs promise of resolving the other abductees matter by
pledging that Japan would pay ransom, in the form of aid, amounting to $10 million
of medical aid and other supplies and a quarter million tons of rice.36
The issue of kidnapped citizens put forth by Japan would create havoc by branding Pyongyang regime as an immoral state in international society. The North is
known to be holding a total of 532 kidnapped citizens against their will from 12
nations, including 485 South Koreans and 16 Japanese.37
In response to the Norths abduction of innocent citizens and nuclear weapon
testing, Japan has implemented the strongest measures against North Korea among
all of the six parties. Japan enacted laws on North Korean human rights, prohibited
North Korean vessels from entering Japanese ports, and played a key role in passing the U.N. Security Council Resolutions sanctioning North Korea. On November
21, 2008, the Liberal Democratic Party (LDP) of Japan compiled a strong draft
bill to deal with North Koreas abductions of Japanese nationals in response to
Pyongyangs reluctance to launch a fresh investigation into the abductees, despite
its promise made in August 2008 to do so. The LDPs 14-point plan calls for a ban
on the entry of all ships that have made stops in North Korea into Japanese ports and
the reinforcement of nancial measures, including the freezing of bank accounts of
all groups related to the North. Japan persistently insists that normalization would
be possible only if the issue of the abducted citizens is resolved. The Japanese bold
position for pressure through connement against North Korea is contrasted with
the outgoing Bush administrations softening position toward Pyongyang.
Meanwhile, Japan has been strengthening its Self Defense Forces (SDF) capabilities after Pyongyangs Taepodong missile launch test in 1998. It has accelerated the
build-up of a missile defense system with the United States, while shifting the SDF
36
Koizumi did not deliver all the promised assistance by cutting off aid deliveries in December
2004 when it became evident that North Korea was backsliding on commitments to resolve the
abductee matter. In 2002, Pyongyang handed over the remains said to be those of Karou Matsuki,
one young male abductee, but testing later showed they were those of an elderly woman.
37 In its 2006 report to the US Congress, the Committee for Rescuing Japanese Citizens states
that aside from Koreans and Japanese, 4 Lebanese, 4 Malaysians, 3 French, 3 Italians, 2 Chinese,
2 Dutch, 1 Thai, 1 Romanian, 1 Singaporean are being held. The confessions of the American
defector Jenkins also verify this truth. See Lee (2008, p. 10).
94
deployment toward the Korean Peninsula area in anticipation of either a potential

attack from North Korea or any possible contingency case.
Japan has a huge stake in the form a unied Korea may take. A unied Koreas
political and economic systems, defense posture, and relations with other countries
will affect Japans national security and the well-being of citizens. Although Japan
has limited direct inuence over the future of Korea, Japan may like to clarify its
national interests in a unied Korea and must take necessary measures to help ensure
that unied Korean political and economic systems maintain long-term bilateral
relations with Japan. Japan may look forward to forming a multilateral security
framework in Northeast Asia to provide a sufcient sense of security for the nations
concerned.
To prepare for any radical regime change in the North, Japan needs to cooperate
closely and strategically with South Korea, China, the United States, and Russia. A
reunied Korea should probably be considered in terms of its would-be system
in the future geopolitical framework of the Northeast Asia, if all nations concerned
do get a winwin outcome by cooperatively coping with the situation in time. As
US-China relation increases due to improving bilateral economic trade, Japan may
look to pursue its own will in the major international arena, while strengthening ties
with both China and South Korea. With Washington starting to embrace Beijing,
the time is propitious for Tokyo to better its relations with its neighbors and work
together, despite a lingering chill because of such factors as Japans wartime behavior in the 1930s and 1940s and territorial issues over the Senkaku islets with China
and the Dokdo (Takeshima) islets with South Korea. China became Japans largest
trading partner in 2007 and Koreas in 2003. On December 13, 2008, Japanese Prime
Minister Taro Aso invited Chinese Premier Wen Jiabao and South Korean President
Lee Myung-Bak to the rst trilateral summit for opening a new era in cooperative relations and for leading to peace and development in the region in Dazaifu,
Fukuoka Prefecture in Japan. They agreed to uphold the ve principles of openness,
transparency, mutual trust, common benets, and respect of diverse cultures, not to
mention agreeing on currency swaps arrangements among them. The three countries
account for 75% of East Asias gross domestic product and about 17% of the worlds
GDP. Japan can play a leading role with the cooperation of China, Korea, and the
United States in any matters of East Asia. A big bang on the Korean Peninsula
would be no exception, for the political and economic systems of a unied Korea
are so important to the interests of Japan, not to speak of its dynamic in affecting
the Japanese scope of activities and inuence in the Northeast Asia.
4.5.7 Russia and the Korean Peninsula

The Soviet Union, like Japan, was interested in controlling the Korean Peninsula
even from the time of Russian czars (tsars) around the 1900s. The expansionist
ambitions of the Russian czar and the Japanese emperor clashed in the RussoJapanese War of 19041905 in which the Japanese defeated the czars army. Japan
4.5
95
occupied the peninsula until its defeat in World War II. The United States, concerned about the casualties resulting from its invasion of the Japanese occupied
land, persuaded the Soviet Union to declare war against Japan. So the Soviet Union
declared war on August 8, 1945, just seven days before the Japanese emperor surrendered, permitting the Russians to enter on August 9 to have a half slice of the
Korean peninsula without ring a shot. The United States did not know when the
war would end and what to do with Korea. As Red Army advanced into the peninsula quickly, the United States hastily proposed its division along the 38th parallel
as the border for temporary share of occupation, and avoiding Soviet takeover of the
entire Korea.
The Soviet Union supported Kim Il-Sung (who had worked for the Soviet ofcials between 1941 and 1945) to establish its puppet communist regime in the
northern half of the peninsula. The Soviet provided huge aids to North Korea during
and after the Korean War with physical reconstruction and army-building. Yet with
the Sino-Soviet split in the early 1960s and with the dissolution of the Soviet Union
system in 1990, aids from China began to increasingly surpass Russian assistance,
while the Juche regime tried to maintain equidistance policy from the two giants
within the communist family.
Today, Russias view of the Hermit Kingdom is a bit downcast. Russia has
changed so much while the Juche North is still literally intact in every aspect of
its domestic governance system as well as in international affairs. Russia may in its
heart like to view North Korea as an old friend, but it is no longer an object to love.
For Russia, North Korea can serve as a reminder of its old disciple in the Northeast
Asian region as well as a basis for containing US-Japan inuence. However, South
Korea is economically more important than North Korea to pragmatic Russians.
Unlike China, todays Russia no longer desires that the North Korean political
system remain a socialist state.
If there is political and regime change in the North, Russians are not likely to
be concerned too much if oods of refugees cross the border of the peninsula. But
the probability of close cooperation on the contingency measures between Russia
and China would most likely surpass the intensity of Russia to side with either the
United States or Japan.
The important strategic goal of Russias foreign policy in East Asia is to become
involved in regional economic cooperation, primarily with neighbor countries, in
order to have more opportunities to develop East Siberia and the Russian Far East.
Russia hopes to advance cooperation with China, Japan, North and South Korea,
and ASEAN countries.
Russia should promote its interests strictly and avoid any possible confrontation
or destabilization, especially along its borders, as well as in the Korean Peninsula.
Russia may hope to maintain peace and friendly regime on the Korean Peninsula,
because it still plans to develop one prospective project a trans-Siberia railway
connecting the South and North Korea through Russia to the European Union
countries. A unied Korea would be exceptionally important because this planned
project can connect to Japan and the other Pacic countries in future. To the eyes
of Russians, the Korean Peninsula is important mainly because of its economic and
96
strategic importance rather than Koreas political system. Still, a remaining question
for Russians to consider is whether the Russians can do as much as the Chinese on
the Korean peninsula.
4.6 How Should Koreans Cope with a Big Bang?

No one can predict the day or hour when a big bang would explode on the Korean
Peninsula. But it will come on a day when people do not expect it and at a day most
Koreans are not aware of, just as the Berlin Wall fell unexpectedly in November,
1989. So, Koreans must keep a close watch and be alert. Being prepared with a
contingency plan will be the best way to minimize costs and disasters, not to say
anything about any probable trap put forth by external involvement.
When one of the political systems in the two Koreas collapses,38 the future fate
of the peninsula depends, rst of all, on the choice the Korean people will make. If
the erstwhile divided people reunited under one bond of national pride and integrity,
they could rebuild one unied nation despite many stumbling blocks, impending
obstacles and problems ahead. Otherwise, the Korean ship would soon sink and
fall apart again under the conicting inuences and leverages of alien engagements.
Given the diversity of anticipated alien inuences from China, Japan, the United
States, and Russia, Koreans must be ready to harmoniously utilize them in favor of
building one unied form of nation. To attract new help from the United States in an
emergency case, South Koreans have to seriously review their recent parochial view
against its old friend and benefactor, the United States, as they could not handle
things on their own. Apparently, the emerging anti-American sentiments in South
Korea have affected the relations with its long-standing partner and friend. South
Korea still needs to closely cooperate with the United States, China, Japan, and
Russia over a prolonged period of time or when reunication arrives suddenly and
unexpectedly. If South Korea fails to integrate all aspects of its relationship with
those countries in the course of reunication, the hardship associated with a hard
landing will inevitably occur.
The best option would probably be for Koreans not to unfairly side with any
party or any subgroup of the neighbors and instead proclaimneutrality in international politics. However, a reunied Korean peninsula should only be thought of in
38
I write this vague expression because I am aware of some worries that South Korea would
be increasingly volatile if its internal strains are too great especially when the state is being
undermined internally by ideological and political conicts as well as from the North. The general
move toward confederation (contemplated by Kim Dae-Jung and Kim Jong-Il in June 2000), which
rides on national trends currently in the South, increasingly favorable perceptions of North Korea,
growing antagonism against the United States, a push to dismantle internal security mechanisms,
and frequent workers strikes and sabotages, to name a few, could lead to North Koreas triumph
over the South Korean state in relatively short order. (see Chang 2006, p. 110). But I rule out such
hypothetical thesis and write this book assuming that the cornered Juche state in the North will
soon collapse.
Appendix
97
terms of a work in progress rather than a well-dened endpoint. To deal with

mounting loads of work ahead, the nation would need a strong leadership (instead
of democratic way of government) for the initial stage of time so as to effectively
achieve a soft-landing after a big bang.
In the initial phase, Koreans should invite well-coordinated cooperation from
all its concerned neighbors without allowing unbalanced leverage in their participation to cope with many subsequent security problems involving possible riots,
weapon gangster activity, and oods of refugees, and so forth. To nance the cost of
reunication, Koreans must also seek a wide variety of international cooperation.
Even now, Koreans should positively prepare and take as early as possible an initiative to organize a multinational body that can supervise or help Korea effectively
tackle any unplanned and unforeseen spontaneous developments in the initial stage
of reunication process. Taking account of many lessons from German reunication
process would also help Koreans deal with an unexpected occurrence of a big bang
on the peninsula.
Appendix
Joint Statement from the Third Session of the Fifth Round of the Six-Party Talks
February 13, 2007
The Third Session of the Fifth Round of the Six-Party Talks was held in Beijing
among the Peoples Republic of China (PRC), the Democratic Peoples Republic of
Korea (DPRK), Japan, the Republic of Korea (ROK), the Russian Federation and
the United States of America (USA) from 8 to 13 February 2007.
Mr. Wu Dawei, Vice Minister of Foreign Affairs of the PRC, Mr. Kim Gye Gwan,
Vice Minister of Foreign Affairs of the DPRK, Mr. Kenichiro Sasae, DirectorGeneral for Asian and Oceanian Affairs, Ministry of Foreign Affairs of Japan,
Mr. Chun Young-Woo, Special Representative for Korean Peninsula Peace and
Security Affairs of the ROK Ministry of Foreign Affairs and Trade, Mr. Alexander
Losyukov, Deputy Minister of Foreign Affairs of the Russian Federation, and
Mr. Christopher Hill, Assistant Secretary of East Asian and Pacic Affairs of
the Department of State of the United States attended the talks as heads of their
respective delegations. Mr. Wu Dawei of the PRC chaired the talks.
I. The Parties held serious and productive discussions on the actions each party
will take in the initial phase for the implementation of the Joint Statement
of 19 September 2005. The Parties reafrmed their common goal and will to
achieve early denuclearization of the Korean Peninsula in a peaceful manner
and reiterated that they would earnestly fulll their commitments in the Joint
Statement. The Parties agreed to take coordinated steps to implement the Joint
Statement in a phased manner in line with the principle of action for action.
II. The Parties agreed to take the following actions in parallel in the initial phase:
98
(1) The DPRK will shut down and seal for the purpose of eventual abandonment of the Yongbyon nuclear facility, including the reprocessing facility
and invite back IAEA personnel to conduct all necessary monitoring and
verication as agreed between IAEA and the DPRK.
(2) The DPRK will discuss with other parties a list of all its nuclear programs
as described in the Joint Statement, including plutonium extracted from
used fuel rods that would be abandoned pursuant to the Joint Statement.
(3) The DPRK and the US will start bilateral talks aimed at resolving pending bilateral issues and moving toward full diplomatic relations. The US
will begin the process of removing the designation of the DPRK as a
state-sponsor of terrorism and advance the process of terminating the
application of the Trading with the Enemy Act with respect to the DPRK.
(4) The DPRK and Japan will start bilateral talks aimed at taking steps to normalize their relations in accordance with the Pyongyang Declaration on
the basis of the settlement of unfortunate past and the outstanding issues
of concern.
(5) Recalling Sections 1 and 3 of the Joint Statement of 19 September 2005,
the Parties agreed to cooperate in economic, energy and humanitarian
assistance to the DPRK, in this regard, the Parties agreed to the provision of emergency energy assistance to the DPRK in the initial phase. The
initial shipment of emergency energy assistance equivalent to 50,000 tons
of heavy fuel oil (HFO) will commence within next 60 days.
The Parties agreed that the above-mentioned initial actions will be implemented within next 60 days and that they will take coordinated steps toward
this goal.
III. The Parties agreed on the establishment of the following Working Groups
(WG) in order to carry out the initial actions and for the purpose of full
implementation of the Joint Statement.
1.
2.
3.
4.
5.
Denuclearization of the Korean Peninsula.

Normalization of DPRK-US relations.
Normalization of DPRKJapan relations.
Economy and Energy Cooperation.
Northeast Asia Peace and Security Mechanism.
The WGs will discuss and formulate specic plans for the implementation of the Joint Statement in their respective areas. The WGs shall report
to the Six-Party Heads of Delegation Meeting on the progress in other WGs.
Plans made by the ve WGs will be implemented as a whole in a coordinated
manner.
The Parties agreed that all WGs will meet within next 30 days.
IV. During the period of the Initial Actions phase and the next phase which
includes provision by the DPRK of a complete declaration of all nuclear
Appendix
99
programs and disablement of all existing nuclear facilities, including graphitemoderated reactors and reprocessing plant economics, energy, and humanitarian assistance up to the equivalent of 1 million tons of heavy fuel oil,
including the initial shipment equivalent to 50,000 tons of HFO, will be
provided to the DPRK.
The detailed modalities of the said assistance will be determined through
Consultations and appropriate assessments in the Working Group on
Economic and Energy Cooperation.
V. Once the initial actions are implemented, the Six Parties will promptly hold
a Ministerial meeting to conrm implementation of the Joint Statement and
explore.
Ways and means for promoting security cooperation in Northeast Asia.
VI. The Parties reafrmed that they will take positive steps to increase mutual
trust, and will make joint efforts for lasting peace and stability in Northeast
Asia.
The directly related parties will negotiate a permanent peace regime on the
Korean Peninsula at an appropriate separate forum.
VII. The Parties agreed to hold the Six-Party Talks on 19 March 2007 to hear
reports of WGs and discuss on actions for the next phase.
Chapter 5
New World Environment Surrounding Korea
There is a time for everything, and a season for every activity

under heaven.
a time to embrace and a time to refrain,
a time to keep and a time to throw away,
a time to tear and a time to mend,
a time to be silent and a time to speak,
a time to love and a time to hate,
a time to war and a time for peace.
Ecclesiastes 3:1 and 3:53:8.
5.1 Introduction: Misty and Rugged Road to Korean

Reunification
The Year of the Cow, 2009, is signaling the imminence of the likely changes in the
world affairs while people all over the globe are preoccupied with the continuing
hardships of the economic turmoil. Amid this, 47-year-old Barack Hussein Obama
took his place as the 44th president of the United States on January 20, 2009, dening the problems America now faces in unsparing terms and exhorting its people to
respond by taking greater responsibility for themselves, the country, and the world.
The essence of the inaugural address of the worlds most powerful president was
a sure rejection of the policies of the former administration and afrmation of the
values of his immediate tolerance and sacrice for the common good. Standing
on the west front of the Capitol as the rst black man sworn in as US president,
Mr. Obama called his fellow citizens to change and to respond to the demands
of a new age by emphasizing All this we can do. And all this we will do.
Surely, the new US presidents inauguration foretells the forthcoming change of
world policy tracks. The question is how the Obama administration will deviate
from its predecessor on the Korean Peninsula issues. Depending on new deployment and engagement of US foreign policy toward Korea as well as East Asia at
large, the Korean reunication scenario would come in a different type and with
a very improbable expectation, if not a distant future one. Because the rst priority is domestic business for President Obama, South Korea, as well as the North

101
102
5 New World Environment Surrounding Korea
Korean nuclear issue, is likely to draw far less attention from the new administration as compared with the Bush administration. East Asia is as well less likely
to draw attention from Mr. Obama given the current US preoccupation with Iraq,
Afghanistan, and Pakistan, and the water boarding (a form of controlled suffocation
that mimics drowning) ruckus at the notorious Guantanamo Bay detention facility
as well as the controversy over abortion funding. This blip in the US policy transition appears exactly what North Korean leadership has patiently waited for by
refusing to its denuclearization verication for several years in the face of George
W. Bushs demonizing the Norths leadership. Now North Korea may expect the
Obama administration to consider diplomatic normalization with it. North Korea
will be the winner if the option of diplomatic normalization rst, then we will talk
nuclear issues with you is agreed upon with the Obama administration. This deal
would be a complete reversal from Bushs policy.
Various recent reports from North Korea show that the North Korean regime
welcomes the new Obama administration while it still warns its Juche-minded intelligentsia not to loose watch on American NGO activities that seek capitalistic
exploitation and invasion under disguised slogans of human-rights, and promotion of democracy into other sovereign nations like North Korea.1 The North
cautions its people against the dangers of the so-called orange revolution and rose
revolution, which would bring a birth of pro-American regime in any sovereign
state.
Meanwhile, the Norths Dear Leader Kim Jong-Il, who had reportedly suffered
a stroke in August 2008, met Mr. Wang Jiarui, the head of the Chinese Communist
Partys International Department, in Pyongyang on January 23, 2009.2 This surprise,
yet timely, meeting with the Chinese visitor was probably intended to offer evidence
not only that the 66-year-old Kim was still alive, but also that he was still fairly well
enough to run his dynasty. Kim may continuously aim to use China as a window to
show the outside world that it is willing to peacefully coexist with all sides, while
still maintaining all tactical and different tracts whenever and whichever is needed
for its own survival.
If the Obama administration would like to expedite rapprochement with
Pyongyang and if North Korea is willing to improve its relations with outside
world with the gradual adoption of glasnost and perestroika approaches, the North
regime could likely continue to survive with much better living conditions for
more extended periods of time to come. Nevertheless, the regime uncertainty and
questions about succession will inevitably continue in the isolated Kingdom as the
common people begin to awaken to the values of social freedom and free will from
the outside world. Of course, it depends not only upon the wisdom as well as political absorption capability of the regime leadership in coping with the new wave
of all changes that accompany reform and openness, but also upon the tolerance
of the people in waiting for steady and stable change. The Chinese model, that
1 Rodong
Shinmun, Not-to-forget lesson, January 25, 2009.

six-member delegation led by Wang arrived in Pyongyang on January 21 to mark the 60th
anniversary of bilateral relations that are steadily growing stronger.
2A
5.1
Introduction: Misty and Rugged Road to Korean Reunication
103
is, a gradual and controlled glasnost and perestroika, would likely t best for the
case, although the social landscapes (national spirits and traits) of (north) Koreans
are not similar to those of the Chinese in many ways. Would North Korea change
successfully if its leadership would follow the Deng Xiaopings program of economic reform and opening? We will never know, nor will the North leadership.
But to his credit, Deng Xiaoping and his followers have made China become an
economy of unprecedented and stable dynamism. That decision taken in 1978 forever changed the direction of Chinese society with both rapid economic growth and
development, not to mention the political stability has seemingly sustained well.
In 20 years since China embraced reform, China is now the worlds third-largest
economy with aggregate GDP of 25.7 trillion yuan ($3.5 trillion). Reform and economic openings have lifted more than 300 million Chinese out of poverty, although
the unevenness of wealth in China has grown greater across regions. Chinese leadership whose legitimacy rests on its ability to deliver increasing prosperity to its
citizens focuses now on the balanced economic development so as to reduce the
vast disparities of income among regions. The reform and economic openings in
China have been so far well managed and documented with increased autonomy
to enterprises and rapid emergence of both private production and free markets
along with expanding political freedom in the society. This, of course, does not
deny that the meaning of Chinas rise underestimates the reality that Chinese are
still not so rich while China as a country is rich. Nevertheless, even if the world
is now suffering from deep economic recession following the global nancial turmoil of 2008, there are many Chinese people coming to the global tour business and
markets.
Why cant the North Koreans dare to challenge a new paradigm shift, for example, like the Chinese reform model when it is caught between a live or die
situation? The North self-imposed isolationist leaders are afraid that the masses, if
awakened, will be tempted to overthrow them as they know that they have deceived
the masses for more than a half century. If it adopts the Chinese model without
taking full precaution of sustaining social stability, the nepotism-centered regimes
erosion may happen very quickly.
Alternatively, can the North regime sustain forever with its enhancing economy
when it facilitates some good relations with both new US administration and other
neighboring countries? In other words, will the two Koreas remain intact and politically independent and divided as long as they satisfy the eyes of all surrounding
nations that have stakes on the peninsula? The answer to this will largely depend
on choices of Korean people (North and South) in favor of unication as well
as political compromise and the patriotic decisions of national leaders in the two
Koreas.
However, the road to this rapprochement approach appears to be much longer and
remote in distance, although the approach may not work as gradual and peaceful
as compared to an abrupt erosion scenario of Pyongyang regime. Also, the two
existing systems may continue to frustrate all Korean dreams for one Korea. In all
considerations, the fate of future Korea is not at all independent from the stakes and
policies of those countries that closely follow the geographical and political weights
of the Korean Peninsula.
104
In terms of time cost of reunication, the time-consuming rapprochement model

would be much more expensive than the quicker implosion model of North Korea
followed by national absorption taken by South Korea. Once the US administration
establishes diplomatic normalization with North Korea as a more exible approach,
North Korea will sooner or later be lured to change in exchange for more economic
assistance and political cooperation from the United States and international organizations. Will the Obama administration extend an olive branch to North Korea?
Depending on North Koreas responses, the Obama government will be willing to
normalize bilateral relations, replace the peninsulas long-standing armistice agreements with a peace treaty, and assist in meeting the energy and other economic
needs of the North Korean people. The outcome most likely would be to either perpetuate the division or frustrate the Korean dream for early reunication. It would
then take a dozen or more decades for the two Koreas to be united into one nation, if
not remain permanently divided. The longer the delay of the reunication, the larger
the cost would be, even though some efforts will be made to narrow the gaps of the
living conditions between the two states. The social cost of delayed reunication (or
continued division) would reach astronomical gures in terms of the ever-widening
disparity in all aspects of life, and social perceptions in the two ideologically divided
systems, not to speak of the per capita average income gap. Until the country integrates into one common political and economic entity, lingering conicts, struggles,
and agonies would remain with a destroyed and unnished dream in the minds
of all Korean people. Who shall or can pay for the psychological and social costs
and sacrices imposed on Koreans due to delayed unication? Perhaps (North and
South) Koreas political leaders and hard-headed national ideologists must assume
the responsibility rst of all, or then the foreign stake-holders should also be considered somewhat responsible. Possibly imported alien political systems and the way
in which Koreans view these systems do matter also. There still may be many other
factors in the politics among concerned parties that are either preventing Korean unication or constituting the misty and rugged road to the unication process, despite
these parties professed non-intervention principles.
Of course, this does not intend to assert that decisive military action would be
the most preferable and quick option ahead of Koreans and also the least troublesome shortcut to the unication. But from the standpoint of a sure and least difcult
way to unication, a military option (excluding large war casualties) might be considered as it would make possible the unconditional takeover by the South, which
will be assumed to win the war. But military action can work, if and only if, other
neighboring powers like China would stay away. This is the least likelihood.
The North regimes legitimacy is still on the brink, and its deep-rooted problems
would not be easily resolved in the absence of both Washingtons and Beijings
tutelage. The South Korean authority must look at all possible cost-efcient ways in
controlling North Korea in the event that the North implodes.
For this, South Koreas diplomacy is so important in assuring its neighbors that
a unied Korea will remain as a land of peace, cooperation and friendship in the
region. A unied Korea must secure international trust and seek comprehensive
promotion of mutually benecial strategic relations, particularly with China and
5.2
The DPRK and Obama Administration
105
Japan. If China, Japan, and Korea cooperate for a peaceful and jointly cooperative coexistence in a better and friendlier East Asian regional environment, Korean
unication would proceed much more easily and peacefully.
5.2 The DPRK and Obama Administration

North Korea might have given a sigh of relief to see off the conservative and hardheaded Bush administration and now has hopeful expectations toward the liberal
new Barack Obama administration. Making use of visiting Chinese Communist
Party senior ofcial Wang Jiaruis meeting with its state leader, North Korea showed
evidence that Kim Jong-Il is still healthy enough to work with foreign visitors as
well as with Obamas exible administration. Pyongyang is believed to be preparing
to open negotiations with the new administration. Perhaps, Kim Jong-Il is seriously
considering if the Obama administration is less concerned or less obsessed than its
predecessors with Pyongyangs ultimate goal of holding nuclear weapons.
Under Presidents Bill Clinton and George W. Bush, Washington insisted that
Pyongyang give up its pursuit of nuclear weapons before the United States to agree
to diplomatic ties. Any clear message for a new foreign policy toward North Korea
has yet to come from the Obama administration; except that Secretary of State
Hillary Clinton indicated in her senate conrmation in January 2009 that diplomatic
relations would not be established with North Korea until North Korea ended serious human rights abuses and a clandestine uranium-enrichment program. Hillary
Clinton also said that the Six-Party talks would be useful if an agreement North
Korea signed with China, Japan, Russia, South Korea, and the United States in
2005 would be maintained. She added room to hold US-DPRK bilateral talks under
the Six-Party talk framework, if necessary. On February 13, 2009, Secretary of
State, Clinton, offered North Korea a peace treaty, normal ties, and aid if the North
eliminates its nuclear arms program. She also stressed her desire to work more cooperatively with China. The US offer to North Korea and China arises some concern
about the US reliability to Japan and South Korea. The decision to take North Korea
off the list of state sponsors of terrorism by the Bush administration already antagonized many Japanese and South Koreans, given that the promised quid pro quo
a denuclearization verication regime was never achieved. The likely twists in
US policy do not reveal if Washington is seriously questioning whether Pyongyang
might have bought sufcient time to obtain nuclear weapons while dragging out the
Six-Party talks with the outgoing Bush government. Such an unclear line of communication from Washington is adding unreliability and a sense of distrust of many
formerly pro-American people in Korea and Japan.
North Korea has recently been cranking up its bellicose rhetoric, declaring that it
would maintain its status as a nuclear weapons state, and smash South Koreas
government in an all-out confrontation for tying aid to disarmament.3 A little into
3 Richardson
(2009).
106
the new year, 2009, North Korea threatened several times to scrap all political and
military agreements with South Korea, accusing Seoul of pushing relations to the
brink of war by negating all the agreements.
This kind of childish actions has often been used whenever North Korea
attempted new plots either to raise the stakes or to improve Pyongyangs bargaining
leverage as it prepared to open negotiations with South Korea or the United States.
The North often raises its hostile rhetoric to get the attention of South Korea and the
United States, whenever it is not sure that its saber-rattling has not drawn a major
reaction. It is likely to attempt further provocation to ensure that it remains a diplomatic priority for the new Obama administration and that South Korea renews its
pledge for aid of food and other goods.
Nevertheless, North Korea will never likely abandon its position to hold onto the
status of a nuclear weapons state, since it has already secured both its nuclear
bombs and weapon technology. If North Korea keeps its atomic weapons even
after ties are established with Washington, the Six-Party talks itself or the bilateral talks between Pyongyang and Washington would no longer relate to the North
Koreas denuclearization issue. North Korea announced on January 17, 2009, that
normal relations with the United States would not be enough to persuade it to give
up its nuclear weapons. This statement implies that the Norths solid status as
nuclear weapons state would be maintained unless South Korea is removed from
the protection of the US nuclear umbrella. Furthermore, the North insists on holding simultaneous nuclear disarmament talks among all nuclear states, including
itself.
Dealing with Pyongyangs harder line will be the Obama administrations rst
Asian homework. To accept Pyongyang into the nuclear weapons state family or not is the question for President Barack Obama to answer. The new US
government still needs to deal with the North Korean nuclear issue with some
urgency, although the Norths rhetoric often sounds foolish. Domestic issues will
be the rst order of business for the new administration. However, the North
Korean nuclear issue should not be left idle, as the nuclear backdrop to this
political psycho-drama is still menacing to both the United States and other countries. President Obama must learn from past history that Kim Jong-Ils regime
is never easy to deal with at all. Past mistakes that the United States has made
with regard to North Korea can be still the best guiding post for the new administration despite major differences in the new presidents approach vis--vis past
policies.
Caught in the middle, the Obama administration is likely to need a more active
cooperation with China to nd ways to deal with the saber-rattling North Korean
regime. The United States would seek a close cooperation with Beijing on Northeast
Asian policy, particularly to sway the troublesome North Korea. But bilateral relations are apt to change depending on new developments of events involving the
relevant parties. Since the beginning of 2009, China is surpassing Japan as the US
governments largest creditor. But strains between the two economic powerhouses
will emerge any time, growing with any possible changes in their mutual perceptions of one another. There could always arise a dramatic shift in how one party
manages its most pivotal relationship with the other.
5.2
The DPRK and Obama Administration
107
So it is very hard to draw any predictable path of the future linking any two
countries in the rapidly evolving economic and political circumstances. For example, at a global leaders forum in Davos, Switzerland, on January 28, 2009, Chinese
Premier Wen Jiabao blamed Chinas economic woes on US-led western nancial
institutions, suggesting a lack of self-discipline and blind pursuit of prot. US
Vice President Joe Biden and Treasury Secretary Timothy Geithner red back at
Beijing for manipulating its currency. Whats more, Geithner further claimed that
the Chinese manipulation was the most important cause of the nancial crisis.
Chinas cheap currency led it to run a massive trade surplus. The earnings from
that surplus poured into the United States. The result was the mortgage bubble. The
US mortgage bubble reached its extreme in 20052007, when China was ooding
the world with cheap capital from its trade surplus earnings. The United States said
that when faced with a deluge of cheap money, no regulatory administrator could be
expected to prevent bubbles.
Whoever is right or wrong does not matter. One party may like to hold the
other party culpable for any related risks and problems on the international theater whenever necessary. This is a sort of realism in the international politics
among competing powers, revealing that any bilateral relations among countries
are capricious depending on nerve-racking shifts at any time. This is to say that the
WashingtonBeijing relationship could be cooperative one day and combative the
next day even with regard to the Korean Peninsula. Nevertheless, in the long run,
Washington may continuously tilt toward China to delegate regional problems; this
tendency had already begun during Bushs second term and is likely to increase in
the new administration.
It is too early to conclude here for sure if the Obama administration will soon
embrace North Korea. But it is very likely that the Obama administration will
eventually seek rapprochement with Pyongyang if North Korea is willing to make
some international concessions in nuclear non-proliferation measure, while the
United States would not be too obsessed with demanding the Norths dismantling
of existing nuclear weapons.
If the bilateral relations between Washington and Pyongyang improve any time
from now, it can, in turn, cause a nervous reaction in both Japan and South Korea,
which will still face serious threats from the North and new challenges posed by the
cold reality of a waning alliance with the United States. The East Asian structure of
pivotal alliance and security will be realigned, and there no longer exists a traditionally shared perception or concept of the erstwhile enemy or friend among former
allies and foes.
The traditional friend and enemy equation as well as the power equation in
the East Asian region will change depending on the choices the new Obama administration will make with regard to North Korea and China. Although Washington
would seek prioritizing ties with China and later with North Korea, the United
States will not likely allow weakening the trilateral Japan-US-South Korea relations to weaken so soon. Nevertheless, as the United States moves closer to China
as its chief Asian ally on political and economic fronts while embracing Pyongyang
with a new diplomatic relationship, this shall surely be a cause for growing doubts
in the hearts of both South Koreans and Japanese about US reliability in the region.
108
If North Korea obtains international recognition as a nuclear weapon state, South

Korea and Japan will need to develop their own grand strategy that can assure their
security and peace, either jointly or individually. This will bring forth a competitive
drive for deadly weapons in East Asia. Such a situation is not wanted above all by
China among others. To prevent such a domino dissemination of nuclear weapons
in East Asia, China should now play a solid role and make North Korea abandon its
plans to hold such deadly weapons. The United States needs Chinese hands to deal
with many Northeast Asian problems as well.
Sooner or later, however, the Obama administration may start to draw stark policy differences with its predecessor on North Korea. As predicted above, President
Obama will use diplomatic normalization with Pyongyang as a more exible bargaining card. The administration may well consider offering a basic treaty on
normalization with the North in return either for a complete elimination of nuclear
weapon programs or simply accepting it as a member state with nuclear weapons
under some conditionality. This may contain the promise that the North agrees
not to export its nuclear weapons and related technology to other rogue countries.
There will be, however, no guarantee that such promise will be genuinely observed.
Certainly the need for caution is still strong. North Korea remains unpredictable and
potentially dangerous. But the US budgetary burdens to increase military confrontations beyond the status quo in Northeast Asia will require a more dynamic policy
one that is more forward looking and that seeks to help shape the inevitable changes
in the region rather than resist them. The United States is at a crossroad to rethink
what it can or cannot do in Asia.
5.3 Will Kim Jong-Ils End Differ from Ceausescus?

The Obama administration will examine what the US interests in the region are,
and its relevant leadership role in fashioning a strategy to meet shared interests.
Above all, it will likely seek to deviate from the Bush administration by accommodating the status quo of ongoing nuclear projects if they are to be used for
the Norths energy production, not for further nuclear weapons proliferation. In
order to secure an acceptable verication protocol involving sampling, forensic
activities, Obama indicated during his presidential campaign period that his administration would pursue aggressive diplomacy, instead of no talks unless you
eliminate rst, which failed under Bush. This tells us that the Obama government
will put its priority on direct and aggressive talk diplomacy with Pyongyang.
Meanwhile, to the extent possible, it will still be the United States responsibility
to assure South Korea and Japan that the current environment for security will be
maintained.
For a while, the Asian-Pacic region will still remain vital to US security and
well-being. But all success of Obamass new policy paradigm for the region will
greatly depend on how tactfully Pyongyang will respond to reduce the lingering
tensions.
5.3
Will Kim Jong-Ils End Differ from Ceausescus?
109
At this important juncture, one useful tip for the new chief executive of the United
States is the lesson that communists will never surrender all their means and ways
in order to attain their ultimate objectives.
From the perspective of the worst-case scenario, North Koreas leadership might
still renew its brinkmanship bargaining any time as a way for survival, if the Obama
administration delays its positive and aggressive diplomatic actions. The Juche
Kingdom in the year of the cow (2009) keeps threatening new long-range missile
tests, renewal of nuclear showdown, and a satellite launching scheme.
Will such childish threatening and brinkmanship trigger a serious sense of fear
and crisis in the numb South Koreans and the world? Will Pyongyangs return to
brinkmanship as a result of its food and energy shortages and the worst human
rights suppression likely lead to any possible anarchic process involving the total
collapse of power structure in North Korea? In other words, can a sudden, disorderly
and bloody collapse similar to Romanias Nicolae Ceausescu regime downfall in
December 1989 be a possible end-game in North Korea?
Current life in North Korea under Kim Jong-Il is much worse than in Romania
under Ceausescu in the late 1980s. The December 1989 popular revolution in
Romania brought the swift downfall of the iron st as well as the demise of communist dictatorship. What ultimately ensured the success of the civilian movement and
avoided a colossal bloodbath was the wise decision made by Romanian military to
not follow orders.
On December 1622, 1989, after dozens of protesters were killed by the army, the
minister of defense, General Vasile Milea, died of a gunshot wound under suspicious
circumstances. Nicolae Ceausescu promptly appointed General Victor Stanculescu
as new minister of defense, but the general refused to carry out an order issued
by Ceausescu, his direct superior as commander-in-chief of the military, to step up
the armed repression, and ordered the troops back to their barracks instead. The
Romanian anti-communist revolution would certainly have failed if the military had
followed Ceausescus orders. The then- Romanian military de facto coup shall be a
lesson for North Korea if a widespread anti-communist unrest would result in Kims
collapse.
Likewise, in North Korea, if a popular demonstration breaks out, the military
may want to ensure the demise of Kim Jong-Ils regime. However, the possibility
of the revolution seems remote. However, just as the rise and fall of a nation is in
the hands of the Almighty God, so will the longevity of any individual and any
nation depend not on human actions but on Gods will. When North Korea faces
its downfall, the very negative aftermath that may be created by the replacement of
one type of dictatorship with another in the North must be prevented at all costs.
This can only be possible if the North Korean military, if not completely dissolved
along with the would-be collapse of political leadership, is to closely side with South
Korea instead of China or other aliens. This may sound very unlikely, but nothing
is impossible, as was demonstrated during the German reunication.
At the time of this writing, North Korea declared its past military agreements
with South Korea to be effectively dead. On January 30, 2009, the Committee for
the Peaceful Reunication of Korea, the North Korean agency in charge of relations
110
with South Korea, accused South Korean President Lee Myung-Bak of not holding
to the Souths end of the agreements, thereby rendering them no longer valid in
their entirety. The accords the North has declared invalid include a 1991 agreement
on reconciliation and non-aggression, which incorporated the promise that it would
honor the western (yellow) sea border claimed by South Korea. The North also
repudiated the 1953 armistice that ended the Korean War, calling it a useless piece
of paper. The committee said, Relations between the north and the south have
worsened to the point where there is no way or hope of correcting them. They
have reached the extreme point where the clash of re against re, steel against
steel, has become inevitable. Despite all such antagonistic rhetoric it is unlikely
that there will be a new bloody war ahead of the two Koreas. Just as is the case
between any two well-known persons, a sort of childish expression of an extreme
hatred by one side could often be interpreted as an indirect sign of extreme call for
help. The Norths strident voice is an attempt to gain attention from its ever-cooler
South Korean brethren, while the new Obama administration delays its approach
to the North. Nevertheless, the two sides must seek to explore both reciprocal
cooperation and real heart-to-heart talks instead of a catastrophic clash if their
shared common objective is truly a peaceful national reunication. Their joint
priority must target not only overcoming all possible external interference factors
but also avoiding any ideological clefts.
The national goal must be that Koreans ultimately unite and put in place a system
that is liberal and democratic under one national ag. The road to such a transition
and transformation toward one unied state may sound not-so-complex, but in
fact it would be a very long, uncertain, misty and rugged journey ahead for all
Koreans.
The rst important question is how the North Korean regime will use its nuclear
weapon programs to trade with the new US administration, which is yet to set up
its new policy toward North Korea. The second question is whether the provocative
remnant of an ideological cul-de-sac in the North will continue to survive on the
Korean Peninsula.
5.4 Will Korean Unification Be Welcome?

Before Washington begins a new dialogue with Pyongyang, China may need to
preemptively cut in between, if necessary. China may choose to play a soft
balancing role to lure its North Korean ally to abandon nuclear weapons in
exchange of more aggressive baits and comforts, while proposing a regional security
cooperation; say, a multilateral China-Japan-US-Russia commission for the Korean
Peninsula.
China can no longer neglect its role by saying to the world that North Korea
does not listen to China, while Beijing has in fact supported Pyongyang without
any expectations of reciprocity whether or not the North expresses gratitude. Since
the earliest days of Kim Il-Sung, Pyongyang has been famous for going its own
5.4
Will Korean Unication Be Welcome?
111
way. Beijing leaders, therefore, have been telling the outside world, and especially
anxious Americans, that they cannot control Kims wily son.4
But the Chinese are by far North Koreas largest source of foreign food and
energy, which helps sustain the North Korean Peoples Army. Kim Jong-Il is still
ruling today thanks to Chinese material and diplomatic support. If China really
wants, it can enable the blinking Kims regime neither bark nor bite. The starving
North Korea is desperately relying on China to supply food and goods that are in
short supply. In January 2009, North Korea began setting up a new free trade zone
on Wi-Hwa Island in the Yalu River (which separates North Korea and China) to
bring food and other goods from China, thus strengthening border trade with its
neighbor.
China appears to have leverage in persuading Pyongyang to act in its favor until
a fundamental shift in the DPRK-US relations occurs. In fact, Beijing has the power
to bring the North leadership in line as China can force Kim Jong-Il to act when it
sees the need. However, if China does not act soon, it will lose both time and its
leverage if friendlier relations are established between North Korea and the United
States. In fact, North Korea may question why it cannot have a nuclear arsenal when
China is still accelerating the building of its own nuclear and conventional combat
arms.5
Likewise, the South Korea-US alliance will also face its own challenges as
the shared perception of a common enemy and threat would be dissolved once a
DPRK-US relation is established. The nation-to-nation relation equation is subject to remodeling depending on the new developments in the Northeast Asia. As
Obamass new foreign policy on North Korea in particular begins to surface, the
regional political environment would be reshaped in due time.
It is a time that China as a mature nation must change its historical perceptions of an old adversary global order in favor of a better cooperative and friendly
global order. In other words, the huge mainland China should now free itself from
narrow-minded ultra-nationalism, and instead of being overly obsessed with trajectories of neighboring small countries, it must behave as an adult and mature state
in both regional and global playgrounds. This is to say that North Korean territory
(likewise the whole Korean Peninsula) can no longer be regarded as a buffer zone
to protect mainland China from extramural invasion by any other Pacic forces. No
country will dare invade China; in fact, no country today, but for some exceptional
cases like the century-old IsraeliPalestinian conict as well as the 2008 Russian
Georgian clash, would cast a covetous eye on anothers territory. At the early stage
of internal turmoil resulting from the would-be regime collapse, the Chinese military might intervene to maintain public order and control the ow of refugees. But
this engagement must be a very temporal one because China will gain nothing but
4 Chang
(2006, p. 134).
Zhiyuan, the commander of the Second Artillery Corps of the Chinese Army said in his
coauthored article for the authoritative journal Qiushi published on February 1, 2009 that we will
develop a nuclear and conventional missile force corresponding to the needs of winning a war in
conditions changed by modern information and technology.
5 Jing
112
international criticism by permanently stationing its forces on the Korean Peninsula.

Wise Chinese leadership had already set up a model example for Vietnam after its
reunication in 1975, as that nation was reunited in the form of a socialistic market
system similar to the Chinese one.
It may not be a close analogy, but Pyongyang once again on January 25, 2009,
threatened a posture of all-out confrontation against South Korea. Perhaps the
North Korean reasoning behind its fresh threats toward South Korea would be that
the United States would push ahead with the stalled Six Party talks or bilateral talks
with it, as mentioned earlier. Blufng is often North Koreas well-exposed tactic,
but ironically it does just the opposite when it needs to send off some message to
the other party. This time the statement seemingly raised against South Korea was
in fact directed toward the new President Obama. But South Korea as well as the
United States does not regard North Koreas blufng as real serious threats. In this
sense, South Korea and the United States have grown quite mature in dealing with
North Korea because the inner cards of North Korean leadership and its inferiority
complex are no longer hidden ones.6
Likewise, China should not regard the United States and Japan as potential or
actual threats toward the mainland from across the Korean Peninsula, even though
the two Koreas will become one state. As long as China does not intend to hold
sway over the Korean Peninsula, the United States and Japan would also be happy
to shy away by helping neutrality in the Korean Peninsula. China may propose
its initiatives for a China-US-Japan-Russia commission to watch over the Korean
Peninsula as a positive step. It could also use the Korean Peninsula as a bridge in
which to mitigate the tense rivalry between China and Japan as well as a potential
military conict between China and the United States.
When the United States establishes diplomatic normalization with North Korea,
future Korean unication would track on gradualism instead of the big bang explosion model. Given such scenario, how to approach Koreas reunication, and at
what speed, and through what model will be matters for much debate. This could
reignite an entire spectrum of discussions and debates of past decades on reunication issues, including the renewal as well as re-evaluation of Kim Dae-Jungs
Sunshine Policy and confederation approach as well as preemptive strike model,
and so on.
With regard to the rapprochement approach, both positive and negative aspects of
German unication could be reexive in such discussion, while the European Union
6 On March 6, 2009, the Norths Committee for the Peaceful Reunication of the Fatherland issued
a threat against South Korean civilian planes that y through the Norths airspace, criticizing the
scheduled annual US-South Korea joint military drill that began on March 9 and ended on March
20. On March 9, Pyongyang cut off the only remaining military hot line between the two Koreas
and made a complete shutdown of all trafc across the border to protest the exercises being held in
the South at a time of heightened tensions. But the North allowed South Koreans back across the
border for jobs at Gaesung industrial complex on Tuesday, a day after severing all communication.
Pyongyang said that the military hot line would remain suspended throughout the duration of the
joint US-South Korean military drills. The North also warned against interference with its plan to
launch a satellite and it would regard any intercept as a provocation that could trigger war.
5.4
113
(EU) integration approach would provide some useful lessons of how to incorporate
century-old enemies into an economic union that built friendship through institutionalized interdependence and trust. But it should be pointed out here that the
Korean reunication issue will not be like the EU integration in its very nature and
will thus involve very unique underlying conditions in nature (rather than hypothetically copy-after any) simply beyond institutional architecture in that the two Koreas
have a common nationality, homogeneous ethnicity, and family backgrounds, which
have been articially divided by alien conicting ideologies and political forces.
The proposed multilateral commission may function to secure a peaceful and
continuously unied neutral state on the Korean Peninsula such like Switzerland.
Korea was wrongly divided by United States and the Soviet Union after World
War II. North Korea will now oppose any intervention of multilateral powers in
the Korean affairs.
However, deep inter-Korean dialogue, if attempted, would bring, and it is hoped
to bring, to the understanding that a unied Korea would be far feasible and better
off only when the two Koreas accept a form of one neutral state under the proposed
common security framework. If such a smooth environment could be arranged, the
reunication process would be the least costly and best one in terms of Pareto
optimality condition in that no one neighbor is better off without making any
others worse off.
Unless a common concession is made among the neighboring powers, such a
proposal as the Confederation Approach for national reunication contemplated in
June 2000 by both Kim Jong-Il and Kim Dae-Jung is far out of reach in reality. The
Commission Approach for a neutral Korea sounds more possible, but if the neighboring countries disagree with one another on the reunication issue, this approach
would also be infertile and infelicitous. Those approaches must presuppose full
agreements among stake neighbors.
The remaining options are either to unite by military action, or to take over
when implosion occurs in one of two regimes. The former is similar to the Vietnam
model, while the latter one is more or less reminiscent of the German Model.
The Vietnam model calls for fraternal blood, and it is the strategy that North
Korean leadership has long eyed in its unication plot. This approach is no longer
likely to get support on the Korean Peninsula because many Koreans still remember
the past tragedy of the Korean War (19501953) that failed to reunite the two states.
In order for this model to work with Pyongyangs favor, North Korea should have
planted many insurgent agents in the South to cause further unrest in the South
Korean society. In spite of the Norths ceaseless efforts to breed its supporters in
the South, South Korean economic strength continues to outpace the North by more
than 20 times. Economic success takes precedent over the efforts of ideological
schemes. Unless the North uses its nuclear weapons to put the South into the sea of
re, there is a slim probability that the North could overtake the South by military
strength. Many South Koreans do not regard North Korea as a superior military
power, if not for the nuclear and biochemical weapons the North is suspected to
hold. Recently, North Korea ramped up its war capabilities amid its frequent blufng
against the South. Even if it continues to provoke an armed clash with the South
114
while preparing to test-re a version of its longest-range ballistic missile and space
satellite launching, most southerners do not appear shaken at all. Perhaps, a majority
of the Souths conservatives and military ranks may want and are waiting for the
economically battered North military to pull the trigger rst. Then the unication
would be achieved relatively easily and unequivocally fast, although much fraternal
blood would be lost in exchange for the simpler integration process. Of course, this
approach also presupposes no military engagement by Chinese forces in the war.
In fact, the North knows well that the direct war between the two Koreas under
the current conditions means the end for the communists. Nor will the South likely
attempt preemptive military action unless the North attacks rst. Thus, this direct
military clash model is very unlikely to occur despite the recent military strains
being beefed up by the poverty-stricken Pyongyang regime. The second fratricidal
war must be avoided at all costs.
The German unication model is alternatively considered as a positive and negative lesson for Korean reunication. Some positive lessons from the initial stage
of German unication will be briey discussed in the next section. Logically, the
Romanian model followed by the German integration process is expected in relation to the collapse of the North leadership. Our immediate concern here is to focus
on the possible sudden regime collapse in North Korea and attempts to successfully unify the country by efciently managing the aftermath of the implosion. If
North Korea internally implodes due to both economic backlash and social instability, the interference of a neighbor country (like China) or countries (China, Russia,
and United States) onto the soil of North Korea (with possibly a new communist and/or communist regime) would constitute a big stumbling block to Korean
national reunication.
As discussed briey earlier, however, we would assume and hope that China
will not attempt to interfere in the Korean affairs for long, if not for the transition
periods, since any prolonged attempt to engage and remain on the Korean Peninsula
would harm Chinese interests. China can gain much more economically as well as
politically by cooperative trading with a united Korea rather than with a divided
Korea.
In order for the South Korea to be able to play a leading role when a big bang
event occurs in the North, South Koreans should be prepared to assume the situation
with full cooperation and initiatives from its neighbors, if necessary. Nevertheless,
the path leading to the national reunication might be misty and very rugged indeed.
South Koreas diplomacy and professionalism in the region must be core prerequisites for the Korean reunication policy to hold. South Korea should maintain
a balance by providing new, non-partisan, innovative, and rm neutral position
on global issues with cooperative engagement with all concerned neighbors. The
intensive readiness for bilateral and multilateral negotiations and arrangements for
national integration cannot be over-emphasized from now on.
Seoul should also learn how to facilitate the diffusion of common, comprehensive, and cooperative security in the region and maintain a balanced foreign policy
and economic relations based on non-biased, non-ideological, global, and comparative advantage principles with China, Japan, the United States, Russia, and others. It
5.4
115
should seriously review its past policies and try to reshape its new sovereign policy
directions so as not to be biased to any particular party, if it seeks a neutral unied state. More important, South Korea must also pursue the multilateral approach
for national integration by maintaining close cooperation with North Korea. On
the other hand, a future Korea may seek a trilateral Korea-China-Japan permanent
cooperation agreement to secure a common prosperity and peace in Northeast Asia.
South Koreas diplomatic professionalism and well-coordinated exercise of balanced wisdom and open minds in the region must be prepared in advance. In passing,
Koreans, South and North alike, must know that existing rampant nationalism
can neither be helpful nor a driving force to bring to one Korea. The rest of the
world seems concerned about neither North Koreas nuclear weapon, which is a real
Korean bomb, nor about the conicts between the two Koreas.
Nevertheless, the Korean reunication will come some day as North Korea continues its rapid slide downward. Unless Pyongyang can effectively control not only
its ongoing rapid economic erosion but also its peoples increasing exposure to the
free outside world, the end of the regime will likely be unavoidable. It may come
in a big bang mode for which you must keep watch, because you do not know the
day or the hour; Therefore be on guard! Be alert. You do not know when that time
will come.7
The question is how to manage the process of reunication if it is accompanied by an implosive regime downfall in the North with as little sacrice and cost
as possible. For this, the swift Romanian-style regime downfall, if any, could give
Koreans not only some insight into how to manage the aftermath, but also on the
hoped role of the North (and also, South) Korean military at the initial stage of
national reunication, as already briey discussed in Section 2.
With no regard to models, timings, and ways, future reunication will critically
depend on, rst, the concerted drive and willingness of all Koreans toward integrating into oneness to assume all expected pecuniary and visible and invisible
costs, and, second, on the non-intervention but positive cooperation from neighboring countries to help the North and South Koreans become united without conditions
and hesitations
As for the Koreans, rst of all, the two Koreas must lose their deep-rooted ideologically different perceptions, their mutual mistrusts, and past hatreds to unite
into one nation. All Koreans, both the North and the South alike, must recall their
fathers teachings during Japanese colonial days, which is, if united, you can live;
otherwise, you die.
To attract positive help and cooperation from neighbors, a unication-bound
Korea should be prepared to declare a non-engagement policy with any future
complicated and problematic disputes among third parties in international affairs.
Meanwhile, to prepare for sudden and Romanian-style total collapse of authority
in North Korea, South Korea must propose a quadripartite China-Japan-US-South
Korea interim setup to deal with such imminent problems as transitory chaos,
7 Quoted
from The New Testament, Matthew 25:13, and Mark 13: 3237.
116
massive refugees, interstitial jobless people, hoodlums, violent riots, bloodshed,

and looting of nuclear and other chemical and bacteriological arsenal, as well as
social security safety networking in the North, followed by integration of the fallen
government with the South with full support from all international organizations
like the United Nations. South Korea must prepare itself to secure its leading role in
controlling the ground when the Norths regime and society is to be dissolved any
time. It should try to persuade all neighbors to participate in the unication process
as a positive way to help the Koreans.
However, if the reunication is not an immediate concern for both Koreas in
favor of continuing with the two competing systems, South Korea will be left with
no alternative but to strengthen its alliance with the United States and Japan, while
enhancing further cooperation with China and Russia in economic and diplomatic
terms. The option of delayed integration is not surely desirable from the standpoint
of Korean people, since it is nothing but simply relaying this generations task for
national reunication to the next generation. If this generation could not do anything
to overcome mutual hatred and mistrust one another, what would they say to their
descendants?
5.5 Leadership Role in German Unification Has a Lesson

for Korea
As the calendar gets closer to 2010, a historic opportunity would appear to be
evolving around the Korean Peninsula. Depending on the qualities and readiness
of ordinary people as well as the core leaders of the North and the South, this invisibly approaching historic opportunity should not be wasted but turned into a real big
bang, leading to the unication of the two Korean states. Historic opportunities are
often wasted, however, or turned into disasters when the leaders of many countries
lack necessary qualities or proper preparations. That is exactly what happened on
the Korean Peninsula in 19451948. Unfortunately, unprepared and divided Koreans
frustrated a good chance when their country gained independence during the wake
of 36 long years of Japanese exploitation. The consequence was more than half
a century-long division of a nation into two hostile entities with major bloodshed
and unnished conicts and hatreds among the same national brothers. The Korean
Peninsula is still the remnant of an ideological war whose political leaders across
the pre-war and post-war periods have remained responsible for failing to turn the
cold war hot.
The contrasting mirror was the German unication of 1989, which no international expert predicted even as the Berlin Wall disappeared dramatically along with
the Cold War that began at the same time as the conict on the Korean Peninsula.
Germanys unication occurred with surprisingly ease and swiftness and, most
important, without major opposition from neighboring powers that were historically never friendly enough to support it at all. It was indeed a tectonic change that
contributed to the breakdown of the entire post-war international order.
5.5
Leadership Role in German Unication Has a Lesson for Korea
117
The key factor that directly ignited the breakdown of the Berlin Wall in 1989
was the overall failure of communist economies in the East that contributed to the
increasingly destitute East Germans and their subsequent uprisings against Erich
Honecker, not to mention a mass exodus of its citizens to the West. And the least
important was the unlimited contagion of Mikhail Gorbachevs perestroika (economic restructuring) and glasnost (openness) across Eastern Europe that helped
enhance the right of all peoples and states to determine freely their destiny. In
addition, a contributing factor was the constellation of political leaders (inclusive of
the Germanys and four powers) of unusual experience and their exceptional capacity
to cooperate in what became the most intensive phase of bilateral and multilateral
diplomacy in European history. But not even the wisest leaders could have produced German unication less than a year after the fall of the Berlin Wall had it not
been the truly gigantic effort of the ofcials working in individual nations and in
the European Community. German unication was brought about by a multitude of
bilateral and multilateral negotiations and arrangements. It was indeed to be remembered as one of the greatest triumphs of leadership and diplomatic professionalism
in the post-war period.8
The 41st US President George H.W. Bush did want German unity to end the Cold
War. He used Americas inuential resources wisely in helping united Germany
develop into a successful democracy and market economy. In the Soviet Union,
despite much internal opposition, President Mikhail S. Gorbachev was determined
to change the erstwhile orthodox communism and construct fundamentally new
relations with the West.
British Prime Minister Thatcher and French President Mitterrand perceived the
potential of a united Germany more of a problem than did Washington. But the
two Germanys neighbors, after initial reservations about the prospect of a powerful united Germany, gave their indispensable support to German unication with
understanding that the shared free world values and cooperative partnership in
leadership could be realistically sustained in the united Germany.
Indeed, the West German Kohl administration employed the art of diplomacy
very cautiously to ensure respect as it established a relationship of cooperation with
the West as well as Germanys right to self-determination by closely communicating
with the Four Powers. Author Karl Kaiser states, In Germany, a chancellor with an
astute sense of strategic opportunities, and a knack for timely and decisive action,
steered the process in symbiotic cooperation with a foreign minister with a keen
tactical sense in the context of the long-term design that had helped fashion for
many years.9
Indeed, the two Germanys were exceptionally lucky with both indigenous and
exogenous developments of internal as well as global environments that helped
the unication process to be easy and swift. The lesson for Korea is the art of
8 Kaiser,
9 Ibid,
K. (1990/1991) Germanys Unication. Foreign Affairs, 70(1), p. 179.

1990/91, p. 180.
118
diplomacy employed by German leaders and their capability to overcome issues

seemingly difcult-to-compromise.
The international environment faced by the two Koreas today is not exactly the
same as the two Germanys had in 19891990. But history now moves in creating
a similar opportunity in favor of a big bang on the Korean Peninsula, as it did in
Romania and East Germany about two decades ago. The approaching environment
will demand that the South Korean leaders practice the art of diplomacy and politics that would shift even externally difcult conditions to work favorably to the
needs of the nation, not to mention the importance of turning seemingly impossible
circumstances to become the nations potential resources. The historical wisdom
that German leaderships conducted in the initial course of the unication will be
what Korean leaders must take into account. Even more, to the extent of possible circumstance, Koreans must seek to ensure a joint security system that is well
harmonized; that is, in synch with all its neighbors, including the United States,
Russia, China, and Japan. Korean leaders require more imagination and new ideas
in fashioning a national strategy that will meet the newly to-be-structured power
balance surrounding the peninsula and the would-be new security circumstances of
the region. It will be the Korean responsibility to build trust with other concerns and
thus to turn all obstacles ahead in favor of their national reunication. More importantly, Koreans should not waste any more of their resources dealing with fratricidal
provocation, as the world is observing their actions. The next generation will question why their ancestors were as foolish and stubborn as to consume one another in
such bloody hostilities and provocations for so long.
5.6 Timely Conditions for a Paradigm Shift

Past lessons show that the national division will only continue if inter-Korean economic cooperation is maintained in such a way that the South Koreans continue to
pour money into the North; a practice evidenced under a decade of the Sunshine
Policy (19982007). The 2009 Pyongyangs high-pitched provocations and threats
against the Seoul government shows that cocky sunshine entertainment from the
South would turn out any time into a total failure if North Korea is not happy
with the healthy enemy in the South. The overow of aid into the North under the
Sunshine Policy was based on the assumption that the South had already won the
battle of ideology and the struggle for control of the peninsula. Has the North not
come to recognize this truth even belatedly? If Pyongyang does not want to admit
frankly that its system is no longer capable of competing with the South, it will no
longer have any rational to ask for non-reciprocal aid money from the South. And it
can no longer delude its own cadets and people. The only option for the North is to
close its operation.
From the standpoint of the South, it should also consider which is the best way
and approach to resolve the issue of a divided Korean Peninsula; through unconditional aids or reciprocal transaction. Since 1971 when the South initiated the two
5.6
Timely Conditions for a Paradigm Shift
119
Koreas talks via Red Cross Societies, various contacts, functional meetings, and
rapprochement efforts have been tried resulting in some fruitful results occasionally
but failures and frustrations mostly by wasting time and money have tended to be
the norm. Park Chung-Hee who seized power through a military coup on May 16,
1961, sought to devote his efforts to peaceful reunication, and in 1973, he presented
the 6.23 Principles, which stated that South Korea did not oppose North Koreas
participation in international organizations. He proposed competitive coexistence in
the open atmosphere of the international community. The Park administration policy targeted more practical construction rst, unication later, instead of victory
over communism. Ever since then, all subsequent South Korean administrations
continued to believe that once mutual reconciliation and peaceful-coexistence were
rmly in place, an increase in cooperation would lead to political unity. But no
actual bilateral economic cooperation or visible rapprochement had ever been made
until 1998 when the Norths Kim Jong-Il responded to the Souths Kim Dae-Jung
friendly overtures, which resulted in aid into the North under his so-called Sunshine
Policy. Kim Dae-jung might have thought that his sunshine would lead to unclothe
the Norths winter garments.
However, the Sunshine Policy has only contributed to undermining the South
while it did not help the North Korean leadership change its overall hostility against
the South, although many talks and meetings under the pretext of coexistence ourished between the two states. Nor did the Norths regime thank really for the money
from cocky South Korean helicopters named as sunshine. The North Korean leadership is not oblivious to the fact that inter-Korean cooperation and aid from the
South will eventually undermine Pyongyang: the fact that things will play out differently in the long run. Meanwhile, the Sunshine Policy succeeded in planting the
wrong perceptions among South Koreans that the life-and-death struggle between
the two Koreas was over when in fact it was not. The Sunshine Policy has induced
a considerable number of South Koreas evangelical Christian church leaders to
transfer large amounts of church offerings to North Korean agencies, namely for the
purpose of missionary base buildings. For example, Seouls two largest Presbyterian
churches named So-Mang Church and Sarang Community Church are known to
have poured astronomical amounts of money into building Pyongyang University
of Science and Technology and others. Some pastors and leaders of rich churches
in South Korea today are too proud and too divine to listen to any faithful and
constructive advices from people. It is indeed a seemingly benevolent or nave way
of thinking for those evangelical church leaders to wrongly dance and sleep with the
enemy (North Korea communist group) who has executed so many Christians and is
still brutally suppressing religious activity. The Sunshine Policy has thus made many
South Koreans, including Christians and Buddhists, to overow with the wrong sentiment in favor of the Norths communists after the June 2000 summit between Kim
Jong-Il and Kim Dae-Jung, which was matched by a torrent of South Koreas antiAmericanism after the death of two girls run over by an armored American vehicle
on training maneuvers near Seoul. The outpouring of sentiment and money in favor
of the North is becoming widespread among many progressive South Koreans who
are pushing political changes that favor the North.
120
In early 2009, however, North Korea renewed its declarations of its hostile provocations, creating the worst state of relations between the two Koreas. The North
Korean leadership may believe that it has many supporters in South Korea who will
arise when the right time comes. It will be nothing but a worthless dream.
It is hoped, of course, for the two Koreas to unite peacefully with a new change
of international environment. Toward this objective, there must be no question that
the two states need to build, rst of all, mutual trust on the basis of mutual coexistence. This approach has been persistently maintained through on-and-off proposals
for talks and cooperation since 1973 mainly by the South, forcing the North also to
comply with the South on the common strategy. The principle of coexistence and
common prosperity between the South and the North has been observed at least
by the South, although there has been the life-and-death competition and struggle. Continued efforts to talk without conditions is, however, today understood
or hoped by many opportunists in the South who still believe that particular policy
will help to open the door for eventual unication. It would be so, if the two rivals
mindsets have common ground in both perception and thought. The possibility
of holding successful heart-to-heart talks without conditions is, however, very low
and unlikely between the capitalists and communists. Whether many-talk-efforts
could induce harmonious unity between the Norths communists and the Souths
capitalists is still very doubtful, given the two different rival perceptions on existing
political and economic systems.
Ongoing assertions to favor unconditional cooperation for mutual coexistence
are mostly based on the assumption that two Korea systems are to maintain the status quo. But they must know the irrevocable truth that men may plan and do just
as they hope in their heart, but God determines their steps.10 In other words, the
inter-Korean cooperation efforts and talks would not necessarily guarantee the harmonious rendezvous for national peace and security. It is worth noting that whatever
inter-Korean rapprochement effort is likely today has already been and what will
be has been before, and nothing much will likely to be fruitful, given the Norths
brinkmanship and closed door policy. Those who insist that inter-Korean cooperation and talks will be the only option for peaceful unication are those who believe
that Charles Darwins theory of Homosapiens evolution is the unshakable truth but
without understanding the biblical view of creation. They do not see that Darwin
made a critical mistake that has in many ways affected how people see the world.
In fact, just as Darwin did not correctly understand the human genome, so neither
do the Souths advocates of the unconditional-talks for national unity understand
the communists in the North. The Souths ill-masterminded advocates have to learn
that only reciprocity and conditional talks will tame the communists.
Most of the past aid unilaterally poured into the North under the pretext of interKorean cooperation turned out to be fruitless, as it was all used to help develop
nuclear weapons as well as sustain the regimes longevity in the North. No one can
10 Old
Testament: Proverbs 16:9.
5.6
Timely Conditions for a Paradigm Shift
121
repute the fact if he or she is concerned with Pyongyangs recent return to its serious
provocation against Seoul.
Instead of supporting its survival, therefore, what if the South just chooses to
induce Pyongyangs illegitimate regime to collapse? A continued ignorance may be
one option that would contribute to the saber-rattling provocative regimes end. In
fact, Seoul has no other option, not only because the North has cut off all relations
with the South, but also because the South still cannot understand what the North
communists (amidst rumors of their starvation) want to achieve with their whimsical
arsenal programs targeted against the South. Of course, despite the Souths neglect
and ignorance policy against the provocations from the North, it must implore all
neighboring nations to cooperatively participate in a concerted economic sanction
against North Korea. Stopping the supply of even humanitarian foods and goods
may sound very irresponsible and heartbreaking for many starved innocent people
in the North, but ending the stubborn regime would only be a sure shortcut to save
those poverty-stricken and suppressed people in North Korea.
Very often the political blather that favors coexistence and cooperation projecting to eventually arrive at a peaceful reunication mostly contains nothing and
lacks any serious realistic facts. Most of them are futile arguments for the sake of
discussion and politician debate based on very hypothetical propositions set apart
from both the domestic and international reality.
Looking back at the past 60 years, the reunication policies have been based
on the assumption that national unication could only be pursued in a cooperation
mode via talks between the two conicting states. And the inter-Korean relations
were developed within the backdrop of the discourse on unication. Although the
last two decades of inter-Korean exchange were deliberately promoted by the South
under the aim of narrowing income gaps to reduce costs of unication, the intercooperation cannot be evaluated as having been successful. Unless the North
adopts a policy of reform and openness, bilateral economic cooperation will not
succeed in the future too. Nor can it be expected to produce remarkable results
for national unication in the absence of the participation of the international community. It is becoming clear that the stubborn economy cannot be fully rebooted;
even the ofcials seem to care about seeking their safety havens when the regime
explodes.
From the standpoint of those wishing early national reunication, the best option
must be helping the Norths regime implode as soon as possible. South Koreans
need to review if the reopening of inter-Korean dialogue and cooperation aimed
to live divided, but in fragile peace is really preferred to the early collapse of
Kims regime followed by a unication in the direction of liberal democracy and a
free-market economy.
The North Korean regime continues to irritate using military provocation any
time with no regard to inter-Korean cooperation as well as the Souths generous
economic assistance towards its stability.
In conclusion, it must be emphasized that the Souths unconditional economic
assistance, as well as the DPRK-US establishment of diplomatic relations, will
either contribute to undermining North Korea or in the worst case help Pyongyang
122
to retain its grip on power for a longer period. The Norths regime can continue for
a while if its leadership uses its military to control a possible implosion that the
masses may ignite sooner or later. We conclude that the policy to induce quicker
implosion or explosion is much preferred to any efforts to extend the longevity
of the ill-founded paranoid regime in the North. The implosion model demands
that South Korea prepare an extensive contingency plan in close cooperation with
all neighboring countries. The effective management of the transition is an even
more important responsibility for which South Koreans must prepare. In order for
the South to take a leading role in national unication, the Souths administration
must rmly establish a determined goal-oriented principle that promotes real and
reciprocal inter-Korean relations with the North Korean masses on future unity. At
the same time, South Koreans must employ wise foreign policy so as to secure full
international cooperation for the South to lead the unication process when the big
bang (implosion) occurs in the North. It cannot be overemphasized that South Korea
must bear a sense of responsibility for the fellow citizens in North Korea who have
been exploited for more than 60 years under the state-run economy. It is a time to
rethink what is the best policy for national interests as well as national unication.
Chapter 6
The Political Economy of Reunification Between

the Two Koreas
Let us not wallow in the valley of despairs, I say to you today,

my friends. And so even though we face the difculties of today
and tomorrow, I still have a dream. . . . I have a dream that one
day this nation will rise up and live out the true meaning of its
creed. . . .
Quoted in part from Martin Luther King, Jr. August 28,
1963 Speech at the Lincoln Memorial Hall, Washington,
D.C.
6.1 Introduction
The 1948 political division of the Korean Peninsula into two rival systems the
North into a Soviet-injected socialist system and the South into an American-enticed
capitalist system has for more than half a century resulted in completely distinct
life styles and levels of living conditions for the two Koreas. North Korea basically adopted a communist command economy from the beginning and has modied
(or strengthened) it with so-called unique self-reliant (Juche) doctrine since 1955.1
South Korea, in contrast, has principally followed the capitalist road of a market
system, although in the early stages of the countrys development (from the 1960s
through the 1980s), the government took a greater indicative role and controlling
practices were indiscriminately used. The fundamentals on which the South Korean
economy is based, however, are characterized as private ownership of the means of
production (capital, labor, land, and natural resources), diversied decision-making
process, and the built-in stabilization mechanism working principally in accordance
with market laws. The market would often face such failures as imperfect competition, natural monopoly, externality, and an insufcient supply of public goods, not
to mention the economic instability arising from depression, unemployment, and
1
The Juche idea was initiated by Kim Il-Sung at the Workers Party Central Committee in 1955 for
the sake of various political and economic causes. The basic idea behind the Juche (self-reliance)
was to make all North Koreans want to become ardent communists independent from alien
inuences. For more details, see Hwang (1993).

123
124
6 The Political Economy of Reunication Between the Two Koreas
ination, which can lead to a growing inequality of income and wealth distribution.
These problems inevitably necessitate public intervention into markets by means of
indicative or adjustment policies, which may employ some direct purchase, taxation, and welfare programs aimed at mitigating gaps in both horizontal and vertical
equity. Beginning in the 1990s, however, the Souths economy has mostly run on
the basis of market functioning.
North Koreas economy, on the other hand, has been more centralized, more
controlled, more ideologically monocratic, and more internationally isolated than
those of any of the worlds other communist states. With its autarkic command and
rationing system (which ceased to properly function after 2002 due to short supplies
of food and other necessities), North Korea has attempted to achieve its socialistic
goals for social equity and welfare, but it has only resulted in shattered failure over
time. As in other command economies, the means of productions are, namely, in
the form of all people ownership and cooperative ownership, which in theory is
geared to serve the promotion of the material well-being of the masses. With regard
to what to manufacture, decisions made by the political judgment of the leadership
elites takes precedence over the general consumer demand in the command economy, quite contrary to market economy. In most socialist economies, the priorities of
production are ranked below public goods (inclusive military goods), heavy industrys goods, and light consumer goods, so that consumer needs on the micro-level are
mostly neglected for the sake of the macro-level targets of the planners. The emphasis on heavy industrial and military sectors has been focal point in most socialist
economies since the Stalinist period, and the North Koreas Juche was no exception. The heavy industrialization needed to secure a large amount of startup capital
amid overly lower levels of per-capita income (consumption) in North Korea. The
Juche spirit is, however, not oriented in principle to mobilize capital requirements
from foreign savings but rather from the so-called internal socialistic accumulation in line with its self-reliant doctrine. However, in the economy where per-capita
income (or consumption) levels are still too low to feed well, the internal capacity
for expanding social resources is severely limited. And the governments continued
urge to make the people tighten their belts and increase their labor productivity for
a better tomorrow has begun to lose legitimacy, particularly beginning around the
mid-1970s.
This policy of heavy industrialization including military sector build-ups in the
early stage of development in the North was well compared with the South Korean
policy that progressed from the development of consumer goods and light industry in the earlier stages to heavy industry in latter stages as the economy was able
to accumulate capital through both enhanced economic growth and foreign savings. As to the distribution of outputs (income), the two systems differ in terms of
the choice of beneciary or demander. The capitalist system distributes its outputs
through a market mechanism to those who can afford to pay the price determined
by condition of supply and demand. In other words, output ows in the direction of
meeting demand. Often consumers face income and wealth constraints that result
from the distribution curves of initial wealth endowments, the abilities of each individual, and other social base factors. Briey speaking, the markets are mostly buyer
markets in a capitalist system but for a number of natural monopolistic goods or
6.2
A Brief Comparison of Economic Performance Between the Two Koreas
125
exceptional other market failures. Therefore, the producers must compete to provide
the prospective buyers with relatively less expensive but better-quality goods and
services. Such a competitive system makes it possible to improve the quality and
diversity of marketable goods, thus helping it extend the markets for the goods
to overseas beyond the national border. In the Norths communist system, on the
other hand, the supreme ruler and top decision-makers allocate resources based
on their policy priorities in the order of military build-up down to party maintenance and household consumption. They ration consumption goods to the people in
accordance with their ranked faithfulness and loyalty to the regime. However, North
Korea has developed its own material incentive systems that are coupled with basic
wages, bonuses, and awards of medals as means of encouraging workers fulllment
of obligatory plan targets, usually dened in percentage growth rates of physical
quantities. Such an incentive system is not assigned to each individual worker, but
to team units. Just as it is possible for an agent in an imperfect monopoly market to
cheat the system in his or her favor, so can a single (wise) worker or every member
worker within each team manipulate his or her working capacity either independently or collaboratively in such egalitarian society. As such, this formal incentive
system begins to lose its effectiveness in spurring workers on because despite their
hard work there is an equal pay system with no regard to individual productivity
or prominence among team members. Beginning in the early 1970s, the North had
already begun to experience the downtrend of workers productivity, which in turn
attributed to lowering the economic growth rates over time. Workers now knew how
to meet the annual quantity targets assigned for production in each factory units.
In other words, the fulllment could be achieved by trading off between qualities
degrade and quantity increase to meet obligatory plan targets. Furthermore, in the
North Korean controlled economy, workers have learned over time that their overfulllment of the assigned plan target by too large a margin in this period would be
the government basis for setting new targets in the next period.
Too much over-fulllment this year will mean too much toil and sweat for workers next year. The system has thus fallen into its own contradiction where there is
no increase in the workers productivity growth or export competitiveness, not to
mention ending up with an overall short supply of all necessities.
Apparently, North Korea had a key turning point in that it could have reformed
its economic system when the so-called Great Leader Kim Il-Sung passed away
in July 1994, but his son and heir Kim Jong-Il overlooked such a good opportunity. Instead, Dear Leader Kim Jong-Il chose to turn all his resources to developing
nuclear weapons and missiles.
6.2 A Brief Comparison of Economic Performance Between

the Two Koreas
The economic performance of a nation is usually measured by an index of inationadjusted national income or its real growth. In the national income accounts, gross
national product (GNP in a capitalistic economy) or gross (value) of social product
126
(GSP or GVSP in a socialist system) can be viewed as a ow of either product or

income, although there is a fundamental difference in respective methods of measuring between values of GNP and GSP (alternatively, GVSP). In general, the national
income (or output, say, Y) can be expressed as the basic identity relationship as
follows:
C + I + G + (XM) = Y = C + S + T + Rf , where C is total value of consumption expenditure, I total value of investment expenditure, G government purchases
of goods and services, (XM) net exports of goods and services, S gross private
saving (business saving+ personal saving+ depreciation), T net tax revenues (tax
revenue minus domestic transfer payments, net interest paid, and net subsidies), and
Rf is net transfer payments to foreign countries. If two countries in question use the
same method in measuring their respective income (output), then there is no problem comparing published income data between the two economies. But it is very
problematic to compare the two Koreas, since actual income (output) compiling
methods are so different, thus making it difcult to compare directly on the basis of
one-to-one mapping, as will be explained later.
To identify the contributions of major factors on economic growth or performance and to compare economies, however, we need to employ a production
function approach of income (Y). One widely used conventional approach is an
endogenous growth model introduced by Romer (1986, 1990) and Lucas (1988).
An endogenous growth model must highlight one or several key role variables such
as human capital and openness of trade and others that have signicantly contributed
to the contrasting economic performances between two comparing economies. For
illustration, recent literatures (Sachs and Warner, 1995; Harrison, 1995; Sebastian,
1992) tried to nd that various measures of openness increase economic growth signicantly through large and substantial investment in physical capital and human
capital.2 Also Robert E. Lucas (1993) found a striking empirical result by comparing South Korea and the Philippines. He showed that as far as secondary enrollment
is concerned, the Philippines had 41% enrollment in 1965 and 68% enrollment in
1984, whereas South Korea recorded a remarkable increase from 35% in 1965 to
91% in 1984. The annual average growth rate from 1965 to 1985 for the Philippines
is 2.3%, in contrast South Koreas rate is 6.6%, almost three times higher than the
former. In this chapter, we demonstrate that Koreas strong outward trade policy
during this period allowed it to surpass the Philippines inward-oriented policy in
terms of human capital accumulation and economic growth.3
To show the role of factors on economic growth, for the purpose of theoretical
illustration, a simple neo-classical production function may be employed as follows. For simplicity, we may wish to recognize four-plus factors of production along
with the endogenous productivity parameter A. The factors may include labor L
and physical composite capital K and human capital H and other factor products
vector X, which encompasses all important resource and environmental (inclusive
2
3
In particular, see Harrison (1995); and Sebastian (1992).

See Lucas (1993).
6.2
127
economic system, openness of trade, degree of democracy, and a vector of government economic policy, and so on) variables (i.e, X = i Xi = X1 + X2 + . . . + Xn ).
Then our production function in the simplicity form is as follows:
Y = A( )F(K, L, H, X), where X = i Xi and i = 1 n.
(6.1)
The generalization of it into the Cobb-Douglass Production functions and then

in labor-intensive form is
y = Y/L =A( ) {[K H L1i i Xii ]/(L L Li L1i )}
=A( )k h i xii (where i goes from 1 to n).
(6.2)
This model (6.2) can be used to explain the variation in real income per capita y
across the two (or more) countries. The labor-intensive form of the function depends
on physical capital per capita, k, and human capital per head, h, and other factors
(such as trade openness, degree of democracy, and so on) represented by xi . The
population (labor force) can continue to be specied as growing exogenously. Here,
we need to derive the measure of productivity variable A. Usually, we may think
about changes in the quality of inputs such as capital and labor in production due
to technical changes enhanced by new innovation, education, and R&D inputs and
so on. In this case, a production function shift comes from changes in technology.
Solow (1957, p. 316) proposed a way of deriving a measure of the level of technology by factoring technology out of production function such that technical change
is treated to be Hicks neutral. The implication of this separable form is that function
shifts are pure scale changes, leaving marginal rates of substitution unchanged at
given capitallabor ratios in the production described as
Y(t) = A(t) f {K(t), L(t), X(t)}. Given the K/L ratio is unrelated to the rate
of technical change, the so-called Solows residuals can be measured from the
aggregate growth accounting equation as follows:
Y/Y = A/A + K/K + L/L + X/X,
where = i i and X = i Xi , (i = 1 . . . n)
(6.3)
and = (Y/K)(K/Y) = A(f /K)(K/Y)
(6.4)
= (Y/L)(L/Y) = A(f /L)(L/Y)
(6.5)
i = (Y/Xi )(Xi /Y) = A(f /Xi )(Xi /Y).
(6.6)
From Eq. (6.3), a measure of technology change rate can be easily obtained if
relevant values of variables are available. Once the implied rate of technical progress
A/A is computed by Eqs. (6.3), (6.4), (6.5), and (6.6), an index of technology A(t)
can be deduced to use in our estimation for Eq. (6.5), which can also be easily
rearranged into natural log form if needed.
128
Estimation of economic growth in two Koreas would be very mechanical if all

relevant data and policy variables are available in the form of equivalence of their
qualities and contents for the two Koreas. The unequivalent (mutually contrasting)
raw data as well as unreliability of the data in reality poses a serious hindrance making any objective and quantitative comparison of economic performance between
the two Koreas difcult.
Using available South Korean macro-economic time-series data (19852005), a
pilot estimation exercise for per-capita real income (y) growth based on Eq. (6.2)
above produced the marginal contribution of each factors to growth in terms of
elasticity values as given below. The raw data sources came from (South) Korea
Statistical Yearbook, and Gross Regional Domestic Product and Expenditure, both
compiled by the Korea National Statistical Ofce (www.nso.go.go.kr), and National
Income Statistics published by the Bank of Korea (www.bok.or.kr).
dlnyt = 2.811dlnAt + 0.318dlnkt + 0.177dlnht + 0.126dlnx1 + 0.715dlnx2
+0.013dlnx3 + 0.042dlnx4 + 0.239dlnx5 1.449dlnx6 ,
where dlnyt = lnyt lnyt1 and ln indicates natural log and y = Y/L (that is,
per capita output); all estimates are signicant at 95% level except ethnicity variable, A = technological efciency parameter (as dened in Eqs. 6.3, 6.4, and 6.5);
h = per capita human capital (H/L), which is derived by H = {(total saving rate on
education) 0.05 aggregate monetary value of the stock of highly educated people} divided by total labor force (L). Here indicates multiplication operator and /
is division operator as usual and 0.05 is an assumed annual constant depreciation
rate of human capital; x1 = degree of democracy (represented by government intervention; that is derived by 1 minus the ratio of real government consumption to
real gross domestic product); x2 =trade competitiveness (proxy for openness); x3 =
technology level (represented by per capita R&D expense); x4 = domestic private
consumption rate; x5 = special demand condition (derived as ratio of real spending
on recreation, culture, religion, and education to nal consumption expenditure of
non-prot institutions serving to households); and x6 = ethnic diversity derived as
{N (1 i) 1} where N is the number of ethnic groups and i is the ratio of ith ethnic
group to total population. As the estimates show, the contribution of technological
efciency to economic growth is the largest (2.811), followed by trade openness
x2 (0.715), physical capital k (0.318), special demand conditions x5 (0.239), human
capital h (0.177), level of democracy x1 (0.126) in order. The elasticity of technology level, x3 , is strangely very low perhaps due to the inclusion of technology
efciency score simultaneously with the level. During the sample period, domestic
private consumption was found not to be a leading factor for economic growth. The
ethnic diversity did negatively play a role, for which further investigation may be
needed in terms of data accuracy as well as estimation methodology.
The above results based on South Korean data suggest at least some important
hint for the almost broken North Korean economy: If North Korea were to open its
economy, to lessen its command control, and to import more foreign capital so as
to improve technological efciency, it would denitely start to catch up with South
Korea.
6.2
129
In order to apply the production function approach to nd how and to what extent
do the differences between some economic and policy variables (such as degree of
democracy, economic openness, physical and human capitals, and so on) of the two
Koreas affect their respective economic performance, all other factors such as the
initial conditions and the resource endowments need to be assumed as usual.
Although the two Koreas had some identical initial conditions such as ethnicity, language, and cultural tradition for more than a millennium until the division
of the Korean Peninsula in 1945, there has in fact developed a fundamental divergence in both political and economic systems between the two Koreas since then.
Nevertheless, any attempt to highlight some key policy variables (that is, openness
of trade and degree of freedom, government defense spending) that are regarded
as signicantly contributing to the contrasting economic performance of the two
Koreas will be of no signicant meaning because there still exists fundamental
heterogeneity in political rulings, policy targets, and other economic policy functions to take into consideration, not to mention the different nature and content of
basic data compilation between the two systems as well as insufcient availability
of needed data for North Korea. Nevertheless, some efforts have been made to estimate the Norths annual values of total production based on partially and ofcially
proclaimed bits of data.4
Even if we set aside such differences between the two Koreas as the startup
endowments of natural resources, industrial structure, the ownership of the means of
production, and economic policy, there are still basic questions when attempting a
comparative analysis based on respectively announced (published) statistics. North
Korea uses two macroeconomic indexes: the concept of gross (value of) social product (GSP or GVSP) and national income (NI).5 However, the concept of national
income used in the communist economy differs from that of GNP or NI in the capitalist economy. National income in North Korea as in other communist countries
does not include value added originated in most service sectors and depreciation
costs. Instead it does include the transaction revenues (prots in turnover), which
are equivalent to the differences between wholesale prices and retail prices in the
transaction of some consumer goods and some services.6
4 See Hwang (1993) pp. 93145, for the Estimates of North Koreas National Income of 19461990;
and Estimates of North Koreas Income, released by the Bank of Korea since 1991. It must be noted
that BOKs estimates of North Koreas income is made in terms of South Koreas monetary values.
5 Socialistic economys gross value of social product (GVSP) consists of three components in
accordance of Marxian notation: GVSP = C + V + S, where C is constant capital that represents
productive equipment (factories and machinery, etc.), raw material and power; V is variable capital
that represents the wage bill; and S is the surplus value of labor that represents net social income.
GVSP is the ow of production per period of time; therefore, C is not the stock of capital, but the
annual wear-and-tear and amortization of capital. In a capitalist society S constitutes the prots
on capital invested and accruing to the factor income of the capitalists, but in socialist income
accounting, S is surplus value, which is returned to society as a whole. And national income (NI)
in socialist economy is dened as a gross value of social products minus capital depreciation and
intermediate costs in accordance with the theory of labor values in Marxian doctrine.
6 Price concepts used exclusively before 2000 in North Korea are still referred to accounting
price, but rarely for exchange price.
130
The gross value of social products (GVSP) entails some double accounting in
the production process because it is estimated by adding up all output values of all
separately enumerated production units. For example, a farm co-operative produces
10 units of wheat, of which 2 units are consumed by the co-operative itself. A wheat
mill uses 8 units of wheat to produce 20 units of wheat our, of which 5 units are
consumed within the mill. Next, a bakery purchases 15 units of wheat our to make
30 units of bread and it consumes 10 units out of the 30 units of bread. Then, the
gross social product (GSP) earned in these productive process is 43 units, that is
(10 2) + (20 5) + (30 10) = 43. But in terms of gross national product (GNP)
concept used in a market-economy like South Korea, this would come to 37 units:
10 + (20 8) + (30 15) = 37. As noted, GNP accounts for all value added, that
is, net value after subtracting the intermediate uses, while GSP (GVSP) takes into
account the net output values of all consecutive production stages. GSP includes the
value of intermediate products and thus its value is counted several times.
More importantly, as explained above, these income concepts in North Korea
deviate greatly from their counterparts in the South. North Korea neither explains
the methods of estimation of its macro-economic statistics, nor releases any details
of the database. The only piecemeal bits of information known to the world are
the growth rates of national income and of some arbitrarily selected commodities,
but without explanation of base-quantity data, and some occasionally released per
capita income gures in terms of wage and reward (bonus) payment increases. But
all these released data is often expressed in terms of the workers overfulllment
rate over the state plan target rate. In principle, the total value of output (GVSP or
NI) achieved in excess of the state plan target rate (100%) is to be distributed to all
workers in the socialist state.
The basic straight wage paid for work done within the state targeted goal (100%)
changes in proportion to the accomplishment rate of the plan target. However, the
reward and bonus payment is made in accordance with the rate of overfulllment
rate. The state basic assignment rate for work fulllment is determined on the basis
of 100% of the base target, while the overfulllment rate is calculated on the basis of
1% unit exceeding the base target (100%); that is, every portion in excess of the basic
plan target (100%). For example, if the actual work fulllment is 110% over plan
target, it means 10% overfulllment as compared with the targeted 100% fulllment
plan. But it is equivalent to just 10 times or 1000% overachievement if measured in
unit of every 1% of overfulllment basis. This complicated method for computing
the labor productivity growth and output rate is the source of overstating the Norths
income growth statistics that is irregularly released mainly for propagandizing its
achievement.
In order to make economic comparison possible, therefore, overall indicators of
North Korea must be somehow adjusted to conform as much as possible to those
measures used in capitalist South Koreas economy, importantly taking account of
the real (shadow) exchange rate needed to convert the estimated incomes into one
standard international money (i.e., US dollars).7
7
With regard to diverse methodologies, refer to Hwang (1993), ibid. Chapter 3.
6.2
131
Without further elaboration on this issue, we show per-capita incomes of two

Koreas based on published and accordingly adjusted data information8 in Table 6.1,
which readers are urged to take with some skepticism, noting the inaccuracy problems inherent in the raw statistics, as discussed above. North Korean economic
power in terms of per-capita income outpaced that of its foe South Korea at least
until 1975, although its socialistic labor mobilization and work stimulation effects
began to inevitably erode in the command economy where every worker gets equal
payment no matter how much he or she produces.
The law of decreasing rate of return to work (labor) in an incentive-lacking
system has been one of the important causes dragging down the growth of North
Koreas economy over the last few decades. It is true that the command-type
Table 6.1 Comparison of per-capita GNP (or GNI) between the two Koreas (in US dollars)
North Korea (DPRK)
South Korea (Republic of Korea)
Year
Per-capita GNP
Per-capita GNP
1946
1953
1956
1960
1965
1970
1975
1976
1980
1985
1990
1995
2000
2005
2006
2007
2008
25
53
46
177
248
304
751
775
1,161
978
1,146
1,034
757
1,056
1,108
1,140
1,174
Population
9,257,000
8,491,000
9,359,000
10,789,000
12,100,000
13,892,000
15,853,000
16,260,000
18,025,000
20,385,000
23,174,000
21,543,000
22,175,000
22,928,000
23,079,000
23,200,000
23,298,000
67
66
79
105
252
590
797
1,589
2,194
5,569
11,432
10,841
16,413
18,372
20,045
21,204
Population
20,194,000
21,970,000
24,658,000
28,628,000
32,163,000
35,246,000
35,822,000
37,965,000
40,882,000
42,719,000
45,250,000
47,209,000
48,138,000
48,297,000
48,456,000
48,607,000
Sources: For 19461990, Eui-Gak Hwang, The Korean Economies: A Comparison

of North and South, (Clarendon Press Oxford, 1993), Chapter 3, pp. 93145. For
19912008, The Bank of Korea, North Koreas Major Economic Indicators, Principal
Economic Indicators (monthly). Note the current per-capita GNP (or GNI) gures
depend on exchange rates of the respective year. Bank of Korea estimates the North
Korea GNP in terms of South Korean monetary value and then converts it in US
dollar value based on South Korean won exchange rate in terms of US dollars. The
rate applied here for 2008 was 1000 won= 1 US dollars as rough approximation.
8 For 194690, Eui-Gak Hwangs estimates use trade exchange rate instead of North Koreas
ofcial exchange rate; for 19912008, it is from the Bank of Koreas estimates made in South
Korean prices, but they are converted into US dollar values by using the South Korean exchange
rate.To save the space, we show the respective annual income in 5-year intervals. Those who need
annual series of data, refer to the two sources above.
132
economic policy could be more efcient in the early stage of development as the
Soviet-type of command economy in North Korea did show a relatively higher
growth rate until the early 1970s. But once a command economy reaches a certain
threshold level of its growth, it will begin to face complexity as all mobilized workers realize that their toil and sweat are not properly rewarded. It will begin to exhibit
a diminishing marginal rate of return to the input of the work-push system typical
in the command system. This stage is followed by a drop in workers morale and
incentive for any further hard work and productivity suffers. Such phenomena has
been spotted in North Korea since the early 1970s, as revealed at least indirectly by
both its stepped-up social indoctrination of Juche idea and other morale-boosting
campaigns to intensively motivate the people.
For nearly a decade beginning in the 1990s, the North Korean economy had been
hard hit by both unfavorable external environments such as the dramatic transitions
of old communist bloc countries and consecutively bad weather conditions, which
damaged its agricultural production in particular. During the period 19901998,
North Koreas economy experienced an annual average of 3.8% growth rate. This
made its gross national income of the 1990s back-drop to the level of two thirds of
the late 1980s. North Koreas annual growth rate recorded 3.7% in 1990, 3.5%
in 1991, 6.0% in 1992, 4.2% in 1993, 2.1% in 1994, 4.1% in 1995, 3.6%
in 1966, 6.3% in 1977, 1.1% in 1998, followed by plus 6.2% in 1999, 1.3% in
2000, 3.7% in 2001, 1.2% in 2002, 1.8% in 2003, 2.2% in 2004, 3.8% in 2005, and
again returned to a consecutive to 1.1% in 2006 and 2.8% in 2007.
It may be suspected that the shift from minus growth in 19901998 to plus growth
in 1999 might be somewhat related to the pouring of money into the North under
the Souths Kim Dae-Jung regimes Sunshine Policy started in 1998, not to mention
that the North mobilized all efforts then under its limited capacity to get out of its
poverty-pit.
But depending only on external help cannot rescue the poverty of a nation unless
the nation is willing to help itself. Above all, heaven must ransom the wrongdoings
of the leadership. Despite loud paeans to self-reliance coming from the regime, a
disastrous famine from 1996 to 1999 was known to have resulted in the death of
about one million people. Starting from 2006, as already shown above, North Korea
appears to have confronted a second wave of annual negative economic growth in
row amid its use of nuclear brinkmanship diplomacy.
In order for the North to free itself from the wrath of starvation, it has to transform
its political and economic system into a free democracy and market economy as
its former communist bloc countries have chosen. The North leadership needs to
change its intransigent mindset.
Of course, the per-capita income level cannot be a sole indicator of economic
strength of any economy. Other economic indicators showing relative economic
power between the two Koreas may include external trade, external debts, size of
national budget, production of electricity, other energy sources, food grains, industrial outputs, steel, and construction materials, as well as social overhead capitals,
and so on, to list a few. In most of these cognitive indicators, North Korea cannot match with South Korea except for its marginal advantage in deposits of some
6.3
The Economics of Guns and Bread
133
mineral resources (that is, coal, steel, and non-metallic minerals). For example, as of
2008, external trade of the South outpaced that of the North by more than 200 times.
More importantly, for all practical purposes, North Koreas state-run economy of
steel mills and coal mines are almost dead as their operation rates are less than
20% of their capacity. The Norths dream for socialist paradise is forsaken, and
its Medicare System and Public Distribution System have all been out of order for
nearly a decade. With the partial exception of the military industry, the only functioning parts of the North Korean economy are now unofcial private markets
whose illegal economic activity is the only way for many people to survive. Amid
the authorities reiterating their old anti-market rhetoric, even ranks of bureaucrats
are looking for other opportunities from the widespread juxtaposed society. In fact,
North Korea ofcially introduced its market promotion measure in March 2003,
but enlarging markets made it increasingly difcult to control the spread of various political gossip and truth among people. So the North attempted to reinstate its
Public Distribution System in October 2005 but with no effective success, mainly
due to short supply as well as black market spread for foods and other necessity
goods.
The regime also attempted the following measures: to prohibit any adult male of
17 years or older from engaging in market transaction in December 2006; to permit women of 49 years or older to participate in marketing activities in October
2007; to list items and prices of marketable goods in November 2007; to restrict
all industrial goods to trade only at state-run markets in December 2007; to convert
the daily market system to one of every 10 days in November 2008; and to convert
all-round market to only a limited farm market system in December. The leaderships perceive the markets to be the source of capitalistic yellow winds (what
they call subversive, anti-socialistic moves), a potential blow to the Norths isolated
Juche system. But these control efforts have only been partially successful in the
North because the closing of these markets would mean the starvation of the people.
Internally, the juxtaposed society produces unavoidable corruption, making possible
many things that were unthinkable in the past, such as various bribing and human
trafcking.
6.3 The Economics of Guns and Bread

The prospects for North Korea are increasingly not promising. Dear Leader Kim
Jong-Il had partially experimented with market reform along the lines of China in
2002, but soon began to make a policy U-turn due to the eroding legitimacy of the
Juche doctrine. Market trade activities would facilitate awareness about the life in
outside world including their brethren across the border. The U-turn process could
not, of course, be complete as mentioned above. However, the frustration of the failure of market reform as well as the Norths unsustainable economy appears to be
driving the leadership to increasingly turn to brinkmanship actions. In North Korea
where people are long subordinated mentally, emotionally, and ideologically to the
134
personality cult of their leader, the ruling classs ostentatious use of nuclear weapon
and rocket (missile) development would still be one of the most effective ways to
bind its people to unity. This does not, of course, imply that a majority of people will
unanimously continue to support the leadership with little regard for their hunger in
favor of the states assurance of victorious military strength. For illustration, lets
suppose we have two free agents: a sole government and people as an aggregate
entity. The government (represented by one man leadership) is currently attempting
to employ a nuclear brinkmanship policy at the cost of insufcient food supply, and
we know with absolute certainty that if it is successful, it can establish a strong state
that will receive sufcient food and aid from the scared outside world. What should
the other agent called people do about this matter? This agent (people) has two
alternatives: He or she can either join the government policy, (and he/she cannot join
the forces of opposition because this means exile), or he/she can remain inactive.9
We may illustratively compute the payoff to people of these two types of action.
The cost (negative pay-off) to people who does not support the government policy, Pi , will equal the increased food secured by successful brinkmanship, Fs , which
the people would receive times the likelihood that the brinkmanship policy, Lb will
be successful: Pi = Fs Lb ., which shows the payoff to inaction (indifference). If
the value of Pi is not less than total implicit cost of employing brinkmanship policy (that occurs if probability Lb is equal to or less than zero), the people can be
coerced to follow government policy whether good or bad. Of course, this payoff
is theoretically a public good and private reward as well in a socialist egalitarian
economy like North Korea. Rational people (agent), though destined to live in the
controlled society, will always weigh both the rationality and success probability of
any government policy when they make their true judgment in their inner-most calculation. The dictatorial leadership needs, therefore, to coerce its people to believe
that its brinkmanship diplomacy has a positive probability of success. In this case,
of course, the selsh dictator needs not to be responsible now for what will happen
to his people or country after his departure from this worldly life.
Amid the U.N. World Food Program (WFP) report that an estimated 8.7 million people went hungry, North Korea blasted off a long-range missile (which
Pyongyang claimed was a communication satellite) from the Musudan-ri launch
facility at 11:30 a.m. on April 5, 2009. North Korea proudly announced that its threestage rocket had successfully put its satellite into orbit, which it claims is circling the
Earth and transmitting revolutionary Kim Il-Sung and Kim Jong-Il songs. Our scientists and engineers have succeeded in sending satellite Kwang-myong-sung-2 into
orbit by way of carrier rocket Unha-2 which is also called the Dapodong-2, said
the state-run Korean Central News Agency. Although the US intelligence conrmed
that the rocket (which the United States and Japan regarded as a disguised ballistic
missile test) apparently zzled into the Pacic without successfully reaching orbit,
the North demonstrated its improvement in missile range. The rockets second stage
9 In reality, it may be also risky if one shows inactive or indifferent response to what the communist
regime does.
6.3
135
landed in the Pacic Ocean waters about 3,200 kilometers (2,000 miles) from the
launch site, showing that North Korea has succeeded in about doubling the range
compared to a 1998 launch of Daepodong-1 missile with a 1,640 kilometer range.
According to South Korean military intelligence authorities, this launch of the
Norths rocket cost the regime about US 300 million dollars, totaling the Norths
direct cost of current nuclear projects and missile developments to an estimated
US 2.6 billion dollars. The amount of US 300 million dollars could buy about one
million tons of rice at the 2008 world price, which would meet the absolute shortage
of rice in the North for a year. Assuming average rice consumption per capita will
be about 500 grams per day (which is larger than South Korean average daily rice
consumption), one million tons of rice (to be procured for US 300 million dollars)
will feed about 5.5 million North Koreans for a year.
With little regard for the plight of most North Korean people, the Norths elite
class, enticed by a cult of personality, along with their Dear Leader, was delighted
when they heard the news of the rocket launch. North Koreans living on Chinas
side of the border and pro-North Korean residents in Japan, as well as a considerable number of leftists in South Korea (that is, members of the Pan-National
Association of Fatherlands Unication in Seoul), hailed the launch openly. South
Koreas Yonhop news agency reported that Mr. Shin Son-Ho, North Koreas ambassador to the U.N., told reporters in New York, We are happy. Very, very successful.
You should congratulate us.10
Would the launch work as a good medicine or as a bad poison for the life of North
Korea? These questions must be approached in the context of the North leaderships
two trump card bets: one a domestic bet to enhance the regimes military and science rst policy as well as a major psychological boost among the mass, and the
other for inducing US President Obama to hold direct talks with the so-called great
fatherlands Dear Leader. In an apparent attempt for a bigger gain by initiating
tensions with this ballistic missile in addition to a nuclear bomb test, North Korea
even had to demonstrate its robustness of self-reliance. In fact, North Korea refused
in 2009 to accept even food aids from the United States and South Korea, its main
food providers since the successive crop failures began in mid-1990s. In September
2008, the WFP made a worldwide appeal to get up to $504 million of food aid for
North Korea, but as of April 2009, only 11% of that has been received, enough to
feed about 1.8 million people.
North Korean leadership is betting on long-range missile and nuclear bombs
(guns) at the cost of its populaces shrinking stomach (food). For the North believes
that betting on guns can surely buy more food later as the western countries
compromise in exchange for North Korea backing down on its provocative moves.
More importantly, North Korea is betting it will not suffer serious international sanctions for the launch, since the U.N. Security Council is divided on a response. If
the U.N. Security Council moved against the our-own-way Juche nation, North
10 The Japan Times, (Tuesday, April 7, 2009), p. 1, U.N. fails to agree on response to N. Korea
rocket.
136
Korea will bolster its nuclear deterrent and continue to develop its so-called disguised space (rocket) program. Nonetheless, the reclusive communist nation will
conduct more provocative act as its means of survival.
Japanese and US envoys working on the U.N. Security Councils response to
North Koreas rocket (disguised missile) launch appeared initially very strong conrming that the launch was a violation of Security Council Resolution 1718, adopted
on October 2006 after Pyongyang carried out a nuclear test. But Japan and the
United States changed their positions and backed down over imposing strict sanctions on North Korea because China and Russia (of the ve permanent Security
Council members: Britain, China, France, Russia, and the United States) took positions of much muted response to the Norths rocket launch in sharp contrast to other
nations. Such factors were probably gured into the Norths calculations to re the
rocket, as usually was the case in its other previous provocative actions toward the
United States and South Korea. If everything did work as the North calculated,
it would be a short-term success for Pyongyang regardless of the dependability
and marketability of its missile technology, because North Korea now adds some
immediate leverage as it bargains away its nuclear weapons and missile programs in
exchange for more food aids and other concessions from the United States either
directly or at the Six-Party talks. North Koreas leadership could also continue to
carry out other provocative acts, such as a second nuclear test, if its rocket launch
doesnt produce what it wants such as direct talks with the United States. This is
indeed a new unpredictable playing-eld that US President Barack Obama must
deal with in East-Asian affairs. Unless the United States can persuade China to take
a rmer position in dealing with North Korea,11 it will be difcult for an inconsistent
US policy to be successful until the Norths regime collapses. More signicantly, the
dening characteristic of the current US policy toward North Korea does not seem
to have any coherence and consistency. Although President Barack Obama during
his visit to Prague in April 2009 sternly voiced that rules must be binding and
violations must be punished when he learned about North Koreas launch of an
intercontinental missile, his special envoy to North Korea, Stephen W. Bosworth,
publicly declared that pressure is not the most productive line of approach in
11
Lee Myung-Bak has called on China to help deal with North Korea following its rocket launch.
South Korean President Lee told a visiting senior Chinese Communist Party ofcial that Beijing
must play a large role in resolving the issue of the long-range missile launch. Mr. Li Changchun
said that China will work with South Korea to resolve the issue. In a national radio address on
April 6, 2009, President Lee said the launch is a threat to regional and global security and cannot
be justied. President Lee said that he is considering joining a US-led initiative to halt the spread
of missiles and weapons of mass destruction. On the same day, South Korean lawmakers passed
a resolution condemning the launch, while some conservative demonstrators took to the streets of
Seoul to protest against Pyongyang for carrying out the launch. According to North Koreas central
news agency (KCNA), Kim Jong-Il was present during the launch and hailed its scientists for their
wisdom and technology. Japan and the United States believe that North Koreas launch violated
U.N. Security Council Resolution 1718, which was adopted following North Koreas nuclear test
in October 2006 and calls on Pyongyang to abandon its missile and nuclear development program.
Reports say that China, Russia, Libya, and Vietnam oppose any further U.N. actions on the Norths
April 5 rocket launch.
6.3
137
dealing with the North. It is very doubtful that the United States will make progress
on missile and nuclear deals with the North, which shows US policy inconsistency.
As the Norths military experts demonstrated a greatly enhanced range of its missiles, the North Korea Workers Party delicately planned the launch to unanimously
back up Kim Jong-Il leadership at the 12th Supreme Peoples General Assembly
(Parliament) held on April 9, 2009. The launch gave the 67-year-old Kim an enormous boost in Pyongyang for the deant act. At the Supreme Peoples Assembly
held just 4 days after the launch, Kim was reelected as the Chairman of the National
Defense Commission, which is in charge of the entire state affairs including all economic policy as well as defense policy.12 This is his fourth term as the head of
both Korean Workers Party and Defense Standing Committee since he rst took
the position in April 1993, when his father Kim Il-Sung was still alive and in power.
The ailing Dear Leader Kim Jong-Il has managed to reenergize his political power
base, thus helping to pave the way for his successor (perhaps one of his three sons
not yet announced) to take the helm. It is apparent that North Korea will enter into
a period of step-by-step power transition due to Kims illness and age.13
It may be noted that the Norths missile (or rocket, whatever it was called)
appears to provide Japan with a new opportunity and incentive to greatly enhance
its own build-up of its self-defense system. Japanese annual defense expense is
approximately US 44 billion dollars, ranking fth largest in the world as of 2009.
Japan already has its 800 million yen (about US 8 million dollars) missile defense
system, including two Aegis destroyers carrying Standard Missile-3 (SM-3) interceptor missiles and several Patriot Advanced Capability-3 (PAC-3).14 After the
Norths April 5th missile launch, the Japanese government moved immediately to
set aside additional scal spending to help each of all municipalities (local governments) introduce a satellite-based warning system for missiles and natural disasters.
Japan intends to nance individual municipalities with their own J-ALERT system (costing an average of 6 million Japanese yen, equivalent to about US 600,000
dollars per unit) under a supplementary budget for scal 2010. Japanese enhanced
12 Kim Jong-Il, having had a stroke in summer 2008, has been less inuential over the military
and has delegated a considerable amount of power to his brother-in-law Chang Sung-Taek and
expects to put one of his three known sons on the throne. It is noted that the third son 26-year-old
Kim Jong-Un, took up a low-level post at the defense commission several days before the Norths
Parliament reappointed the senior Kim as the commissions chairman on April 19, 2009.
13 Kim Jong-Il appointed his brother-in-law Chang Sung-Taek (63) (who is the husband of Kims
sister Kim Kyong-Hui) to a powerful seat, one of the newly expanded 13 standing members of the
National Defense Commission at April 9, 2009 Supreme Peoples Assembly. This is seen as the
most likely choice to take over power should ailing Kim die suddenly. He could also mentor one of
Kims three known sons if he decides to groom them for succession. Chang, an economic specialist
considered pragmatic, suffered career setback in 2004 as a result of a power struggle in Pyongyang,
but was seen returning to Kims inner circle in 2006 when he attended a reception hosted by the
National Defense Commission. He, the youngest member of the National Defense Commission, is
likely playing a key role in preparing for the post-Kim era. Probably, 26-year-old Kim Jong-Un,
third son of Kim Jong-Il is being groomed as his fathers successor, as the 67-year-old leader Kim
is still recovering after limping after a stroke in August 2008. See Footnote 12 above.
14 SM-3 s can cover most of Japan and each PAC-3 has a defense range of 20 kilometers.
138
military expenditure can be interpreted as one good evidence of prolic economics

involved with military preparedness, which is partially attributed to the Norths ploy
with its economics of guns.
6.4 The Economics of the Norths Nuclear and Missile Tests

Today, the world is instantly connected like a spider web without borders. Robert
P. Warren pointed that in that time he learned that the world is all one piece. He
learned that the world is like an enormous spider web and if you touch it, however
lightly, at any point, the vibration ripples to the remotest perimeter and the drowsy
spider feels the tingle and is drowsy no more. . . . 15 Indeed, any external shock anywhere in the globe may quickly inuence everywhere in either degrees depending
upon the wave of its bang effect.
The effects of the Norths nuclear and missile tests on the world nancial
markets are mixed. Immediately following August 31, 1998, when North Korea
launched its Daepodong 1 missile, the worlds stock markets reacted surprisingly
upward (instead of downward) along with a dollar rate rise. On the other hand,
the September 1, 2001 US terror attack caused world stock prices, dollar rates,
and world interest rates to drop instantly. The North Korean missile launch (March
10, 2003), its declaration of nuclear weapon development (February 11, 2005), its
nuclear test (October 9, 2006), and its rocket launch (April 5, 2009) have so far
had no signicant inuence on South Korean markets as well as world nancial
markets in contrast to relatively angry rhetoric in Seoul, Tokyo, and Washington
while most European cities remained indifferent. This shows that the world nations
do not buy North Koreas real capability of threatening the world politically and
economically. If it were not under Beijings tutelage, the Norths existence would
largely be ignored whatever brinkmanship the deformed regime may employ. South
Koreans are much more unresponsive to the Norths scoundrel which, in fact, lacks
any robustness in terms of physical strength. With no regard to the Norths tests,
South Korean economy continues its normal trends over time, as South Koreans
are doubtful that the North is really capable of carrying out its threats. The Souths
short-term economy is more dependent on both domestic and world nance and
market conditions rather than any policy move in the North, even though there is
the potential for the economy to be adversely affected if war did break out in the
Peninsula.
If an economy is concentrated toward heavy industry at some take-off stage of
growth, then investment in military technology (like rockets, satellites, warships,
and so on) could have some accelerating boost effects for the economy as a
whole through its forward and backward linkages on overall sectors. There is plenty
of research evidence to support the economics of military spending, not only the
employment effect but also skill training effect of military cadets. There are
15
Quoted from Murrel (1990) p.44.
6.4
The Economics of the Norths Nuclear and Missile Tests
139
also pro-and-con arguments regarding whether military spending is merely consumptive and non-renewable particularly when the economy is still primitive and
at a less-developed stage. It depends, but in an impoverished and isolated economy
like North Korea, increased spending in the military sector would surely harm the
people economically because other sectors could not afford to grow. Channeling
most resources into beeng-up the military sector to the detriment of others would
have a great effect on the majority of the poorly nourished people, resulting in
the height and weight of average people as in North Korea becoming shorter,
smaller, and weaker over several decades. There is no question that weak physical health attributes affect the average workers productivity in North Korea (only
one-twentieth) than that of average human capital in South Korea. Inefcient use
of resources for military-rst tenacity at the cost of daily necessities is certainly
the main cause of the dichotomy of North Korean policy makers. The Norths
military-rst policy also makes its counter partner in the South divert scarce
resources to military defense, as it also is likely to affect Japan as cited above. Such
a diversion of resources to the military sector would constitute the negative externality resulting from the diseconomy of the Norths adherence to nuclear and missile
developments, although in both South Korea and Japan (which are now at the economic stages of mass consumption and beyond) the increase in military spending
could have some positive linkage effects to revive their respective economies during
the global recession.
The current military capability in terms of quantity and quality between the
two Koreas are unclear as to who is superior. North Korea has a 40-year-long history of missile development since it emulated the old Soviet Union and Chinese
technologies. North Korea, now with its own capability of developing middle and
long-range missiles (ranging from 300 kilometers to 2,500 kilometers), has developed a formidable ballistic missile with a 3,200 kilometer range (estimated total
weight of 70 tons) as was launched on April 5, 2009.
To both South Korea and Japan (as well as the United States in the not so distant future), the Norths missile power is an integral part of a nuclear threat. While
South Korea is exposed to the Norths nuclear threat, its missile defense capability
is severely limited, but greatly covered by US forces in South Korea. Currently, the
US forces in Korea deploy PAC-2s and PAC-3 s in South Korea (ofcially, Republic
of Korea) to intercept any of the Norths missile attacks toward the southern part
of the peninsula. In case of a Korean contingency, the United States may dispatch
Aegis ships armed with SM-3s.
South Koreas SAM-X system,16 if applied in parallel to general ROK
United States cooperation, may add more defense capability. As a matter of fact,
South Koreas defense depends greatly on ROKUnited States missile defense
cooperation, although the proximity to North Korea (ofcially, Democratic Peoples
16
SAM-X is the codename for South Koreas program in the future upgrading of a surface-toair missile system, enveloping plans to acquire early-warning ballistic missile systems, an Aegis
destroyer, and PAC-2 ATM.
140
Republic of Korea) does not make any missile defense system so effective. A North
Korean missile to be launched near the military truce line can strike Seoul in less
than a minute.
It is technically not feasible for a South Korean defense system, if any, to detect
and interdict incoming missiles like Rodongs or Scud-Cs, more than half of whose
ight is exo-atmospheric and occurs in the blink of an eye.17
A comparison of military strength in terms of quantity (numbers only) between
the two Koreas as of December 2008 is shown in Table 6.2.
Table 6.2 Comparison of military strengths between the two Koreas (end of 2008)
Army (persons)
Navy (persons)
Air Force (persons)
Sub-total
Corps (units)
Divisions (units)
Mobile Brigade (units)
Tank (units)
Armored Vehicle (units)
Field Artillery (units)
Emanate Artillery (units)
Battleships (units)
Landing (Ship) Tank (units)
Submarine (units)
Air-ghter (units)
Helicopter (units)
Reserve Army (numbers)
South Korea
North Korea
522,000 (19,000)
68,000
65,000
655,000 (19,000)
10 (2)
46 (4)
15 (4)
2,300
2,400 (100)
5,200 (+100)
200
120
10
10
490 (10)
680
3,040,000
1,020,000 (+ 20,000)
60,000
110,000
1,190,000 (+20,000)
15 (4)
86 (+1)
69
3,900 (+200)
2,100
8,500
5,100 (+300)
420
260
70
840 (+20)
310
7,700,000
Note: numbers in parenthesis is the change of numbers over 2006.
The data given in Table 6.2 was from the 2008 White Paper of Defense published
by the Ministry of Defense of the Republic of Korea. As shown, North Korea leads
South Korea in most of the comparable data when viewed from the angle of military
quantities, but in terms of quality of weapons such as accuracy and sophistication,
South Korea coupled with the US forces in Korea is known to be no less powerful
than its counterpart. But it is not hard to believe that military authority always needs
to show its relative disadvantage (inferiority) as well as some prole of strains
over the enemy in order to secure more funds from the annual national budget for
the military sector. On the other hand, South Korea needs to reboot the ROKUnited
States alliance that has been going downhill not only because of the Korean antiAmerican sentiments and calls for autonomy implanted by former liberal leaders
Kim Dae-Jung and Roh Moo-Hyun, but also due to the new US strategic exibility
policy taken after the September 11, 2001 terror attacks.
17 See
Kim (2008), p. 51.
6.5
The Political Economy of Korean Unication
141
According to military experts, South Korea is now ahead in its spaceship technology but behind in rocket technology than North Korea. Table 6.3 compares (with
no further comments) the rocket technology between the two Koreas.
Table 6.3 Comparison of Rocket Technology between the Two Koreas
Division
South Korea
North Korea
Name
Length
Diameter
Weight
Propel Method
Flight-height
Carrier
Carrier Weight
KSLV-1 (small satellite)

33 meters
2.9 meters
140 tons
1st stage by liquid and 2nd by
solid fuel
300 kilometers
Science Satellite-2
100 kilograms
Developer
Launch Date
Cooperation with Russia

2009. 7 (plan)
Eun-Ha (Daepodong-2)
32 meters(estimate)
2.4 meters (estimate)
about 70 tons (estimate)
1st and 2nd by liquid and 3rd by
solid fuel
200300 kilometers (estimate)
Kwangmyungsung-2
Maximum 1000 kilograms
(estimate)
North Korean Scientists
2009. 4. 5 (actual)
Source: South Koreas Space Research Bureau (April, 2009).
Refer to http://kr.news.yahoo.com/etc.text.htm/articleid=2009040602535562210
(2009-04-07)
South Koreas missile development had been so far restricted only to its capacity
limits of less than 180 kilometer range and 500 kilogram weight by the ROKUnited
States agreement made in the 1970s. The agreement was revised in January 2001 to
allow South Korea to expand its range limit up to 300 kilometers in 3 years, after
North Korea launched its Daepodong-1 of about 2,500 kilometer range in August
1998, following its Rodong-1 of 1,300 kilometers tested in May 1993. In order to
target all corners of North Korea, South Korea has to have a missile with at least a
550 kilometer range.
As a result of the Norths April 5th rocket launch, new voices are emerging in
Seoul asking for the recovery of nations missile rights, which are still being regulated by the ROKUnited States defense alliance pact and missile non-proliferation
compliance with all members of MTCR (Missile Technology Control Regime).
Meanwhile, South Korea plans to develop its own early warning radar system, which
will have a 1000 kilometer range by 2012 with a total investment of US 300 million
dollars.
6.5 The Political Economy of Korean Unification

The political economy of would-be Korean reunication must be balanced, as in all
political affairs as well as in individual behaviors, in terms of potential benets and
costs over due time. The hope and despair would be unavoidably mixed in the course
of the process regardless of either implosion or explosion and how it comes either
142
in gradual mode or in a big bang. The lighter side of the unication may include
an enlarged economy in terms of expanded capacity of land, people, endowment of
natural resources, and markets, not to mention the potential savings due to the end
of political rivalry between the two Koreas.
Economic integration will contribute not only to bring forth national external
competitiveness but also to enhance national spirits above all. All such direct and
external benets (and costs as well) would, of course, be neither fully realizable nor
accountable until the occurrence of physical integration.
The noticeable physical and pecuniary effects, if not emotionally, will come
rather slower than expected over several years or decades, as learned from the economic consequences of German unication. With the fall of the Berlin Wall in 1989
and the ensuing reunication of East Germany with West came great expectations
for a renaissance that would presage an even stronger German economy. Although
the cost that involved with moving an antiquated socialist economy toward its capitalist counterpart was anticipated to be signicant, German industrial efciency was
expected to quickly overcome the challenges that would be encountered.
However, things turned out rather differently in reality, perhaps due to misguided
macro-economic policies rather than monetary costs of unication, as Germany suffered poor economic performance and rise in public debt on unication for nearly
the entire 1990s. The deterioration in public nances and the countrys exceptionally
poor economic performance during most of the 1990s was a direct and apparently inevitable result of German unication. But the German government and its
Bundesbank (Germanys central bank) soon put in place scal and monetary policies; that is, higher taxes, increased social security contribution rates, spending cuts,
aimed at reducing borrowing, and in turn, containing the inationary pressure. The
overall results were low ination and sound nancial and structural balances, which
provided somewhat for unied Germany to travel a long way to reach to about US
40,000 dollars per-capita income in 2008. Nevertheless, the unied Germany continues to have lingering negative results, including relatively high unemployment,
slow growth, and the disappointing economic developments in eastern Germany
since unication.
A few years after the unication, West Germanys economy coped rather
smoothly with the strains that unication put on its resources. In fact, real GDP
grew at a solid rate of 5% in both 1990 and 1991. Investment, potential output, and
labor productivity grew rapidly, with the result that supply-side growth was strong
and broadbased. Employment growth was evenly distributed and included people
previously classied as structurally unemployed. Moreover, the inux of labor from
former East Germany provided important supply-side relief, so that general labor
market pressures were abated. But soon Germanys misguided macro-economic policy paradox (mixed with pro-cyclical scal policy and counter-cyclical monetary
policy) began to harm the post-unication era of German economy.
If it had not been for the scal-monetary policy paradox where the German
government embarked on scal consolidation in a pro-cyclical and inexplicably
aggressive way and while the Bundesbank, in turn, magnifying the depressive
effects of scal policy by tightening money supply, the economic performance could
6.5
143
have been much better.18 More cohesive policies could effectively have stabilized
the economy as it absorbed the cost of unication. Jorg Bibow (2001) argued that
tight, pro-cyclical scal and monetary policies that dampened economic activity
after the rest of 1990s were major causes of anemic growth and high unemployment
for which the countrys nance department and central bank were responsible rather
than two Germanys unication.19
The counterproductive results of high unemployment, slow growth, and scal
deterioration were mainly due to the Bundesbank, because the German central
bank was obsessed with controlling ination while mistakenly underestimating the
amount of spare capacity and supply-side elasticity of the economy. If it had not
been tight money, the united economy could have achieved better growth.
As in the case of Germany, the government macro-economic policy in xing
the economics of a nation is very important. No less important is, of course, the
nations preparedness to face up to real problems, and not to ignore the importance
of the quality of people in place. In 2008, the world witnessed the collapse of a
host of big nancial institutions everywhere, as small groups of traders and business
executives in these once venerable institutions brought global nancial systems to
ruin with their reckless risk-taking, thus bringing the world to the worst economic
calamity since the 1930s.20
The experience of the two Germanys illustrates that the post-unication economic policy is one of the most important factors that Korea must consider in order
to minimize the negative externality and loss of efciency that will be accompanied
by the unication process.
Ofcial estimates of scal transfers from western to eastern Germany are about
DM 180 billion per year since 1991, or roughly 6.5% of western Germanys GDP.
This gure is the sum of all unication-related expenditures and tax relief. The portions of both this expenditure and tax relief partially come from federal revenues
generated in eastern Germany that must be deducted to yield proper net transfers
from western to eastern Germany. Thus, the net transfers are some DM 120140 billion per year since 1991, or roughly 4.5% of western Germanys GDP. Considering
such gures (4 or 5% of the Souths GDP) applicable to the Korean case, some
may argue that unication will likely bring too heavy an economic burden on the
shoulders of South Koreans who are supposed to absorb the North. Although such a
scal transfer from the South to North Korea may constitute a big share of unication burdens, the amount of such net transfers is not an appropriate measure of the
18
Jorg Bibow, The Economic Consequences of German Unication: The Impact of Misguided
Macroeconomic Policies, Public Policy Brief (No. 67, 2001), The Levy Economics Institute of
Bard College, p. 8.
19 Ibid, p. 6.
20 For example, a handful of oligarchs and elites have contributed to their countries economic
downfall or brought businesses to ruin in the pursuit of their own selsh interests as witnessed historically in Russia, Latin America, Africa, and Asia as well as at companies such as Bear Stearns,
Lehman Brothers and AIG more recently in the United States.
144
nancing requirements resulting from unication. Income and employment multipliers to be generated from gross scal transfers to North Korea will also benet
South Koreas public nance sooner or later by raising exports to North Korea and
abroad as well. Therefore, actual nancing requirements would be expected to be
considerably lower than any total numbers suggested in terms of actual transfer
money.
The unication will balance the pecuniary benets and costs over dynamic process and time, while it will surely make its positive externality exceed its negative
externality for the nation. Although the two Koreas have followed diametrically
opposite paths of development in politics and economics, they have been rooted in
common culture, language, and family. Once the two are united, Korea will be able
to advance its economic, social, and inherent national tradition and superior cultural fronts by diverting its national energy, talents, and other resources from where
they were once used to compete against each other. Nonetheless, Koreans under
one national ag will likely recover its high-spirited identity and will be able to
take more responsibility as well as a more assertive role in world affairs. No less
important are the conceivable implications of the unication of Korea for the evolution of the more cooperative multi-national economic relations both in Asia and
on a global scale. One Korea to be re-constructed on a solid neutral state which will
keep distance from all world rivalry politics and military conicts will contribute
to balancing the power among China, Russia, the United States, and Japan in the
region.
The experience and lessons gained from the post-Vietnam reunication also suggest some inference for Korea. Vietnam today after its reunication in 1975 does
present very challenging economics of hope (or no-worry) for Koreans even if the
latters path to national unication would differ from that of Vietnam. Vietnam,
which has 54 different ethnic groups had divided and followed opposite political
and economic systems for almost two decades that followed the Geneva Accords
in July 1954. North Vietnam was based on an attempt to construct socialism like
North Korea, while South Vietnam was set on the capitalist path of development
like South Korea. After the collapse of the South Vietnam Government in August
1975, the communist Ho Chi Minh Government succeeded in achieving a political
and socio-economic unication overcoming and solving many problems thereof,
while accelerating its economic reform, adopting open-door policy, free pricing
system, and nancial market liberalization. Since then, Vietnam has entered a new
stage of economic development with the average annual GDP growth rate exceeding
7.5% annually.
Currently the per-capita income is still no more than US 1,200 dollars, but
Vietnam with its population of more than 83.2 million (about 44 million of working
age population) is now being overowed with national vitality and hope for a better future with much improved individual and political freedoms. Integration of the
two systems into one offers new motives and reasons to leaders and people to compete, accommodating more exible and pragmatic political and economic policies
than when the two were divided and ghting against one another.
6.5
145
Likewise, the reunication of Korea will induce all Koreans to work together
in unity with a new hope and dream and the rst unied generation will tell their
offspring that oneness is always worthier than division, whatever the cost of unity
might be.
As for the cost of Korean reunication (possibly due to either total collapse of
a regime reminiscent of Romanias Nicolae Ceausescu in 1989 or other unexpected
causes), factors to be considered are too diverse to count. To list a few including contingency expense, pecuniary and non-pecuniary immediate costs needed to
deal with waves of emigration, peoples adaptation to new circumstances, structural
unemployment, post- military role readjustment and disposal of weapons, violence
and demonstrations, as well as housing problems and so on, are all in important
order. However, if the reunication were to come in such a mode (that is, more or
less peaceful and gradual process) as was in Germany after the Berlin Wall fall in
late 1989,21 it might be considered in terms of time-structural costs and benets
involved with the SouthNorth monetary, economic, and social integration process.
As an example, East and West Germany ofcially signed a state-to-state pact on
monetary, economic and social union (MESU) of the two Germanys on May 18,
1990, by which East German socialist economic order was legally integrated into
the social market economic order of the West, effective as of October 3, 1990.22 In
order to integrate into one unied system, Germany took, rst of all, the measure
of monetary union between two separate currencies used theretofore respectively in
the two Germanys. The exchange rate between the west and the east currencies was
politically set at about a one to one ratio, despite then the actual shadow rate which
was approximately 4.4: 1 between East Germanys Mark and West Germanys DM
(Deutsche Bundesbank Mark).
The reunication cost can be considered largely of two categories: consumptive
cost and recoverable cost. The benet side is also considered in light of the aspects of
not only cost-savings from two rival and thus duplicative expenses (that is, military
and security budgets, diplomacy expenses) but also economic, political, and social
benets and externality (that is, larger land, labor forces, markets, resources and tobe-enhanced human rights, democracy, reduced war risks, higher national spirits).
They are all not necessarily static concepts for cost and benet but are dynamic over
time. Therefore, any attempts to estimate the would-be cost-and-benet of Korean
reunication is very challenging, but the results would likely not be of any useful
21
See the appendix on chronology of the German reunication process.

The de Maiziere administration of East Germany and the Kohl administration of West Germany
concluded the monetary, economic and social union (MESU) on May 18, 1990. As the treaty went
into effect just 6 weeks later as of July 1, 1990, nancial integration was carried out dramatically. More importantly, about seven and a half weeks later on August 23, the Peoples Council
of East Germany decided to reunite with the West on October 3, and to hold a general election on
December 2. On August 31, 1990, the two Germanys concluded a reunication treaty. In Moscow
on September 12, 1990, two Germanys, the United States, the United Kingdom, France, and Russia
removed the impediments to the reunication of Germany, by signing the 2+4 Treaty. The political
reunication of the two Germanys was nally achieved on October 3, 1990.
22
146
value in reality, as it would be nearly impossible to take account of all relevant

factors in terms of their internalized values over time, if not a mere intellectual
exercise for any concerned researcher. The estimates will also depend on assumed
cost and benet categories, needless to say. Broadly speaking, the cost must be equal
to the benet if measured at the end point of the unication process.
For example, we will employ a somewhat simple but realistic approach to estimate a pecuniary amount of money (dollars) for national reunication. First of
all, we will dene the cost (or benet) of reunication as a lump-sum investment
requirement to equalize per-capita income between North and South Koreas. Since
it is contrary to the economics of hope to level down the higher side of income to
the poor side income, it is suggested that investment must be implemented so as to
make the poor income level up to the rich. Of course, it is possible to include time
dimension in terms of total number of years it would take for the poor to catch up
or to converge with the rich. As it is a matter of calculation for either compounding
ow of investments over a continuous period or for a static (or relatively shortperiod) lump-sum investment, we simply choose a total lump-sum investment as if
it is needed at the base year, for simplicity purpose.23
Now the cost of reunication (which is alternatively the total investment required
to make the two sides of per-capita income equalize one another at a target year) can
be estimated in a straightforward manner. Based on pre-xed values of marginal
capitaloutput ratio, actual per-capita income gap between the North and the South,
and the number of total population of the short income side (that is, North Korea),
we estimate the investment cost (which is conceptually equal to benet in a national
unity) in the formula as follows.
Note that I = Kt Kt1 = K == (K/Y) . If the difference of percapita income (Y) between two Koreas is assumed to be Y in real money terms
and assume that marginal capitaloutput ratio (K/Y) is approximately about 3
and North Koreas total population is POP, then the incremental investment needed
to make the per-capita income equal will be I (or I) = 3 Y POP.
Based on Table 6.1, the NorthSouth per capita income gap in 2007 was US
18,905 dollars (= $20,045$1,140), and the Norths population estimate was about
23.2 billion. Using the data, the direct cost of investment at the end of 2007 is
estimated to be almost US 1.32 trillion dollars, which slightly exceeds the level of
South Koreas GDP of that chosen year. For the year 2000, it was about US 670.84
billion dollars while it amounted to about US 307.50 billion dollars in 1990.24 It
shows a trend of doubling the cost every 10 years as the income disparity widens.
23
Total sum of continuous investment cost will be estimated by the formula: IT = Ai (1 + ri )t ,
where IT is total investment, Ai is ow of annual variable investment (where amount A is assumed
to change annually as Ai indicates different amount of investment in each year i ); ri is annual
variable interest rate; and t denotes the number of periods from 1 to n (end year).
24 See also Eui-Gak Hwang, ibid. (The Korean Economies: A Comparison of North and South,
Clarendon Press Oxford, 1993), pp. 314317, for earlier estimates using a range of incremental
capitaloutput ratios.
6.5
147
In sum, the cost of investment depends largely on the expected per-capita income
gap between the two Koreas, the total number of people in the country that have
relatively lower per-capita income, and the factor of incremental capital output
ratio (which is realistically assumed to be about 3) of that country. Also the cost
will be related to the timing, the extent of socio-economic friction, and the ease and
the speed of integration.
Neoclassical economics teaches us that human beings are very quickly adjusting
to new situations and that the big bang will be basically unproblematic. The possibility of slow and costly adjustment or high friction while acknowledged in
general by most institutional economists, is treated as rare. The neoclassicists support shock therapy over gradual approach to transform a command economy
into a free market because they believe that the big bang will be less costly than
the gradual approach. In reality, however, such a transformation involves changes of
not only human nature factors, but also physical and human capital, enterprise structures, physical and social infrastructure as well as social values that would drag on
for an extended period of time in the united system. It is a matter of empirical ndings that will also be subject to many factors such as therapy timing, circumstances,
ethnic characteristics, variances of both systems and income gaps, and many others.
Additionally, it must be noted that the direct investment estimate above tends
to underestimate the real aggregate cost, if any, because the direct investment cost
does not take into account the external cost to be incurred in forms of psychological, sociological, and political factors among others. If we added any internalized
externality costs to the above direct investment costs, the gure will expand to a far
greater gure, perhaps more than double the direct investment cost. A quick rule
of thumb calculation amounts to about US 2.64 trillion dollars based on the 2007
data. It is indeed an astronomical gure in terms of lump-sum money. If anyone is
opposed to the reunication because it is too much of a national burden to bear, then
the only comforting word to this is that the investment will be distributed over years
so as to spread investment burden over the years. Of course, however, if we want
to regard the direct investment cost as benet accrued to Korean people as a whole,
then the external cost must be internalized to be considered as pure net cost after
deducting internalized positive externality (external benet of the re-unity) thereof.
But as already mentioned briey, the internalization for all externality (both positive
and negative) accompanied by the reunication process is literally immeasurable, if
not impossible.
In conclusion, the costs of transition and reunication are going to be either
much higher depending on what are included as costs, or much smaller if the cost
is counted as a benet in the end for all Koreans. But it is evident that the larger the
income gap between the two states and the greater the friction factors, the greater
the costs of reunication will be. As per-capita income gap gets larger and deeper
over time, the estimate for investment costs greatly increases as time passes by.
Unless North Korea changes its overall economic and political landscape dramatically toward a more open and market-oriented direction, it is not likely that the
gap will narrow. Said in a different way, it is very unlikely that the economics of
convergence (in economists jargon that convergence applies when a poor economy
148
tends to grow faster than a rich one) will occur on the Korean Peninsula. It is likely
that the incumbent Norths leadership will never risk its status quo by loosening
its st on its current political and economic system. If so, the cost of reunication
will get smaller, the sooner it is achieved. Thus, the economics of attempting early
reunication by all means is more positive and less costly for the nation unless
North Korea voluntarily anchors itself in the wide and robust stream of todays free
market-oriented world.
Chapter 7
Policy Priorities for the Unified Korea
And if at another time I announce that a nation or kingdom is to

be built up and planted and if it does evil in my sight and does
not obey me, then I will reconsider the good I had intended to do
for it .. . .
(Jeremiah 18:9-11.)
I will drive the northern army far from you, pushing it into a
parched and barren land, with its front columns going into the
eastern sea and those in the rear into the western sea. And its
stench will go up; its smell will rise up.
(Joel 2:20.)
Therefore keep watch, because you do not know the day or the
hour.
(Matthew 25:13.)
7.1 Introduction
The economic and political integration of a unied Korea has always been the
national hope of both Koreas, but in reality the two sides have been pursuing the
integration in a way that would favor their respective but completely different systems that each has antagonistically maintained since the division in 1945. The origin
of the nations division was in large part traced to the ideological split among
independent movement leaders after the World War II, whose misguided political
ambitions underlined the stumbling blocks that did not allow them to compromise
and to unselshly unite. After the rst cornerstone was mistakenly placed and xed,
it was not possible for the leaders to acknowledge that a mistake had been made. In
addition, the special interest groups as well as specic situations have not made it
possible for the separated to be in accordance, since either side was not willing to
completely give up its respective ideological philosophy. The two sides have thus
been in endless conict and have maliciously blamed each other for the nations
division and the resulting pains. In a bitter rivalry for over a half century, the competition seems to have almost driven the North into a dead-end. Toward the end of
the last century, a powerful force wiped away the landscape of communist bloc

149
150
7 Policy Priorities for the Unied Korea
countries. A decade of subsequent turmoil revised and reformed the theretofore

atlas of most communist countries. The last remnant of Stalinist-type communism
resides in the Democratic Peoples Republic of Korea, which is, in fact, neither
democratic nor a peoples republic.
Subsequently, North Korea has lost most of its former trading partners. The isolated Juche doctrine, in addition to the collapse of the communist bloc in East
Europe, has only added to its worsening economic foundation, which has been
inherently inefcient. The North is incapable of meeting its peoples basic needs,
such as providing food. But the leadership in Pyongyang has nonetheless developed
very expensive rockets (or disguised ballistic missiles) and nuclear bombs and it still
manages to retain its grips amid rumors of widespread famine. The puzzle cannot be
easily solved without (1) a full understanding of the North regimes brutal political
rule and ruthless suppression of human rights,1 (2) Kims gift for political manipulation, (3) North Koreas use of brinkmanship diplomacy, and (4) Chinas tutelage.
When the famine-stricken North bluntly rejected food offers from South Korea in
summer 2008 and from the United States in spring 2009, many North Korea watchers wondered how it was going to meet the short supply if China did not provide
support. While a U.N. Security Council is still in debate on imposing strong economic sanctions against the North in condemnation of the Norths April 5, 2009
rocket launch, breathless Yonhap news in Seoul wired that many full loaded trucks
are moving busy into North Korea from China side across the Yellow river bridge.
On April 14, 2009, North Korea asked the International Atomic Energy Agency
(IAEA) inspectors to leave the country in a strong response to a U.N. Security
Councils non-binding presidential statement (condemning the Norths rocket
launch on April 5 in violation of Security Council resolution 1718 that was issued in
the wake of its nuclear bomb test on October 9, 2006) made a day earlier. The communist nation also announced that it would never again take part in the six-nation
nuclear disarmament talks and would restore the plants at Yongbyon that produced
weapons-grade plutonium. Soon after the strong reaction from Pyongyang, the
United States made a statement urging the North to return to the six-nation forum.
The United States may likely offer direct talks to woo it back to the Six-Party dialogue as hinted by Hillary Rodham Clinton. Clinton criticized Pyongyangs move,
but added that the United States is hopeful of eventually achieving a breakthrough
by direct talks with the North. That is exactly what the communist nation intends:
to prompt the US to hold bilateral discussions on the normalization of diplomatic
relations. The Norths boycott of the Six-Party talks also looks like a snub to China,
which has played a role of chairmanship. But China is always keeping an open door
to bilateral talks with North Korea. More importantly, however, it is very doubtful that the six-nation talks (the two Koreas, China, Russia, Japan, and the United
States) would be successful if they resume. The US-led members of the talks would
1 It
is known that there are more than 150,000 political prisoners in labor camps today; that is,
one political prisoner for every 155 citizens. To know about the terrifying life in the North Korean
gulag, read Kang and Rigoulot (2000).
7.1
Introduction
151
likely never win in this pull-and-push gamble with the North. To join the world
nuclear club, Pyongyang seems to have so far deliberately studied and set up its
strategy to deal with the US-led opposition.
The Norths military-rst policy has been intentionally deploying a rotation
of push-and-pull strategies with a series of mixed of policies, namely, creating
a reputation as a member of the axis of evil by hacking two American ofcers
to death in Panmunjum JSA (Joint Security Area) on August 18, 1976; by shooting down a Korean civilian air ight with 116 passengers on board in 1986; and
by breaking the IAEA rules in 1993, including the following: (1) repeating partial
exposition and hide policy of its nuclear and missile programs (19932009); and
(2) harmonizing its brinkmanship diplomacy with country risk management (2003
2009). In the end, North Koreas tactics is to blame the other side for all failures on
the table. All such strategies and tactics are deliberate and purposeful schemes; they
are not accidental events. In general, most communists only use and sacrice others
thoroughly for the sake of achieving their selsh-motivated objectives.
On the other hand, most countermeasures taken by the South, under the protection of the United States, were mostly instant and unprepared beforehand. Even the
Norths rocket launch was well prepared and calculated in advance for what it could
gain. Kims gift for reading the would-be responses from the United States, Japan,
South Korea, Russia, and China is far beyond the comprehension of these nations.
Once it knows the others, it dares to experiment without fear for whatever it wants
to do. In particular, it regards that the United States as nothing but a paper tiger
that likes to talk but will not risk real danger. More importantly, the North calculates
that the United States will seldom use its power to attack the North in face of prodigious Chinas military presence. Instead, the US may prefer to take a back seat if
possible in most Asian problems.
If so, North Koreas leadership can behave as if it is an ox without its yoke and go
its own way. But a time will come sooner or later when its exploited people will no
longer tolerate the ruthless oppressor and dictator. People are endlessly being brainwashed to be red and to wait for future, but their real hearts are unchanged as
planted by creator in the beginning. Many North Korean elites who have continued
to support their leadership with little regard for the plight of their people must now
fear that the day is coming where the people will rise up against their brutal rule. On
that day, the arrogant ruler will be put to shame for all the wrongs he and his regime
have done to innocent people. The erce anger will be poured out; the raging of
oppressed people will rage against the tyranny and his cadets, making them the desolate ruin bringing the end to those destined for the end. Is it not written everywhere
(see Isaiah, Chapters 17, 18 and Zephaniah, Chapter 3) in the Holy Bible?
In fact, South Korean administrations have so far feared that North Korea might
implode, which would produce many problems such as refuge exodus and huge
unbearable costs for national integration. Therefore reunication either through the
Norths implosion or through other ways is what South Korea is trying to avoid for
as long as possible until the per-capita income of the two sides converges. But the
conversion will not likely occur without integration. The Norths paranoid ruler is
not likely to turn away from his evil, nor to reform his ways and actions. The North
152
regimes collapse to be followed by national reunication will come when we least

expect it, and surely with it the best ways to manage all costs and problems thereof.2
South Koreans just need to be watchful and to prepare for themselves for that day.
There are numerous things that Koreans need to prepare toward national reunication as there will be many unexpected problems and both short- and long-term
issues to deal with in the process of national integration. Both preliminary and
follow-up measures would vary depending on how the reunication will be processed.
Integration into a command-type political and economic system would differ
from a unity into a free market and democratic economy. Gradual integration may
require, of course, policy measures far different from the case of a big-bang mode.
Planning a new political and economic system in a unied land is another important matter to take into consideration. In this section, therefore, unication policy
issues (priorities) will be discussed in a general framework with no regard to the
speed and mode of reunication, although we hold out hope for the sudden collapse
model for the incumbent Kims regime in the North. One possible proposition is
that the nation will be absorbed into South Koreas free democratic market economy, although politically the unied nation may assume a neutrality stance in the
world politics. Naturally the discussion will evolve with a clear perception that the
integration process is to be made by South Koreas leadership at the wake of the
dissolution of North Korean regime.
To begin with, we assume that hard-landing is the only way to lead to
national reunication; namely, a model of implosion that is to be ignited as the
masses rise up against the Norths brutal but unsustainable regime. This hypothesis may not work in the near future if Beijing, Seoul, and Washington provide an
unconditional steady provision of foods and other assistance to the regime because
of anxieties about the consequences of North Koreas sudden collapse and about the
political price to be exacted if a different-than-expected situation arose in the postregime change. Otherwise, we assume this would surely come sooner or later as
North Koreas masses are tempted by the material conditions and individual freedom
of their neighbor to the South.
In contrast to the hard-landing scenario that would result from an unexpected
collapse of the North Korean regime, one can argue that gradual integration or the
soft-landing model is possible and preferred. But observing North Koreas stance
to keep its Juche system teaches us that a soft-landing despite its alleged advantage
over a big-bang approach is not to develop in Korea, thus cementing a possible
permanent status quo (division). It may be argued in both words and theory that the
soft landing is less costly, but in reality a gradual integration between two extreme
ideological rivals is not likely possible unless one side faces a sudden death. More
2 In
connection with this issue, refer to the following messages in the Bible: Who of you by
worrying can add a single hour to his life? Since you cannot do this very little thing, why do you
worry about the rest? Consider how the little grows. They do not labor or spin. Yet I tell you, not
even Solomon in all his splendors was dressed like one of these. (The New Testament, Luke 12:
2527.)
7.2
Contingency Tasks for a Post-Kim Jong-Il Era
153
important, it is almost impossible to get Korean communists to compromise with the

Souths capitalists, just as it is impossible to mix re and water. Those who support
a gradual approach are miscalculating that the North and the South could converge
into one unied philosophy over time. Otherwise, they must be favoring permanent
division instead of national reunication, because they believe that the reunication
will be of no help for both sides. In other words, indeed, the two Korean sides do
not oppose national unity, but the two sides have apparently different perceptions on
the integration method and approach.3
The path of Koreas post-implosion must not be out of reach for South Koreans,
in that South Korea will take a sovereign control over the process of transition with
full support and the close cooperation with neighboring countries like China, Japan,
Russia and the United States among others.4 With this in mind, this chapter will
discuss policy priorities for a united Korea. First, we will consider some immediate
steps to be taken at an occurrence of the big bang, to be followed by some in-depth
analysis of key transitional economic policies to be taken in the process of national
integration as well as problems thereof.
7.2 Contingency Tasks for a Post-Kim Jong-Il Era

Since summer 2008, reports began circulating in the world media that Kim Jong-Il
has moved his government to an underground bunker ofce, and for about 6 months
he had not appeared in public, inviting many outside news sources to speculate about
a possible stroke and his serious health condition. However, he began to reappear
in public in days before and after the Norths April 5th rocket launch in 2009. His
photo taken with a group of scientists and engineers to congratulate themselves for
their successful rocket launch and released by the Chosun (North Korea) Central
News Agency on April 6 shows him wearing a thick jumper to cover up his haggard
appearance.
Being reappointed as Chairman of the National Defense Commission by the
Supreme Peoples Congress on April 9, 2009 demonstrates that he still has his
full authority, despite his worn-out appearance. After the April 9th meeting of the
3 North
Korea and South Korea both say that the national objective is to achieve reunication.
But North Korea made it clear that inter-Korean relations and cooperation are one thing, and
our fatherlands reunication is another. It says that two states can increase non-political
exchange in economics, cultural, and social domains. But this method cannot be a method for
the improvement of relations between the North and the South for the settlement of the question of our countrys reunication. See National Reunication and Conclusion of Agreements on
Trafc, Correspondence and Trade, Information Bulletin: The Secretariat of the Committee for
Peaceful Reunication of Fatherland (Pyongyang, DPRK), No.86, April 1990. pp. 611. Refer to
the Appendix of this chapter at the end of this chapter.
4 To secure such support and cooperation, a unied Korea must proclaim its neutrality stance
in the regional and international politics, keeping its policy of non-partisanship after national
reunication.
154
Peoples Congress, both discussion and speculation abroad of the possible conditions related to a post-Kim Jong-Il in North Korea ranged from military or collective
rule to the hereditary transfer of power to one of his sons or to Kims brother-in-law
Chang Sung-Taek under some type of protectorate or interim control. The next succession may not necessarily be the same as when Kim Il-Sung passed the baton to
his son Kim Jong-Il. Rather, it may be more of a united leadership where the newly
appointed member of the National Defense Commission such as Chang Sung-Taek,
a secretary and de-facto Kims love-mate Kim Ok, and some senior military heads
working with one of, or more of, Kims sons may come to compromise but with a
very unstable nature of a united leadership. Such a united leadership structure will
be inherently unstable due to hidden conicts of interests among those elites and
particularly being untenable as long as the North is incapable of feeding its people
amid its extravagant spending for its nuclear and missile projects.
We see that Kims sudden death or implosion backed by an inside coup detat will
lead to the total collapse of the North Korean regime, similar to the fall of Romanias
Nicolae Ceausecus regime in 1989. At this juncture, we have two questions: (1)
Is it possible at all for mass demonstrations to rise against the brutal and skillful
communist dictatorship in North Korea? (2) When anti-government uprisings occur
due to the peoples overall dissension or to an internal breach among the elites,
who will North Koreas military eventually side with: Kims close followers or the
protestors?
Any probable incidence of large mass uprisings is seemingly doubtful as Kim
Jong-Il continues to enforce his absolute power grip, which allows no chance of
factionalism or discord going forward. But there is still room for the story to change
in the event of Kim Jong-Ils death or incapacitation due to his health, depending
on the worsening conditions threatening the North Koreans survivability. The latter
case is like an overly inated balloon that will soon burst. Many North Korean people are being tempted by the material conditions and social freedom of their brothers
across the border. The Norths leadership has become increasingly aware that the
NorthSouth often contacts are contributing to the social erosion in the North. It
was unofcially reported that Choi Seung-Chul, a Norths architect who promoted
the inter-Korean relation, was executed in late 2008 for misguiding the people in the
North. As a communist regimes legitimacy erodes swiftly, the masses are likely to
ght to get rid of the disastrous regime. A Romanian-style regime downfall due to
civilian unrest is not at all impossible for the North Korean people now experiencing
the pre-1990 Romania.
But civilian-led uprisings may result in a colossal bloodbath unless the Norths
military protects the civilians by staging a de-facto coup against the ruling class.
Despite Kim Jong-Ils tactics to buy its military favors through his so-called
military-rst policy enacted a decade ago, a considerable number of military forces,
particularly those in lower ranks, might be siding with their family members and
relatives who have been exploited by the communist authorities. In other words,
most members of the North Korean military might not view themselves as a group
separated from the rest of the North Korean society. Such an example was also made
in Romania. The downfall of Ceausescu was swift, because the Romanian military
7.2
Contingency Tasks for a Post-Kim Jong-Il Era
155
led by General Victor Stanculescu avoided escalating civilian casualties by standing

rm against the Ceausescu regime. It was an unimaginable experience, but who can
say that the Romanian experience will not also apply to possible end-game scenarios
in North Korea? While the Workers Party is viewed as being the root of all evil and
Kims pawn, the military (despite of Kims policy priority) is less responsible for the
appalling political oppression and human rights violations, and personality cult, possibly with the exception of a few very high-ranking generals having memberships
in the National Defense Commission.
According to rumors leaked out of the North, students and young people no
longer respect Kim Jong-Il or the communist cadets group. In fact, there is much
vandalism perpetrated against Kim Il-Sung and Kim Jong-Il statues on corners
throughout North Korea. This foretells the possibility of a peoples uprising in North
Korea as time passes.
A contingency situation will likely invite Chinese military engagement into
North Korea to prevent mass refugees and armed people from crossing the borders.
China may attempt to cross into the Korean Peninsula with or without the agreement
of the U.N. Ofcially, China has a non-intervention policy on the peninsula, but the
Chinese reaction would be volatile depending on the circumstances at that time. On
this, South Korea must maintain talks with China, Japan, and the United States to
secure full cooperation on the contingency plan. This will be the important test that
South Korean diplomacy has to pass on its road to a successful national integration. Koreans must also give serious thought to the fact that China, Japan, and the
United States might not want to see the two Koreas unied, contrary to their rhetoric
of supporting Korean reunication. In particular, Koreans must reconsider what it
meant when the Chinese President Hu Jintao sent a friendly message to Kim Jong-Il
expressing his willingness to strengthen the bilateral relationship between China
and the DPRK at the wake of a U.N. Security Councils Presidential announcement
condemning the Norths rocket launch on April 5, 2009.
Although China has made substantial adjustments to its Korea policy, moving closer to Seoul for economic cooperation, China still maintains its lukewarm
relations with Pyongyang. From a security standpoint, China may not support the
reunication of Korea, preferring a divided Korea on which it can exert its military
inuence more readily. The juxtaposition of its two-Korea policy is not so encouraging for all Koreans who put priority on a national reunication. But knowing the
neighbor better will help all Koreans explore the best ways to cooperate with each
other (between the North and the South) as well as with its neighbor for their mutual
benet and for the future.
In brief, China may want the two Koreas remain divided, by which it can manage
the conicts and competition between the two states in the Chinese favor for international politics, not to mention its security standpoint.5 Japan and the United States
5 If a new diplomatic relationship were established between the United States and DPRK, the entire
picture would likely change. In general, current North Korean leadership has some reservations in
fully trusting the Chinese despite Beijings tutelage. DPRK, if it still managed to survive till then,
will shift its dependence from China to its new friend, the United States, when it establishes a more
156
may regard the Korean reunication as helpful for their security only if it is unied
in the form of a free democratic system. But both countries are not so keen on seeing it united soon. These are all points of considerations that all Koreans (North and
South) must keep in mind in judging how to wisely respond when a sudden big bang
occurs in the North.
On the other hand, the North Korean regime downfall may bring a swiftly anarchic process involving riots, bloodshed, and refuges, and it also raises the specter
of North Koreas nuclear, missile, chemical, and bacteriological arsenal being on
the loose. To effectively control these problems, the Souths military may need to
cooperate with the Norths military by ensuring a timely and legitimate promise
to accommodate them into various posts in the post-unied Korea. For a further
successful transformation, the South must seek many feasible approaches that will
grant the North Korean military the legitimacy to be the decisive factor in a post
Kim Jong-Il transition and to allow them to smoothly assimilate into the South
Korean mainstream afterward. It may sound impossible for the heretofore rival military powers to co-operate with one another, but it will no longer be a matter of past
enemies and there will be nothing impossible if a big-bang opportunity occurs to
make the divided Koreas into one. No less important is, of course, the full cooperation and support for national reunication from those countries that have stakes on
the peninsula. This is possible if, and only if, the people of the two Koreas united
toward the common objective of national reunication. And it is believed that most
Koreans, the North and the South, are willing to do this, only with the exception
of North Koreas communist leaders who will be destroyed as soon as a big bang
revolution breaks out in the North.
7.3 Approach for Economic Integration

In this section, we will maintain the scenario that Korea will be unied abruptly
as the Norths communist regime collapses one day due to neither reforming
the current inefcient socialist system nor improving the standards of living.6
And it is assumed here that post-reunication measures will be mostly assigned
to the responsibility of South Koreans. Despite the probable advantages of softlanding, North Koreas adherence with its untenable juche doctrine, which has for
nearly ve decades contributed to the worsening economic situation and severe
food and energy shortages might force South Korea to assume the hard-landing
situation.
conciliatory relationship with the Uncle Sam. If so, it would be interesting to see if China wants to
move closer to South Korea and vice versa.
6 As a matter of fact, a post-reunication economic measure is indifferent with regard to the mode
(either gradual or sudden) and method of the reunication. What matters are both the timing of
adjustment process taken in the post-integration and the degree of existing differences in all levels
of economic conditions and sectors between the two states at the time of political unication.
7.3
Approach for Economic Integration
157
The process of reform in Central and Eastern Europe following the collapse of the
Berlin Wall on November 9, 1989 was a fascinating experiment in swift transition
from one type of socio-economic organization to another. In many cases, the speed
of adjustment was grounded on shock therapy, involving rapid trade and price
liberalization, rapid privatization, deregulation, and a swift end to state subsidies. No
less signicant was an attempt to build a fully functioning, market-based economic
system in each ex-communist country, not about replacing one communist party
system with multi-party democracy.7
With both Koreas conditions and Europes policies in mind, this section will
discuss such important priority issues as they relate to the SouthNorth currency and
nancial integration and privatization of state-owned enterprises in the northern part.
Other issues such as NorthSouth migration, reform of property ownership, and
restructuring of manufacturing and rural sectors are in order, but we do not regard
them as quite so urgent. In particular, migration between two parts of the country
will occur in two ways, offsetting each other. At the early stage, many refugees may
ow into the South, while many northern-born residents and their descendants in
the South would perhaps like to return to their hometowns in the North once the
country is unied.
7.3.1 Economic and Monetary Integration for the Unified Korea

As a point of departure, we dene the concept of integration in terms of static
sense as a situation in which the national components of unied Korea are no longer
separated by economic frontiers (that is, the northern area and southern area) but
function together as an entity. Used in a dynamic sense, it indicates the gradual
elimination of the formerly separate national economic entities (that is, North Korea
and South Korea) gradually merging into a larger whole (the unied Korea) over
time. Even if the two Koreas are politically unied at a point of time, a gradual
(dynamic) process will still linger on for some time until the integration process has
passed through its stages and reached its object. Therefore, the dynamic application is the more usual in reality, but here we will treat economic integration as a
stock (static) variable instead of a ow (dynamic) variable, for simplicity of our
discussion.
First of all, economic integration is basically the integration of markets where
both outputs and factors (labor, capital, entrepreneurship, and so on) are traded
based on their respective demand and supply. Markets are the places where all
citizens (producers and consumers) interact with one another to maintain their
7 However, it must be kept in mind that the transition from a socialist economy to a market economy
is a time-consuming experiment. Because it needs a passage of time to complete transforming the

old implicit social contract embedded in the workers mindsets to a new one. In other words,
changing an institutional factor cannot be so successful using shock therapy as contrast to the
prevailing arguments supported by most neo-classical economists (i.e., Jeffery Sachs).
158
lifestyle.8 In order for these markets to function in an economy, a commonly

accepted medium of exchange (say, money) is required. In short, the market integration between the North and the South must be backed up by a common means of
exchange; that is, a unied currency. As the market is an integral part of the social
organism of a modern nation, so is currency (money) an indispensable lubricant to
help smooth the processes of all transactions in a market economy. For an integrated
economy, one kind of monetary unit (that is solely issued by the nations central
bank) is commonly accepted and circulated as ubiquitous means of transactions for
all walks of life within the country.
When a unied Korea is to be set up, therefore, the rst urgent economic task is
to integrate the two existing monetary systems into one. A natural way is to liquidate
the Northern currency system by exchanging all existing quantities of the theretofore North Korean legal notes with South Korean notes. The conversion rate must
be calculated by relative values of two respective currencies adjusted to standard
money like the US dollar. In applying this rule, however, there are several important
problems with which to deal. The rst is what shadow (real) exchange rate we would
have to be used to convert the unit value of the to-be-absorbed sides (North Korea)
money into US dollars. The second problem is related on how to estimate the total
quantity of cash in the hands of all North Koreans. North Korea has never released
its statistics on monetary indexes such as quantity of reserve money, amount of
bank notes issued, and other monetary aggregates (that is, M1 and M2 ). The third
question is if money (and wages as well) were fairly distributed and accumulated
based on each ones productivity such as to justify fairness of each individuals
cashes or income held. There could be serious misgivings at the integration that
funds might be misappropriated by communist party leaders and their relatives, and
Kims favored elite groups and their families. Given the unfair distribution of the
North Korean cash holdings at the time of national integration, an unconditional
exchange of their holdings with the Souths notes will cause another dilemma in
relocating the economy. To attempt a fair control in this money-exchange job would
be one of the most problematic aspects of monetary integration in the unied Korea.
This wealth redistribution issue will be one of the most important among former
North Koreans in the post-reunication era.
Going back to the rst problem, we show here an alternative approach. First, we
have to approximate a shadow (real) exchange rate for both North and South Korea,
respectively, by the formula:
p
EP
e = pdf = pdf , where e is the real exchange rate; Pf domestic price of tradable
goods; Pd domestic price of non-tradable goods; and P f denotes the foreign price
of tradable goods (in other words, world price in foreign money) and E (that is,
8 Karl
Marx had his conviction that the capitalist market is a machine where capitalist methods
mutilate the laborer into a fragment of a man, degrade him to the level of an appendage of a
machine (Das Kapital). Marx never understood that market is life with the capacity for individual creativity and self-expression, and unlike the communist system it gives the capitalist system
both its extraordinary vitality and its social legitimacy.
7.3
159
Pf / P f ) is nominal exchange rate.9 Of course, price must be a weighted average

price of all commodities and services in the relevant sample.
In reality, it is not possible to approximate any meaningful foreign exchange
rate for North Korea, because information on both its price and commodity bundles
and their relevant weights are not known to the outside world. More important, the
countrys trade sector is less than 13% of its GDP in contrast to more than 70% in
South Korea.
However, since the North has its ofcial rate of won/USD exchange, which was
adjusted from about 2.21 won = US $1 in June 2002 to 153 won = US $1 in July
2002 when it attempted to adopt a timid price reform. Since then, the ofcial nominal exchange rate has stayed at about an average 140 won = US $1. Of course,
this new rate cannot be interpreted as its shadow exchange rate nor the rate before.
In absence of any alternative rate, however, we may simply use cross exchange
rates to convert northern currency value to the South Koreas legal tender. The
cross exchange rate between the northern won (let us express it as NW): 1 USD
and the southern won (SW): 1USD is calculated as NW140/ SW1049, which produces an inter-Korean exchange rate at 0.133 NW=1.0SW. This can be rewritten
as 1NW=7.52SW. The cross exchange rate used here, for illustration purposes,
is based on 5-year average rates (20032007) of both North and South Korea,
respectively.
Next, we have to estimate the total quantity of northern currency in circulation
before the national integration. This may be roughly calculated by using the Norths
nominal GDP (say, Y=py) and a well-known Irving Fishers equation of exchange
expressed as MV = Y where M is quantity of money, V velocity of circulation, and Y
the nominal income (GDP). Given an estimate of Y, it is straightforward to calculate
the quantity of money if we assign an estimate on the size of velocity (V). A rough
guess on velocity in the juche and socialistic distribution system of North Korea
is less than 5.0 at most, because commercial trade and transactions are extremely
restricted and controlled. North Koreas nominal GDP was estimated by the Bank
of Korea to be about 25,000 billion won in 2007. Based on these data, quantity of
money supply (M) can be approximated to reach about 5,000 billion won. Again
a rule of thumb will tell that total amount of the Norths notes would be counted
to about 500 billion won, a more or less 10% of total money creation. To convert this 500 billion North Korean holding currency into the Souths currency, the
South Korean government should supply about 3,600 billion won of South Korean
legal tender (that is, equivalent to 500 billion of North Korean paper money). This
amount corresponds to about 5 times larger than total investment money (about 730
9 There is some discussion on whether the exchange rate should be dened as P
f /Pd or Pd /Pf . Both

approaches have their pros and cons. In the case of the former one (Pf /Pd ), a real appreciation of
foreign currency is reected by an increase in the real exchange rate index, while a decline represents a real depreciation of foreign currency vis--vis domestic currency. In the case of (Pd /Pf ),
both nominal (E) and real (e) value of foreign currency (depreciation/appreciation) moves in the
opposite direction with ratios of two price indexes (increase/decrease).
160
billion South Korean won) made by 101 South Korean enterprises into the Gaesung
Industrial complex in North Korea as of March 2009.10
All those illustrative gures are based on the year 2007 data. In addition, it goes
without saying that the conversion rate will mostly likely be determined not by
economic principal (standard) but by political consideration as was the case during the German post-reunication process. If the absorbing entity (South Korea)
is condent that it can accommodate even one-to-ten (1NW = 10SW) conversion
rate between the northern currency and the southern currency, it may choose so,
of course, at a higher cost to South Koreans. Similarly, wage conversion rate also
needs to be determined when workers from the northern side are to be employed.
In principal, the wage rate should be in line with the labor productivity. Workers
from the socialist economy may take some time to adjust their working attitude
and ethics to that of competitive market economic system, but it would not take so
long. Once the merit of incentive system is given to northern workers, their average
productivity will soon converge to the level of average southerners.
The conversion rate is thus completely a matter of political judgment at the time
of national reunication. The cost thereof, as well as other unication costs may
be in part met from savings that could be available by reforming theretofore military, diplomacy, and other duplicative expenses. Both unication and liquidation
process will also create multiplier effects to expand both income and jobs, which
will contribute to increasing tax revenue that will help meet partially offset the cost
of integration.
However, some people may still worry that this monetary conversion (whatever
conversion rate is applied) would place a huge burden on the central bank of the
takeover country. This burden does of course mean the would-be ination pressure
to be caused by money supply to meet the integration demands. But if integration is
swift and if overall productivity is enhanced due to the successful relocation of those
Norths workers into various economic activities in the unied economy, then inationary pressure will be surely mitigated. As long as nations productivity growth
matches the growth rate of money, demand-side inationary pressure is no longer
of a problem.11
All our discussions above are made on the assumption of a big-bang reunication (integration) in place of alternative gradual integration. For the latter
10 North Korea Army threatened South Korea by saying that Seoul is located within a 50 kilometer
distance from their artillery located near DMZ, on April 20, 2009, and also implied that they would
consider taking some critical measures on Gaesung industrial complex where about 101 South
companies run manufacturing plants if the South were to join in the US-led PSI (Proliferation
Security Initiative organized on May 31, 2003 to prevent WMD proliferation). If Gaesung were
shut down, it would cost about 730 billion won of invested money plus an additional 630 billion
won of opportunity cost to the southern investors.
11 This can be explained by the quantity equation of exchange, MV=py. By taking natural log of
this quantity equation, we have ln M + ln V = ln p + ln y. Again taking the derivative to this log
equation gives dM/M = dp/p + dy/y dV/V. This explains that rate of money supply equals the
ination rate plus overall productivity growth minus change in velocity rate. If dV/V = 0, then
ination rate (dp/p) would be zero if dM/M = dy/y.
7.3
161
case, dual economic systems are often presupposed to coexist separately in a unied
country for an extended period of time. In the dual systems scenario, the exchange
conversion rate, wage conversion rate in relation with labor productivity, and rms
competitiveness and many other problems must be analyzed in terms of dynamic
long-term and gradual adjustment framework. The dual systems model applied in
the process of integration appears seemingly less shocking and with less friction,
but the model will complicate the integration process by allowing two separate governments (systems) to function collaboratively (but not likely successful) until full
economic and political unity between the two systems are made. This presupposes a
transitory process to work with two governments and systems in one country,
which is nothing much different from the so-called confederation (low stage of
federation) approach long proposed by North Korean authority.
It is surprising that many experts on the economics of German unication discussed in the context of such proposition (scenario) call for maintaining two separate
entities in their integration process.12 But in reality, East German government was
quickly dissolved and absorbed by the West. All integration tasks and problems
thereof were placed on the shoulder of one unied German government and people.
There are no longer two systems nor two people with different German ags.
Therefore, such proposition for maintaining any dual systems (like a confederation) as a transitory process if made in any unication discussion must be cautioned
as unrealistic and irrelevant for a unied Korea, which will take sole charge with
one central government under one unied political and economic system in place of
two separately independent local (regional) systems.
The monetary integration may necessitate the nancial integration along with
other economic integration between South and North Korea.13 If a big-bang reunication is to occur, nancial integration will also be achieved in one stroke by South
Koreas absorption of North Korea as happened in Germany in July 1990. Then,
nancial integration will be just a part of the overall process of economic integration
in terms of South Koreas absorption.
We briey summarize here the German unication process: (1) a rapid integration approach; (2) a one-to-one conversion rate applied between the two currencies,
which resulted in substantial overvaluation of the East German mark (ostmark);
(3) a near equalization of Eastern wages with West Germans wages; (4) the huge
infusion of nancial resources from the West to the East; (5) the elimination of
trade barriers and permission of free movement of labor and capital. These policies
resulted in decrease of industrial production in the East by 54% in 1990 and another
20% in 1991. Also unemployment increased about 30% in the East. Nonetheless,
the West infused a huge transfer payment to maintain the high wage and consumption level in the East. This caused inationary pressure on Deutsche Bundesbank,
12 Ghaussy
and Schaefer, eds. (1993).

researches are made on gradual nancial integration between South and North Korea on
the assumption that the South and the North will coexist for a while. For example, see Park and
Mueller (2001), pp. 127.
13 Some
162
which, in turn, ended up with Germanys macro-economic policy mismatch in early

1990s.14
The current banking (nancial) system of North Korea is more or less similar
to the East German system before the 1990 reorganization, in that both are based
on the Monobank System. The central banks (the Central Bank of North Korea
and the State Bank of East Germany) handle not just the business of a central
bank (that is, notes issue, monetary control, domestic and international settlement
business, lending, savings, insurance, and the supply and receipt of national funds)
but also those of a commercial bank (that is, a wide range of cashless settlements
ranging from currency fund trading services to settlements with the national budget and transactions of bank loans and payments at various stages of economic
activities).15
Still, there are some differences. In East Germany, the Staatsbank (central bank
of the German Democratic Republic) determined foreign exchange rate, but in North
Korea, the Foreign Trade Bank determines it. The North Korean central bank handles deposit taking whereas the East German counterpart did not, but the savings
banks did handle the business.
As there were a wide range of differences in the banking systems between the
two Germanys, so are there big differences in the banking systems of the two
Koreas. The fundamental differences are originally attributed to their respective
economic systems with a market-oriented banking system (in both West Germany
and South Korea), a socialist banking system (in both East Germany and North
Korea), and no substantial business relations between these two systems. Probably
the most obvious institutional difference between socialist economies and market
economies lies in the ownership structure and competitiveness among their nancial
institutions.
In both East Germany before 1990 and now in North Korea, banks are all stateowned and thus are not competitive; banking in the market economy is characterized
by both a great variety of institutions mostly privately owned and very specialized
nancial services. National reunication will transform the socialist banking system
in the North into a market-oriented banking system in the South just as an integral
part of overall economic integration and nation rebuilding process. In short, big
bang reunication will make it possible for the overwhelming side (that is, the South
14
See the chapter on The Political Economy of Re-unication between Two Koreas, Section 5 in
relation with the Germanys misguided macro-economic policy paradox mixed with pro-cyclical
scal policy and counter-cyclical monetary policy.
15 North Korea has a unique fund supply system, which solely controls the supply of funds as
other socialist economy does. The Central Bank of North Korea implements the so-called control
by Won, a form of state control in which the central bank guarantees the supply of funds for all
institutes and companies by which the bank controls the economic activities of all state agents and
their purchase of raw materials, utilization of manpower, productions and sales, and the acquisition
and utilization of xed assets. Control by Won is indeed meant by the national (state) control that
applies to those economic enterprises and institutes within the monetary domain.
7.3
163
Korea) to assume nancial and economic sovereignty over the eroding side (North
Korea).
This scenario is much simple and a sure one that will lead to one unied Korea
versus an uncertain gradual approach scenario. The gradual reunication scenario
for Korea is based on the so-called June 15th Declaration jointly signed by the
Souths Kim Dae-Jung and the Norths Kim Jong-Il in Pyongyang in 2000. The two
leaders recognized a basis for common understanding in the Kim Dae-Jungs suggestion of a confederation and the Norths suggestion of a lower stage of federation,
and both leaders agreed to pursue reunication. This indicates that it was agreed the
two Koreas would exist with different political systems on the peninsula for some
considerable time.
Is there still a real chance over a longer period that the two Korean states could
live together in a confederation? In other words, can the North regime hold on much
longer if the South continues to pour aid into it? In monetary affairs this would mean
that the North would have to build up its nancial institutions and economic vitality,
of course, with some help from South Korea. Will the self-isolated North keeping its
political system intact become better enough to accommodate dynamic economic
reform to balance with the South? More important, will the communists vote for
reunication after many years of confederation? Or will a time come to make the
majority of South Koreans accept the Norths juche communist system instead of
keeping divided? For politics is only a game for politicians. Answers to the above
questions are all no.
Through the June 15th confederation deal, the Norths Kim wanted to get much
economic aid from the South with which the North could strengthen itself militarily
and economically, while the Souths Kim wanted to further his personal ambition
(that is, to win a Nobel Peace Award) by showing his initiative for peaceful coexistence. But seemingly, reunication was not a real desire in their hearts, if not
in words. The Norths economy has not improved much since then. Importantly,
a confederation of the two sovereign governments with two currencies, probably
more-or-less restricted trade, and at the same time two citizenships to prevent a
mass exodus across the border is politically and morally infeasible, because it is
no more than a juxtaposition of two countries still in hostile relations. Why such
a deformed idea for a confederation? Is it just a joint plot to dash away peoples
longed-for hopes of reunication?
It is also realistically impossible to have a real reconciliation, if not a fake one,
between the two ideological rivals till either the South leader bows down before the
ever-victorious General in the North or the ruthless leader collapses as a result
of an inside implosion. Korea will not be reunied in gradual mode, but in bigbang mode. Nevertheless, many so-called Korean specialists and experts have been
nibbling at gradual reunication on the peninsula. Such a discussion on assumed
gradual reunication is indeed in vain and nothing but a play upon words. For
gradualism will never work on the Korean Peninsula as far as divided Koreans
are concerned. Korean reunication has to come like a whirlwind some day in an
unknown future.
164
7.3.2 Economic Restructuring and Privatization

The post-unication policy will highlight integrating the North Korean collective
economy into open market system of the South. Systemic transformation may be
very difcult, given the socialized system with population in the northern part numbering about half of the 48 million in South Korea. Economic restructuring cannot
be done in a big bang mode, and its long-term success will largely depend on
getting the institutions right and getting the restructuring process right, with wellorchestrated micro and macro economic policies. Here the restructuring process
includes overall economic functioning, rearranging institutional and legal systems,
as well as the reconstructing North Korean manufacturing, service sectors, and
social overhead capitals. Many difcult problems lay ahead, of course, in particular if many lawsuits are attempted in an attempt to regain lost property rights in the
North. Many old land and property owners and their descendents living in the South
will surely like to claim their land and property rights in the North that have been
under state and collective ownership since early 1950s. If a unied government does
not immediately enact a special precautionary emergency law governing the rights
of land property in the North, social turmoil and problems will likely be the order in
the wake of national reunication.
The unied government must provide guidance on the restructuring process so
as to smoothly transform the socialistic and collective mentality of workers toward
competitive markets from the outset so that all individuals and all range of economic
activities may quickly adjust to the new system to be introduced to the North. The
Norths immediate advantage of becoming part of the South Korean political and
economic system will lie in that it does not need to pass through the process of trial
and error in nding its new system. The North Koreans can draw on South Koreas
creditability on basic economic foundation, although it could never be perfect in
many aspects. Particularly, the Souths capitalist economy embodies many problems and shortcomings from a normative perspective of start up fairness and social
righteousness. The shortcomings inherent in the Souths capitalist economy must be
managed by all peoples efforts so as not to diffuse into the unpolluted part. In other
words, those shortcomings and problems need to receive constant social attention
before and after reunication as an important moral drive to rebuild the nation on
good governance and transparency.
Privatization of the previously state-owned companies and properties will be the
most important and difcult task in post-unication Korea. This privatization must
be implemented in the most honest and fair way, while maintaining an efcient and
productive entrepreneurial concept, that is conducive to enhancing overall interests (shares) of all people. It may need to establish a state organization, such as
the Treuhandanstalt of Germany,16 which will set up overall restructuring framework and prepare the restructuring blueprint under its oversight and responsibility.
16 Treuhandandstalt was established on July 1, 1990 to promote the privatization of state-owned

companies in the East Germany. But in Germany this state organization took sole power beyond
its capability in privatizing companies in the transformation process.
7.3
165
This state agent must exercise assistance to get the institutions and the prices
right. The privatization process will depend on legal and political institutions (and
well-organized regulation) that help control corruption and enhance efciency if
the post-unication policies are to be effective. The success of privatization will
also depend on whether the oversight organization (government) delegates its privatization task to most competitive private agents in those deals related to sale
and purchase of state-owned companies. Likewise, private bidders and state oversight organization as well must have entrepreneurial concepts and understandings
for those many companies and institutions for which they are charged with overseeing. They must be able to correctly diagnose and identify between viable and
nonviable enterprises. They must be able to make impartial judgment on timing and
choice regarding the immediate liquidation or recovery investment for businesses.
In short, the privatization process must not be monopolized by the oversight organization (government), but be open to competitive biddings among many private
participants.
Lastly, everything depends on good leadership and honest and faithful patriotic
workers who are to be in charge. Korea needs to invest for the many important tasks
ahead by training and preparing these groups of young elites who are willing to
work for their nation.
In conclusion, good leadership and honesty will accompany the political will and
judgment to privatize the previously collective or state-owned companies as fast as
possible. This means that in the earlier stage privatization carries a sort of strategy
for state intervention in the market. The government subsidy for the privatization
process is a common way to distort the stream of funds in the market economy. If
private entrepreneurs are inuenced by the amount of government subsidies in their
business decision makings, the results would be another distortion of fund allocation
in the markets. This sort of negative externality of public money inputs needed for
privatization and liquidation in post-unication economy must be balanced with
the positive externality of government subsidies in the integration process. How to
ensure free market capitalism in face of large demand for state intervention in the
process of unication will depend on what policymakers and technocrats do in the
post-unication process and era. While free-market capitalism would be a long-term
ideal for a unied Korea, a strategy of ensuring a balance between state capitalism
and open market capitalism will still be a working model for economic integration.
In an economy whose success will yet depend on both good government policy and
heavy state trafc control, it may be premature to assert that the free market will
be the only powerful alternative to state intervention from the onset of integration.
In general, deep state intervention means that bureaucratic waste, inefciency, and
corruption are likely to arise in the economy. Likewise, the free market model cannot
necessarily be a panacea for a transitory and disordered economy.17
17 The
global recession, which ignited from the United States mortgage market collapse in 2007
2008, undermined international condence in the free-market model, driving socialist countries
like China, Russia, and other states to blame American-style capitalism for the slowdown. The
US governments huge investments to buyout the failing companies assets aroused a debate as to
whether the US is still a free market economy.
166
A rst step will entail the fate of an entire people unless a painful shift of
step-correction does subsequently occur. Time and again, the demons of ideology,
politics, and conicting interests have so far exercised disproportionate inuence
on academic and public debate about Koreas unication policy. However, an unbiased policy prescription and choice for national integration should be drawn within
attainable goals with arguments based on reason and reality. As such, contemplation of possible scenarios for Koreas near- and long-term direction in relation
to its post-integration process remains a work in progress for all Korean political
economists.
Appendix
(A) National Reunification and Conclusion of Agreements
on Traffic, Correspondence and Trade
This is a North Korean propaganda text reecting its ofcial position on National
Reunication. It appeared at Information Bulletin, Pyongyang, DPRK, No.86,
April, 1990. This statement proposing to perpetuate division of the nation, which
came in response to the then South Korean President Roh Tae-Woos July 7th (1988)
declaration for national reconciliation, is well contrasted with the follow-up events
in which the North Korean leadership reversed its tack and sought simultaneous
entry into the United Nations with South Korea on September, 17, 1991.
Lately, the South Korean authorities are frequently talking about the question of concluding agreements on trafc, correspondence, and trade between the north and the south and
clamoring that this year they would conclude an Agreement on Trafc even if they
could not do other things.
Today, our nation is confronted with the supreme task of national reunication and,
accordingly, the establishment of any relation between the north and the south should proceed from this fundamental aim of national reunication and should contribute to it. No one
can dare deny this principled demand.
Then does it conform to this principled demand to conclude the aforesaid three agreements at the present juncture? In other words, does it break the present state of closure and
open up the road to the peaceful reunication of the country?
If the north and the south conclude the three agreements at the present juncture, it
will not open up the road to national reunication but, on the contrary, will bring about the
grave consequence of freezing and perpetuating the present state of division.
To begin with, the South Korean authorities proceeded from the conception of two
Koreas in talking about conclusion of agreements between the north and the south,
clamoring about agreement on trafc, agreements on correspondence and trade and
the like.
Aside from this argument on the nature of free market economy, there would be stages of
different economic conditions in which government intervention is the must. In particular, in
the early stage of two different economic systems integration into one, laissez-faire policy is not
realistic.
Appendix
167
It goes without saying that the conception of conclusion of an agreement is a

conception in international relations commonly used among different states.
If the north and the south conclude any agreement, it will mean that they recognize
each other as a state, and externally it will give an impression that the north and the south
are separate states. This clearly shows that conclusion of agreements between the north
and the south is intended to make two Koreas a fait accompli.
From the beginning there cannot be such thing as the conclusion of agreement
between the north and the south. And even if the three agreements are concluded between
the north and the south at the present juncture, it cannot open up the road to national
reunication.
Of course, the conclusion of the three agreements can be a method for improvement of
relations for the normalization of diplomatic relations between two different states. But it
cannot be a means of promoting the improvement of relations between the north and the
south and bringing them close to each other in our country.
In international relations it is true that when two states restore their relations that have
been severed and normalize diplomatic relations between them, they usually start from nopolitical exchange and partial exchange of economic, cultural and social domains and, on
its basis, gradually deepen the relations of friendship and cooperation.
This method can be a method for the improvement of relations for the normalization
of diplomatic relations between two states but cannot be a method for the improvement of
relations between the north and the south for the settlement of the question of our countrys
reunication.
For the peaceful reunication of our country it is necessary to solve various questions
in north-south relations including the question of removing the political and military confrontation and the question of realizing many-sided cooperation and exchange in economic,
cultural, social and various other domains.
In view of its signicance the question of concluding the three agreements is not a
pressing issue that must be settled before anything else. And even if this question is solved,
it will not help solve other questions. In other words, in our country where the north and
the south extremely mistrust each other and stand in sharp confrontation with each other,
personal travel, correspondence and trade cannot be realized satisfactorily and even if they
are partially realized, it will not contribute to the realization of national reconciliation and
unity.
To begin with, the attempt to introduce the method for improvement of relations for the
normalization of diplomatic relations between two different states is a dogmatic conception
and is a wrong one.
To make a breakthrough for national reunication at the present stage, they should not
peddle around the conclusion of the three agreements but take practical measures for
removing the political and military confrontation and tension and ensuring peace between
the north and the south and, rst of all, pull down the concrete wall, the symbol of national
split and north-south confrontation.
Then mistrust and confrontation between the north and the south will be removed,
national reconciliation and unity be realized and a broad avenue to national reunication
is opened.
In particular, as the South Korean authorities pursue the two Koreas policy, the three
agreements will only result in maintaining and xing the present state of division.
Although the South Korean authorities never miss a chance to talk about unication,
their talk is nothing but a deceptive trick to cover up their splitters nature.
The South Korean authorities try to step up the northern policy and separate admission to the U.N. and keep in force the national security law. This clearly proves that they
are following the two Koreas policy in actuality.
As publicly known, the northern policy and separate admission to the U.N. are
aimed to win the recognition of south Korea as an independent state from the socialist
168
countries and through the arena of the U.N. and have two Koreas legalized and the
national security law is aimed to make the north and the south completely closed to each
other and thus block the road to reunication and perpetuate the division.
As long as the South Korean authorities seek two Koreas, the three agreements will
only realize partial trafc, correspondence and trade under the present conditions of split
but will not serve to open the door of reunication.
The South Korean authorities keep in force the national security law, which denes
the north as an anti-state organization and declares any contact with and travel to the
north violation of the law. Their talk about the conclusion of the three agreements is
itself self-contradictory and ridiculous one. In view of the contents, the three agreements
are aimed to realize trafc, correspondence and trade among a few people under the control
of the government and not to make a breakthrough for reunication.
According to South Korean publications, the agreement on trafc, agreement of correspondence and agreement on trade envisage prior permission of the authorities and the
special law on north-south exchange and cooperation stipulates that permission shall
not be given to those who are liable to endanger the national security or public peace.
This means that even if the three agreements are concluded, the south Korean rulers will
not open up the road of trafc, correspondence and trade to the patriotic people who oppose
unkeyism and treachery and two Korea plot and call for independence, democracy and
reunication but only to those who follow their anti-reunication policy. Furthermore, the
south Korean rulers threaten, saying that when south Koreans want contact with people in
the north, they will allow only non-political contact not discussing the reunication question and even those who go to the north with their approval will be severely punished by
law if they are suspected of having conducted activities for reunication during their visit
to the north.
From this we can know that the South Korean authorities are completely separating articially the question of conclusion of the three agreements from the question of national
reunication. Therefore, it is clear that the argument about conclusion of the three agreements from the concept is not aimed to break the closure of the north and the south to each
other and open the road to reunication but to maintain the present state of division as it
is and open the road of pure trafc, correspondence and trade to a few restricted people.
The above mentioned facts clearly show that the South Korean authorities argument about
conclusion of the three agreements is not oriented for reunication but for division.
They are lately noisily talking about the question of conclusion of the three agreements
whose splitters nature is transparent. This is nothing but a last resort to counter our new
reunication proposal for demolishing the wall of division between the north and the south
and realizing free travel and full opening of the door.
As everyone knows, the great leader President Kim Il-Sung in the New Year Address for
this year advanced the epochal reunication proposal for demolishing the wall of division
between the north and the south, rst of all, the concrete wall in the southern portion of
the Military Demarcation Line, and realizing free travel and full opening of the door as a
decisive measure to overcome the obstacle and difculty lying in the way of reunication
and bring about a fundamental change in the solution of the reunication question.
If the wall of division between the north and the south is pulled down and free travel
and full opening or the door are realized between them, the closure of the north and the
south to each other will be removed, the national bond be restored, the north and the
south discard misunderstanding of and mistrust in each other and national reconciliation
and unity be achieved. And it will be possible to pool the nations desire for reunication,
join its strength, repulse the foreign interference and realize the reunication of the country
independently and peacefully.
For its feasibility and fairness our new reunication proposal enjoys the warm welcome and support of the entire Korean people and the worlds progressive people and the
south Korean authorities are urged to accept it without delay. Of course, the south Korean
authorities talked more than once about the question of free travel and full opening of
the door. But it is no more than propaganda for improving their public image.
Appendix
169
While clamoring about the home-visit of separated families, they opposed the performance in south Korea of the Opera Flower Girl, an art work reecting the our countrys
situation in the early 1930s at the time of the Japanese imperialist colonial rule and invited
even by capitalist countries to be performed before full house, and with it as pretext they
opposed the exchange of home-visiting group numbering several hundreds. This proves that
the South Korean authorities are not interested in the home-visit of separated families and
further have no intention to realize free travel and full opening of the door between the north
and the south.
The South Korean authorities cannot accept nor openly oppose our epochal proposal for
demolishing the concrete wall and realizing free travel and full opening of the door. Finding
themselves in such a dilemma, they put up to the fore the question of conclusion of the
three agreements as a last resort.
In his press conference, Roh Tae-Woo rejected to all intents and purposes the pulling
down of the concrete wall and said he would step up conclusion of the agreements on
trafc and correspondence, calling for realizing rst of all correspondence, telephone
conversation and mutual travel of separated families on the pretext that agreement on free
travel and full opening of the door would take time.
As is clear to everyone, if the two sides have an intention to realize free travel and full
opening of the door it will not take time to reach an agreement on it and if free travel and
full opening of the door are realized, such questions as the home-visit of separated families,
correspondence and telephone conversation would be settled without difculty.
This notwithstanding, the traitor Roh Tae-Woo demands the realization of the homevisit of separated families, correspondence and telephone conversation before free travel
and full opening of the door. This is nothing but a crafty trick to cover up anti-reunication
nature opposing our epochal reunication proposal.
If the South Korean authorities have an iota of national conscience of being concerned
about the future destiny of the country and the nation, they should not peddle around the
question of conclusion of the three agreements but take the road to reunication though
it is belated.
The South Korean authorities should clearly announce the reunication of the two
Koreas policy, give up the scheme for U.N. membership and northern policy externally
and withdraw the national security law, and evil law opposing reunication, and unied
channel of dialogue internally. Thus, they should heighten the atmosphere of reunication
and open the road for the people of all strata to participate in the north-south dialogue.
At the same time, they should demolish the concrete wall and take practical measures to
remove the political and military confrontation.
Then, the north and the south eliminate misunderstanding and mistrust, achieve national
reconciliation and unity, remove the obstacle and difculty lying in the way of reunication
and open up the highway to the reunication of the country by the concerted efforts of the
entire nation.
Note: This English transcript is reproduced here as it was originally released

by The Secretariat of the Committee for Peaceful Reunication of Fatherland,
Pyongyang, DPRK in April, 1990. This copy is intended to help all Koreans now
and of the next generation to read history and judge who, the North or the South,
was really telling a truth or lie under coveted name of fatherland reunication.
(B) The July 7th Declaration entitled Special Declaration

for Korean Self-Existence and Prosperous Unification
The rst reunication policy of South Koreas President Roh Tae-Woo made on
July 7, 1988 was embodied in the Korean National Commonwealth Policy
170
presented on September 11, 1989, which proposed the three principles of independence, peace, and democracy to establish a piecemeal reunication strategy. In
October, 1989, based on July, 7, 1988 declaration, the South proposed the North to
make the SouthNorth Exchange and Cooperation Agreements focusing on trafc,
correspondence, and trade between the two Koreas.
My sixty million compatriots,
Today, I am going to enunciate the policy of the Sixth Republic to achieve the peaceful
unication of our homeland, a longstanding goal dear to the hearts of the entire Korean
people. We have been suffering the pain of territorial division for almost half a century. This
national division has inicted numerous ordeals and hardships upon the Korean people, thus
hindering national development. Dismantling the barrier separating the South and the North
and building a road to a unied and prosperous homeland is a duty that history has imposed
on every Korean alive today.
The South and the North, divided by different ideologies and political systems, have
gone through a fratricidal war. The divided halves of the single Korean nation have distrusted, denounced and antagonized each other since the day of territorial partition, and this
painful state has yet to be remedied. Though the division was not brought about by our
own volition, it is our responsibility to achieve national unication through our independent
capabilities.
We must all work together to open a bright era of SouthNorth reconciliation and cooperation. The time has come for all of us to endeavor in concert to promote the well-being
and prosperity of the Korean people as a whole.
Today, the world is entering an age of reconciliation and co-operation transcending ideologies and political systems. A brave new tide of openness and exchange is engulng
peoples of different historical and cultural backgrounds. I believe we have now come to a
historic moment when we should be able to nd a breakthrough toward lasting peace and
unication of the Korean peninsula, which is still threatened with the danger of war amidst
persisting tension and confrontation.
My fellow compatriots,
The fundamental reason why the tragic division has still to be overcome is that both the
South and the North have been regarding each other as an adversary, rather than realizing
that both halves of Korea belong to the same national community, so that inter-Korean
enmity has continued to intensify. Having lived in a single ethnic community, the Korean
people have shaped an illustrious history and cultural traditions, triumphing over almost
ceaseless trials and challenges with pooled national strength and wisdom.
Accordingly, developing relations between the South and the North as members of a single national community to achieve common prosperity is a shortcut to realizing a prosperous
and unied homeland. This is also the path to national self-esteem and integration.
Now the South and the North must tear down the barrier that divides them and implement exchanges in all elds. Positive step after positive step must be taken to restore mutual
trust and strengthen our bonds as members of one nation.
With the realization that we both belong to a single community, we must also put a stop
to confrontation on the international scene. I hope that North Korea will contribute to the
community of nations as a responsible member and that this will accelerate the opening and
development of North Korean society. South and North Korea should recognize each others
place in the international community and co-operate with each other in the best interests of
the entire Korean people.
My sixty million fellow compatriots,
Today, I promise to make efforts to open a new era of national self-esteem, unication and prosperity by building a social, cultural, economic and political community in
which all members of the Korean society can participate on the principles of independence,
peace, democracy and welfare. To this end, I declare to the nation and to the world that the
following policies will be pursued:
Appendix
171
We will actively promote exchanges of visits between the people of South and North Korea,
including politicians, businessmen, journalists, religious leaders, cultural leaders, artists,
academics, sportsmen and students, and will make necessary arrangements to ensure that
Koreans residing overseas can freely visit both parts of Korea.
Even before the successful conclusion of the NorthSouth Red Cross talks, we will promote
and actively support, from a humanitarian view-point, all measures that can assist separated
families in their efforts to nd out whether their family members in the other part of the
Peninsula are still alive and to trace their whereabouts, and will also promote exchanges of
correspondence and visits between them.
We will open doors for trade between South and North Korea, which will be regarded as
internal trade within the national community.
We hope to achieve a balanced development of the national economy with a view to enhancing
the quality of life for all Korean people in both the South and the North and will not
oppose nations friendly with us trading with North Korea, provided this trade does not
involve military goods.
We hope to bring an end to counter-productive diplomacy characterized by competition and
confrontation between the South and the North, and to cooperate in ensuring that North
Korea makes a positive contribution to the international community. We also hope that
representatives of South and North Korea will contact each other freely in international
forums and will co-operate to pursue the common interests of the whole Korean nation.
To create an atmosphere conductive to durable peace on the Korean Peninsula, we are willing
to co-operate with North Korea in its efforts to improve relations with countries friendly
to us, including the United States and Japan; and in parallel with this, we will continue to
seek improved relations with the Soviet Union, China and other socialist countries.
I trust that North Korea will respond positively to the measures outline above. If the
North shows a positive attitude, I should like to make it clear that even more progressive
measures will be taken one after another.
I hope that this declaration today will serve to open a new chapter in the development
of inter-Korean relations and will lead to unication. I believe that if the entire 60 million
Korean people pool their wisdom and strength, the South and the North will be integrated
into a single social, cultural and economic community before this century is out. On that
basis, I am condent that we will accomplish the great task of uniting in a single national
entity in the not so very distant future.
Chapter 8
International Politics and a Search for Unified

Korea
Sapiens qui prospicit (the wise sees the future)
8.1 Introduction
The Korean desire for national reunication entails thought about the course and
political form of the unied Korea that could be achievable under the current international security architecture provided by those stake-holding powers China, Japan,
the United States, and Russia in the region. A stable international institution is still
uncertain or absent with no credible mutual deterrence mechanism to speak of, in
particular when a big bang occurs on the peninsula.
Even if an imminent implosion occurs that would plunge the Norths regime into
a sudden collapse, the fate of the peninsula will evolve unexpectedly depending on
the political dynamics of those powers with footings on the peninsula. Preparing
for the future of the Korean Peninsula is just as closely interrelated with the future
policy directions of those neighboring nations inclusive of China, Japan, the United
States, and Russia in the Northeast Asian region. More importantly, as there have
been changing shifts in the distribution of both international economic and military
power in Northeast Asia, the Korean Peninsula has many times experienced being
like a shrimp caught in the middle of a contest of strength among giant whales. As
in the past, so in future would China and Japan be hard to tolerate if the peninsula
came closer to any one of them militarily and politically, while the United States
and Russia will not, of course, shrug off their stakes on the future course of the
unied Korea. Indeed, a future unied Korea could become an important spot where
no neighboring power would want to give up its solidarity and inuence. Current
international politics makes it even more difcult for the two Koreas to get unied
and to stand alone, as long as the world is still divided in military confrontation as
well as in mutually conicting state egoism. This is why a future Korea preparing
for reunication must seriously contemplate both its political stance and security
architecture in East Asia.

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174
8 International Politics and a Search for Unied Korea
History teaches us that an entitys life, whether an individual or a nation, is not

realized as it is planned by the individual or the nation. As it is said in the Scripture,
In his heart a man plans his course, but God determines his steps (Proverbs 16:9).1
But it is equally important for a nation to design its future course in tandem with
neighbors under surrounding conditions and then to leave the reply (decision) to the
heart of Heaven.
To frame the future political path of a unied Korea, it is worth considering the
power game (power relations) or respective foreign policy stances of neighboring
nations in the region. Taking such major external factors into consideration, the
nation (Korea) has to search for the best political system available for itself. The
choice may be less than ideal, nor a peaceful road, but once one solid national stance
is chosen, it will be the one that Koreans must live with in the whirlwind of history.
If all neighboring countries observed such common stances as non-interference,
respect for fair economic competition, promotion of democracy and individual
freedom of life, free mobility across the borders, and freedom from ideological confrontation, then Koreans would not be so concerned about the future course taken by
a unied Korea. But the Korean Peninsula is a geostrategic concern for these four
powers. The cause lies in some possibility that Korean geopolitics may incline very
in-eclectically toward any one side of two power groups conicting one another in
the region.
In the following sections, we will briey review respective perceptions as well as
the relations of four powers (China, Japan, the United States, and Russia) surrounding the Korean Peninsula and suggest the possible solutions for the two Koreas to
not only realize national reunication but also to survive in the stormy waters of
cool international politics.
History shows that discord between any two nations is originally attributed to
acute interest conicts and clashes between any two groups of people. The sources
of both peoples conicts and clashes are manifold, including matters of live and
die related to land, food, water, and shelter availability. The rise and fall of different
communities are repeatedly due to such underlying factors as ethnicity and cultural
similarity (or diversity), differing stages and levels of civilization, ways of life management, political, economic and social ideological norms, and a non-remediable
breakdown of congruence among leaders and power rivalry even within the same
ethnic boundary as well. However, mankind is always looking for a way to mutual
peace that will help secure the mutual benets in place of physical clashes or war.
One device is to maintain frequent individual and commercial intercourse. Many
proponents of globalization today believe that the spread of international transactions would lead people to recognize the mutual benets that could come from open
trade and exchange among nations.
One stumbling block could be a counter-favoritism kept on two ideologies footed
in socialism and capitalism. Capitalists believe individual-based free competition
1 To
man belong the plans of the heart but from the Lord comes the reply of the tongue
(Proverbs16:1)
8.2
Four Gangs Tug-of-War Politics and the Korean Peninsula
175
and the private ownership system are the most powerful tools to enhance economic
efciency and is the best alternative to social ownership and state interventionism.
Supporters of democracy and capitalism thus perceive open trade, transparency,
and enhanced human rights as the best road to enhance peace and harmony in
the world. On the other hand, socialists put more weight on equity than efciency and believe that peace and harmony would come only after the arrival
of socialism. Of course, many modern socialists, like the contemporary Chinese,
agree in principle that frequent intercourse and trade among different nations and
people would contribute to mutual understandings and benets. However, as long as
the respective ideological perceptions among neighboring countries continue to be
diverse, those nations would nd it difcult to converge to a common ground for
peace and harmony, if not impossible at all.
Unless the existing deviancy is not eliminated, to say the least, a compromise on
the Korean issue between socialist countries (China, Russia) and capitalist countries
(the United States and Japan) remains yet another obstacle for Korea.
8.2 Four Gangs Tug-of-War Politics and the Korean Peninsula

This section will briey review the four powers interrelations as well as their
respective policy pursuits in the East Asian region, with particular focus on their
stakes on the Korean Peninsula.
First, China has historically had relations with Korea in the east, and has particularly developed a far closer relation with North Korea since the 1950s. To China,
the Korean Peninsula is like its vermiform appendix, which is not needed when its
health is good, but is very painful when something goes wrong with it. As long
as it hinges at the Chinese far southeast edge, the peninsula can serve as a good
buffer zone against any external attack coming from the Pacic side, for example,
Japan and the United States. In other words, Korea posits a good physical shield for
mainland China from any whirlwinds from the Pacic east.
To some lesser degree, the value of Korea is similar to Russia, too. This ligament
remains intact over time. The solid family-like relation between North Korea, China,
and Russia lies in that they are footed on the common root of political ideology; that
is, international communism. This does not, of course, rule out that there are no other
conicts (that is, Sino-Soviet border disputes and the North leaderships general distrust of the Chinese and so on) between them, but it implies that the three countries
share the common ideological state system. The relationship was so well manifested during the Korean War (19501953). Neither China nor the Soviet Union
was prepared to allow the entire Korean Peninsula to fall into the United States
orbit. Hundreds of thousands of Chinese joined the North Korean forces in the war
to push back the South Korean forces backed by the United States under the aegis of
the United Nations. The Soviet Union provided huge military and economic aids to
North Korea over both pre-and post-Korean war periods. Their continued relationship today is not much different from yesterday, as often experienced in Chinese
176
and Russian opposition votes against such initiatives brought by the United States
and Japan through the U.N. Security Council to punish any misbehavior by North
Korea. There is truth in the old saying that a crab keeps closer side with a lobster
in the marine animals battle under the waters. Nonetheless, Russia appears increasingly tired of backing up North Koreas deance linked with nuclear proliferation
risks.2
As already mentioned, North Korea posed its stern position by publicly hinting that it would renew its nuclear bomb and missile test unless the United Nation
Security Council would apologize immediately for the Councils non-binding presidential statement (April 29) denouncing North Koreas long-range missile launch
on April 5, 2009. Quite unexpectedly, at the time when the South Korean society
was mourning its former President Roh Moo-Hyuns tragic suicide,3 North Korea
triggered a new underground nuclear test at 9:45 on May 25 in Kiljoo, Ham-Kyungpukto, North Korea.4 It is unknown this time if they would test the nuclear bomb
again, but usually the North noties Beijing in advance of its serious arsenal tests.
China has positioned its opposition to any nuclear test in the neighborhood. After
this second successful nuclear test, however, Beijing did not make any immediate
comment on the Norths unprecedented deance contrary to other nations shocked
responses.
With the Norths second nuclear test, China must face a policy dilemma internationally as to whether it would or would not oppose any U.N. Security Councils
move to strengthen penalties and sanctions against the North. But it is likely that
China would be absent during the U.N. Security Council vote, arguing that new
2 Russian
U.N. Ambassador, Vitaly Churkin, said on June 11, 2009 that Moscow shares the frustration and concern of all U.N. Security Council members over North Koreas nuclear and missile
tests. He said, We are clearly facing a situation which poses clear proliferation risks. We are
doing it (sanctions talks in U.N. against North Koreas May 25th second nuke test) with a very
heavy heart,. . . because having sanctions is not our choice. But some political message must be
sent. (Quoted from AP report in The Japan Times, Friday, June 12, 2009, p. 1.)
3 Roh Moo-Hyun, 62, who served his ve-year term as South Koreas president from February
2003 to February 2008, reportedly killed himself by leaping off a cliff behind his rural home early
dawn on May 25, 2009. He left a note in his personal computer: Dont blame anybody. Please cremate me. And please leave a small tombstone near home. He was under prosecutors investigation
on suspicion that his family took about $6 million in bribes from a company CEO, tarnishing a reputation he tried to nurture of being a reformer who insisted to a clean Korean society. As president,
he pushed political changes that sought to harmonize Southern politics with those of the North. He
initiated without success an attempt to abolish the Souths draconian National Security Law, which
the North consistently wanted to abolish. He went to Pyongyang in October 2007 for talks with
Kim Jong-Il, a second summit meeting of leaders of the divided peninsula.
4 At the very moment when Seoul was in mourning, Pyongyang staged its second nuclear bomb
experiment at the same location where the rst nuclear test was made on October 9, 2006. In
response to the Norths provocative action, South Korean government announced on May 26, 2009
that South Korea will immediately participate in the PSI (Proliferation Security Initiative) pact
(proposed by President George W. Bush on May 31, 2003), which aims at stopping international
trafcking and the transfer of weapons of mass destruction (WMD).
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177
rounds of sanctions against North Korea would ineffective. North Koreas detonation of this second nuclear weapon is serious enough for the U.N. Security Council
to call for even stricter sanctions against North Korea, although, as always, the
prospect that the U.N. is likely to deter it from further provocations is not bright.
The U.N. Security Council is always frustrated because both China and Russia are
reluctant to act against North Korea.
Chinas traditional alliance with North Korea dates back to the Chinese sponsorship of Kim Il-Sungs anti-American and anti-Japanese stance before and after
World War II. Even more than Russia, China has maintained a warm ofcial friendship with North Korea through most of Koreas existence. The longstanding close
relation like lips and teeth cannot be expected to break off any time soon as China
and North Korea are close neighbors linked by mountains and rivers. The friendship cemented in blood during the Korean War period (19501953) has grown in
the course of the protracted struggle against their common potential enemies, US
and Japanese capitalists, even after Beijings pragmatic shift of its foreign policy,
which began in the early 1970s. Chinese leadership has often alluded to the western
world that China has some inuence but it does not have the kind of relationship where it can tell the North Korean leadership what to do. However, Beijing
has been providing the largest material and diplomatic support to North Korea,
whether or not the North shows gratitude to its benefactors in Beijing. In spite of
the leverage that China can use to force the North leadership to respond when it
sees the need, China does not do any of these things now while publicizing that
North Korea is a sole sovereign nation. China has repeatedly refused to exert its
economic leverage against North Korea for other political ends to the North, arguing that the political and economic realms should remain separate. It is not easy
to read the shrewd reasons behind Chinas dual faces on the matter of the Korean
Peninsula.
One obvious reality is that Beijing wants to keep the Korean Peninsula within
close proximity for the sake of its security shield against its potential adversaries, the
United States and Japan. If North Korea collapses with its 23 million people, China
will be faced with a tough decision if it has to dispatch the Peoples Liberation Army
into North Korea. This dispatch would meet up with the South Korean or US armies
heading north; therefore, a prior compromise would need to be arranged among
these countries to avoid physical clashes. China also needs to make some preventive
arrangements with both South Korea and the United States to control North Koreas
stocks of deadly weapons as well as the North Korean rush into Chinas northeast
as refugees.
China must be concerned with possible future problems to be brought about
by increasing numbers of Koreans in addition to Korean ethnic residents that
together will outnumber the Chinese in Chinas northeast regions, which were
mostly territories of old Korean ancestors until AD 915.
Chinas position may pose stumbling blocks in the rugged road ahead of not only
the Korean reunication but also a unied Koreas future policy direction. The question of which country China or the United States will make the 21st century its
own will no doubt inuence the future path of Korea. The international community
178
recently began to call the United States and China a G-2 group.5 Indeed, Chinas
rapid rise to great power status calls for a new level of cooperative relations between
the United States and China, particularly on the Korean Peninsula despite of their
mismatched interests and capabilities. Of course, the new situation demands Korean
nation to work hard globally and wisely to win both the two superpowers supports
for Korean reunication.
The hopeful possibility is, however, that there appears to be a slight shift in the
Chinese thinking about Korea. With North Koreas constant saber rattling tactics,
China may come to realize that North Korea is more annoying to China most of
the time despite the fact that it receives a continual supply of Chinese material and
political support.
China has learned that when Beijing tells Pyongyang to take its advice on internationally sensitive matters, Pyongyang listens even less. As North Korea continues
to go its own way, China may logically reconsider that it will be better to have a
unied Korea that will do more together with China than the North alone. Chinese
leaders may see that North Korea is a psychological burden for China in the longrun when Pyongyang continues its international provocations. Although Beijing has
long regarded the North as a strategic buffer against the extension of the United
States and allied forces up to its 1,416 kilometer frontier with the North, China also
fears that North Koreas nuclear threats could destabilize the region into a costly
military rivalry.
The Chinese government will be extremely cautious, however, in abandoning its
usual reticence. But if the North continues to play with reworks, China will not
be able to stall international expectations by repeatedly saying that North Korea
does not listen or that we have no inuence. More important, if North Korea
mishandles its nuclear and missile arsenal across the border, a catastrophic accident
could claim many Korean and Chinese lives. A time may surely come for Beijing
to rethink its frustrating friendship with North Korea. In other words, China may
come to think it worth supporting a unied Korea, which will at least maintain a
cooperative neighborhood relationship. Who knows if someday a new great Chinese
leader will emerge to help tear down the wall between the two Koreas, just as did
Mr. Gorbachev help tear down the Berlin Wall in 1989?
To make matters better, China and the United States jointly seek to secure peace
and stability in East Asia with US President Barack Obamas new foreign policy
motto: More cooperation on more issues more often. In the time ahead, the United
States administration is likely clamoring for a greater role from China in stabilizing
East Asia, as Washington recognizes Chinas growing importance in world politics
and economy. The new USChinese bilateral keen cooperative partnership would
surely pave a relatively easy road leading to Korean reunication when the regime
in Pyongyang falls.
5 Zbigniew
Brzezinski advocated in early 2009 the development of a G-2, comprising China

and the United States that could address the international nancial crisis, limit the proliferation
of weapons of mass destruction, tackle climate change, and help resolve ongoing international
conicts.
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179
Second, Moscow appears ready to abandon its adherence to ideological doctrine

in place of economic pragmatism, although it has not yet clearly washed off its
past ideological ties with Pyongyang. Moscow was an important support to the
communist regime of the North,6 but after the Gorbachev era Russia has been shifting away from being obsessed with political and military ties to more cooperation
in the economic eld with other countries. This suggests that Russia will not be
much concerned with the future political status of a unied Korea as long as it can
secure a good relationship with united Korea so as to promote mutual economic
benets. Russia will be inclined to seek its benets in an ever-widening environment for peace and stability beyond mere political siding issue in the East Asian
region. Mikhail Gorbachev contributed greatly to such a new realism in Moscow
so that ideology gave way to pragmatism and internationally accepted standards
of friendly economic relations. Russia will keep on this track. Notably, Russias
Foreign Ministry swiftly criticized Pyongyang for its second nuclear test of May
25, 2009, calling it a serious blow to international efforts to prevent the spread of
nuclear weapons, as mentioned earlier.
How far Russia would make distance with its old allies (North Korea and China)
remains to be seen, but it is increasingly hopeful that Russia will likely take a levelheaded assessment of the two Koreas and deal with Koreas reunication in a
coordinated manner with other countries, including the United States, Japan, and
China. Of course, Russias attitude will still depend on the dynamics of its political
and economic relations with other countries in the region. In particular, the future
direction of RussiaUS, RussiaNATO, RussiaChina as well as RussiaJapan relations (or tensions) will affect the Russian position. Russia still has a highly imperfect
political and legal system with media suppression and rigged elections. Also, it will
matter how Russia perceives a unied Korea that if friendly, would cooperate with
it in the international theater. It is hoped that Russia will continue to move toward
an open democratic society so as to take a more reasonable position regarding the
Korean reunication issue.
Third, US interest in the Korean Peninsula is no less important. The United
States lost more than 30,000 young American lives to save South Korea from falling
into the hands of communists during the Korean War. After an armistice based on
the division of Korea at the 38th parallel, the United States poured huge amounts
of economic and political aid and support towards building a democratic system
and to ensure its national security along with economic development in the South.
Even with the recently widespread anti-Americanism becoming intense due to inuence of growing nationalistic elites over the inevitable passing of generations in
6 The Soviet Union was responsible with the United States for the division of Korea at the wake of
the World War II and had provided more than $2 billion in foreign aid and credits to North Korea
up to 1984, as well as an increasing quantity of oils, gas, weapons and other materials along with
advanced military technologies up until 1989, a year of dramatic change in the external relations of
the Soviet Union.From that time on, ideology gave way to pragmatism and internationally accepted
standards of external deals.
180
South Korea, the existence of American troops is without question the main support
backing up Seouls continuous economic development and democracy.
Of course, the US perception rooted in pragmatism could shift its foreign policy
in the direction of improving relationships with the North Korea any time soon if
North Korea would change its paradigm of its heretofore brinkmanship diplomacy
in favor of a more cooperative gesture to the Obama administration in Washington.
If so, the United States would be willing to establish a new diplomatic relationship
with Pyongyang. If the two states improved their relations, the possibility of early
reunication of two Koreas would of course cross the river of no-return for the
time being, if not forever. Then the strategy of Korean reunication must change
from sudden implosion or explosion model to gradual approach.
However, the incumbent North Korean leadership in 2009 is unpredictable
enough to sabotage any possibility for opening diplomatic relations with the United
States as it continues to conduct missile launches as well as nuclear tests. Slandering
Pyongyangs irrationality may be driving the Obama administration to shy away
from its proclaimed idealism, which seeks to solve bilateral discords through
talks.7 If the U.N. Security Council (UNSC) adopted strong economic and maritime sanctions against the North,8 Pyongyang would face a deteriorating economic
situation that may eventually lead to an uncontrollable implosion within its political
territory. Of course, the Norths economic hardship will depend much on whether
China would continue to supply food and energy to North Korea through the back
door.
To deter North Korean pursuit of nuclear weapons, the United States has so
far thought talks would be more effective than other options. Past talk options
needed increasing help from China, but they ended up with the futility of the SixParty talks, which in return only contributed to helping the North earn both more
time and more money to develop its nuclear weapons as well as the means to deliver
them. Of course, Beijing would not want to see Pyongyang have the nukes and
7 As
of June 2009, the Obama administration is reportedly becoming impatient with the Norths
reworks, and seeks tough measures like redesignating North Korea as a country that sponsors
terrorists.
8 It is still a question if both Russia and China would follow up with a new U.N. Security Council
binding resolution. But Russia, once a key backer of North Korea, condemned the Norths second nuclear test. Moscows U.N. ambassador, Vitaly Churkin, who is also the Security Council
president in 2009, said the 15-member body would begin work quickly on a new resolution.
The Chinese Foreign Ministry spokesman Ma Zhaoxu also said Beijing resolutely opposed the
nuclear test, urging North Korea to return to negotiations under which it had agreed to dismantle
its atomic program. This time, North Koreas reckless test made it difcult for Russia and China to
shy away from international move to impose new sanctions against the isolated communist nation.
In the end, the U.N. Security Councils sanctions committee imposed a new set of sanctions on
North Korea in accordance with the Resolution of 1874, which the council adopted on June 12 in
response to the Norths second nuclear test on May 25, 2009. But North Korea seems unfazed by
both the move of U.N. Security Council resolution and the would-be effect of limited sanction,
which will put the North in a tighter corner. China continues to supply food and oil to North Korea
despite the Norths provocative behavior.
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it encourages more talks, but talks alone will never induce the North to abandon
nuclear projects.
In passing, it must be noted that it was on the Korean Peninsula that China and
the United States fought against one another during the Korean War in 19501953, a
place where both countries had their respective interests. But China views its interests much differently than the United States sees its interest. Today, Washington
views a no-nuclear peninsula as more important than the would-be political position of a unied Korea. On the contrary, if given the choice between a nuclear-owned
North Korea and no North Korea at all, the current odds for Beijing would be to
take the former. But there will surely be time for Beijing to reassess its policy toward
the Korean Peninsula, when China views the unied Korea to be more helpful for
the economy and security of Chinese people in the region. If a unied Korea takes
its position as a neutral state, Beijing need not worry about facing US troops across
the Yalu River or across the whole land-bridge peninsula.
The United States and its current allies South Korea and Japan have
largely failed to read Pyongyangs ultimate intentions, and they mistakenly believed
Pyongyang would change its course if they offered enough economic and diplomatic
aids. They simply could not read the very fact that the Norths leadership has created
its own dilemma of a half- century-long misguided policy, which it realizes is too
late or too risky internally to change now. For its own self-survival, the Norths
leader groups continue their brinkmanship tactics not only for domestic purposes
but also for external purposes. The tactics aim to tame domestic discontentment and
instead boost militant spirits of the North Koreans while inducing the external world
to pay more attention and give more aid if you want to sooth our provocations. In
addition, the ailing Kim Jong-Il needs to clear a way through his military and plan
for his succession. To make his intended successor become a true National Hero,
the father needs to lay the groundwork to boost his designated successor (maybe
his youngest son named Kim Jong-Un9 ) as a main architect to develop the nuclear
industry.
Despite this reality, the so-called experts as well as policy makers in the United
States and South Korea still anticipate that the North will return to talks after a
cooling-off period. They must have already learned enough lessons about the
North over the past several years. Nonetheless, it is not clear what they are still
expecting to gain from talks with our-own-way-regime in the North.
When carrots are no longer effective (and unwelcome), it would be better
to stop trying to feed the Norths closed mouth (which favor tasty chosen beef
instead) with carrots, and instead use sticks. The best policy option for the
9 The Norths saber-rattling in April June 2009 was believed to be part of its succession campaign.
According to outside rumors, Kim Jong-Ils youngest son, Kim Jong-Un, 26 years old, has the best
chance of succeeding the authoritarian leader. He is known to have studied at the International
School of Bern in Switzerland until 1998 under the pseudonym, Park Chol, learning to speak
English, German, and French. Among his classmates, largely consisting of children of foreign
diplomats, he was known as timid, humble, and introverted but an avid skier and a big fan of the
NBA basketball star Michael Jordan.
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United States and its allies might be either to respond with a benign neglect to
bellicose Pyongyang or to prepare a critical preemptive strike (even if it would
likely result in large casualties) against it. The more futile talks and time the United
States and its allies waste, the poorer return they would get from the North. For the
last several years, such a lack of rather effective options has driven the United States
and South Korea (and Japan and Russia as well) to look to the futile engagement
talks with Pyongyang with the mediation of China, which only helped Pyongyang
from collapsing and instead bought it time to develop a nuclear arsenal and more
missiles. But it would be a step into the unknown if the United States considers
taking rather a tougher stance toward North Korea if negotiations with China and
Russia fail to yield a new strategy that would force Pyongyang to give up its nuclear
program.
There are three policy options available for the United States to consider regarding North Korea as well as the entire peninsula issue. The rst one is that the
US government would seek an extension of the October 2000 North Korea visit
of the then Secretary of State, Madeleine Albright, if it still believes that a high
ranking ofcial visit to Pyongyang can achieve breakthroughs in negotiations
with the North. This does not mean that Washington must ignore its past lessons
about Pyongyangs unpredictability. The United States success may depend on
its willingness to concede to the North as much economic aid as Pyongyang
demands.
The second is to seek a diplomatic relationship with Pyongyang as soon as
possible without any prior requisites: US diplomacy may include the opening of
cultural, educational and economic exchanges with the North. Some North Korea
experts (such as, Andrei Lankov) have suggested that such a new approach along
with enhanced cooperative economic projects in the North will induce the North to
change.10 But these experts (in particular, Andrei Lankov) must not overlook the
fact that the North leadership is very alert to such an approach and that even if introduced in a limited manner to help thaw relations, the outcome would be slow for
long-term objectives.
The two Koreas separate political systems would not converge to one by themselves for an extended period, thus making Korean reunication be placed on a long
drawn out table. Most telling, these experts on North Korea do not really understand why North Koreas leadership always tries to isolate its nation from the rest of
world.
If the US rapprochement toward the North begins someday, Japan and South
Korea must realize that Washingtons traditional commitment to the defense of its
Asian allies will no longer be the same.
The third option is that the United States may choose to carry out a harder stance
either with all out sanctions or prudent measures against ongoing provocative North Korea. Although China signaled its displeasure with that prospect, such
a strong policy position will lay grounds to induce the Norths regime either to
10 Blumenthal
and Kagan (2009), p. 16..
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183
implode or to explode sooner or later. If such a big bang occurs in the North, the
United States will be induced to take contingency action with the South Korean
military at the initial stage. But in order to avoid any possible direct military confrontation with China on the Korean Peninsula, the United States would have to
make a concession with China to establish at least a color-free neutral state on
the peninsula unless a pro-US regime is permissible due to the power game in the
region.
American pragmatism would prefer a realistic peace rather than conict with
Chinese military forces in the Asian theater, which is largely beyond Washingtons
reach. Of course, the United States will not want to frustrate Japan in terms of
the USJapanese security pact. The upcoming political shakeup on the Korean
Peninsula would pave a way to getting the US, Japanese, and Chinese relationship
to settle on a trilateral compromise. Being open-minded, rational and cooperative,
policymakers in China, Japan and the United States can agree to help Korea reunify
at any critical moment in the future, all three can become unequivocal allies. It is
unofcially predicted that the three countries would initiate a trilateral cooperative
organization to discuss extensive agendas on Northeast Asia, including the Korean
Peninsula issue. While China still needs the United States for its own stable economic growth, the US may also positively seek to solve the worlds problems jointly
with a rising China while embracing Japan as well. In this case, the three countries
will not want to include either South Korea or North Korea or both in their trilateral
cooperative talks.
Finally, Japan is most sensitive to any hostile events and military provocations
evolving around the Korean Peninsula not only because of its geopolitical and economic adjacency but also because of its national security and stability. As Japan
relies on United States nuclear arms for its protection, Japan, is currently more concerned that the United States continues to provide an effective umbrella for Japan
especially in regard to China and North Korea. North Koreas nuclear and missile
tests are really serious enough to alert the Japanese leadership and people to the
dangers involved. While Japan calls on the Obama administration to reafrm U.S.
commitment to security assurances, including extended nuclear deterrence to its
allies,11 it now seeks to reinforce its defense system after North Koreas missile
launch on April 5, 2009, not the least of its voice for keeping equal status with the
United States on the global nuclear issue. On the other hand, Japan expects China to
look to regional and global peace today as well as tomorrow, although Japan is more
concerned about the long-term effect of Beijings growing hegemony than North
Koreas provocative nuclear threats. Japanese conservatives and Chinese communists have not forgotten their wartime sentiment toward one another. As the history
books read, in early July, 1937, the Japanese and Chinese armies clashed near the
Marco Polo (Lugou) bridge southwest of Beijing. Toward the end of the month the
Japanese army began a large-scale attack from North China territory just south
11 Extended
attacked.
deterrence refers to the idea that the United States would retaliate if its allies are
184
of Manchukuko (Manchuria), the country Japan had established just a few years
earlier. In mid-August, 1937, Japan opened a war front in Shanghai, landing its
forces throughout the city. In that year, the Japanese army rampaged into Nanjing
(Nanking), the then- Chinese capital, winding up with the historically tragic Nanjing
massacre.
Even if the two giants are still politically and militarily imprisoned by their memories of tragic history, they may have common interests toward the 21st century that
would allow them to act more cooperatively and competitively for the prosperity of
every country involved. New Japanese Prime Minister Yukio Hatoyama may look
to form a single economic zone in closer consultation with its old enemies, China
and South Korea. It is high time for the East Asian countries (Japan, China, and
South Korea or a unied Korea) to think of creating a common economic community through which they could tackle both security and economic issues and also
seek to change the law of jungle where the stronger white-colored players have so
far dominated.
The three Asian countries can create the largest single economic zone in the
world if they agree to initiate their rst step toward integrating into a common currency system. Such formation of a single economic community with a common
Asian currency will set up its own barriers to costly war and mutual discord. In
this case, South Korea will be included in the cooperative entity while the United
States may be set aside. A ChinaJapanKorea trilateral harmony will also contribute to mitigating political conicts across borders which could arise as a
consequence of a North Korea that implodes or explodes. Once the three countries
begin to work together for common prosperity in peace and security, Korean reunication would rather easily be achieved even if adopting a market economic system
without much opposition from them. That case will be indeed a blessing for all
Koreans.
Some may argue that such a single Asian community is unlikely in the near
future, mainly because of mutual antagonism and distrust deeply rooted in the mindsets of those three countries. But the experience of old enemies in Europe (as well
as the post-war US Japan relation) has been that friendly competition and cooperation does work well for the prosperity of everyone, and that prosperity and peace
provide a way of forgiving one another for past offenses. This is todays important
lesson for China, Japan, and South Korea, all of whom have rather limited political relations despite many shared cultural traits. And much is changing rapidly
and dramatically in todays world order. Recently, we have seen more signs of the
shape that international relations in East Asia will take in the coming years. More
importantly, Japanese leadership appears to understand the necessity of building a
strategic, reciprocal relationship and discussing a number of urgent problems, most
notably the ongoing global economic crisis and North Koreas latest turn to intransigence. And the Sino-Japanese, South Korean-Japanese, and Chinese, Japanese, and
South Korean trilateral summits are becoming very routine in their agendas and their
cooperation with one another beyond past historical problems. Economic, environmental, and technology cooperation as well as cultural and educational exchanges
are driving their relationship forward. This will mark the beginnings of perpetual
8.3
185
peace and cooperation among the three East Asian countries, although there is still
much work to do. It goes without saying that as Japan and China continue to mend
their differences, Koreans can hope that reunication will likely be smoother when
a big internal shake-up occurs on the peninsula.
Meanwhile, Japan will seek to develop a pivotal trilateral relationship with China
and the United States to ensure its shared interest and security in any future contingency situation in Korea.12 In order to secure all supports for national reunication,
Koreans must do their best to enhance a nationwide drive to post friendly relations
with its neighboring nations.
8.3 What Is the Unification Formula: Option for Colorless State?

The future path or direction facing a unied Korea will depend largely on its survival strategy as it seeks balance between anking powers. The conicting gravity
of neighboring powers will inuence the politics of the nation as well. For example, if China and Japan compete to build up their respective military strength,
this would cause a stumbling block to the path of Korean reunication. A SinoJapanese rivalry would enforce the necessity for a would-be unied Korea to keep
a neutral and nonpartisan prole. Otherwise, Korea could freely assume its political stance in the world in accordance with the desire of its people. If neighboring
countries are truly bystanders leaving the reunication to the free choice of both
North and South Koreans, the reunication would be ideally an internal matter for
Koreans. But just as word is one thing and behavior is another, so the reality is
far away from idealism in terms of the political dynamics in the region. Indeed, it
is really impossible to reliably predict the policy directions of neighboring nations
when all look to pursue their own interest-rst-policy in a dynamic international
environment.
In this section, we will examine the feasibility of a neutral Greater Korea if the
current status quo in international relations is unchanged when the two Koreas face
that unexpected moment for reunication. In other words, when the North implodes
or explodes, what unication model (approach) will ceteris paribus most likely be
effective?
If we consider the issue from a pure perspective of pragmatic realism, neutral Korea is a feasible option that all stake-holding countries would accept, if not
reluctantly, given the current international political environments around the Korean
12 Such
an idea of holding a trilateral framework among Japan, the United States, and China was
rst oated by China to the former US President George W. Bush. But it was shelved due to
Washingtons concern that such forum might trigger a negative reaction from South Korea if the
issues on North Korea were included in its principal agenda.
186
Peninsula.13 Of course, neutrality does not necessarily reect a majority of the unied Korean nations political stance (position) in the world. This neutrality option
is offered as one of alternatives that could minimize any aggressive opposition from
neighboring powers to a critical chance for Korean reunication when the North
implodes or explodes.
If a unied Korea sides with China, then the United States and Japan will not
accept it unless a drastic improvement in existing military and political rivalry would
occur among them. Likewise, if a future Korea stands with Japan and the United
States, then China (and perhaps Russia as well) will think it hard to tolerate. Of
course, if a great politician comparable to the former Soviet Unions Mikhail S.
Gorbachev rises in China to transform the Chinese political landscape completely,
the story may change. Otherwise, the existing political and ideological wall dividing China and the others would not likely change if a unied Korea were to side
with any party or parties. One exceptional (but very slight possibility) case would
be if the two Korean leaders got together and dramatically agree to break down the
wall between the two Koreas and unify the nation in a chosen political and ideological way. Perhaps in such a special case, reunication is literally a matter for
Koreans to which no other nation can object. Such a radical occasion may initially
call for nationwide martial law until a new social order for unied Korea is rmly
established.
As long as the two Koreas run parallel to each another, however, such a precocious presumption is not realistic. And as discussed previously, the idea for gradual
unication is also in fact nothing but a vision of a protracted consensual permanent
division of the nation under the pretext of two states in one nation, if not each
vying to eventually absorb the other.
Some insights into the reason to continue the division is provided by a look at the
ideological and socioeconomic differences and gaps that would need astronomical
amounts of money to be integrated into one. Even a lapse of time would not likely
narrow these pecuniary and not pecuniary cleavages between the two Koreas. After
all, two decades of engagement policy has proved sterile, and a forced national unication is just not feasible. So, to reiterate, the sure and shortcut way to Korean
13 Neutralism
means a condition for a state to stand aloof from surrounding powers while accepting the balance of power around the state. This condition can be secured through a legal or binding
pact agreed by the powers of stakes on the particular state. Neutrality could be used as a protective political and military umbrella for the state from all concerned powers without fears that the
balance of power in the region would be tipped against any of them. The 1968 Princeton study
dened a neutralized state as follows: A neutralized state is one whose political independence and
territorial integrity are guaranteed permanently by a collective agreement of great powers, subject to the conditions that the neutralized state will not take up arms against another state, except
to defend itself, and will assume treaty obligations that may compromise its neutralized status. . . . .
Neutralization is a special international status designed to restrict the intrusion of specied state
actions in a specied area. The status of neutralization is often referred to as permanent neutrality
to signify that it is valid in times of peace as well as war. (see Cyril E. Black, Richard A. Folk,
Klaus Knorr, and Oran R. Young, Neutralization and World Politics, Princeton University Press,
1968, chapter xi.)
8.3
187
reunication is to push the North into a tight corner so that a critical breakdown
occurs in Pyongyang. And then South Korea must try to get the support from its
neighboring nations to ensure a smooth integration process when a big bang occurs
in North Korea. If any country (and anyone as well) insists that choking the economic lifeline of North Korea wont solve both the Korean strife and the Norths
nuclear ambitions, that countrys real intention (contrary to its rhetoric) is perhaps
to maintain a divided Korean Peninsula divided longer, if not forever.
To induce neighboring powers not to oppose Koreas national integration, the situation must be addressed in a roundabout way through prior diplomacy that a unied
Korea will keep its neutrality stance in international conicts.14 Of course, a multilateral arrangement must be subsequently negotiated to guarantee the neutrality
among the nations when such a deal actually develops.
The idea of a neutral Korea oats, rst of all, in a hope that a negative reaction
from neighboring powers will not be triggered by an upcoming chance for Korean
reunication.15 The proposal does not rule out, of course, that a unied Korea may
take a form of democracy as its political ideology as well as a system of free
market capitalism. It implies that the united nation will not side with any particular
party when there is a conicting view among concerned nations. Needless to say,
a neutral stance as a sovereign nation must involve many disadvantages (as well as
advantages) when the issues at hand are such that there is a price to sustain its independence and security. But if neutrality is the most resilient way for the two Koreas
to become united under the complaisant concession of its neighbors, Koreans must
positively grab such a rare pragmatic opportunity.
Korean reunication will be achievable if rst, incumbent North Korea and South
Korea come to terms with each other, and with a deep sense of nationalistic unity get
rid of all things related to ideological, political, and partisan interests and division.
But in reality, this kind of candid rapprochement between the Norths communists and the Souths capitalists has not been induced by mutual cooperation and
exchange as evidenced in the past experiments of the two decade. Strong psychological barriers in the mindsets of the two Korean leaderships as well as in the majority
of the divided people are almost too hard to overcome through such humanly means
and efforts as serious talks. As long as each state searches for a strategy of victory
over the other, any seemingly mutual approach for talks to increase exchange and
cooperation is fated to fail whenever a conict of interest comes across one another.
This says that the probability of Koreas reunication by way of such seemingly
nationalistic appeal is almost nil at least under the contemporary situation. Koreas
reunication appears only possible when either the North or the South abruptly
collapses due to implosion or explosion and if the remnant side takes over.
14 Neutral
Korea is not an ofcial position of the South Korean government, nor is it yet fully
supported by majority of South Korean residents. It is just one of the pilot options that would meet
fewer objections from all the stake nations.
15 It has not yet been determined if every country that has a stake on the Korean Peninsula would
be willing to accommodate a unied Korea in form of neutrality. We simply assume this system
will face the least resistance to a reunication opportunity, assuming a bang occurs soon.
188
The chance of internal implosion is, however, split at a 70% likelihood that
the North will collapse. In other words, the odds of collapse in the North are
assumed higher than in the South. Internal political instability coupled with the
North Koreans widespread discontent against their leadership is growing faster
in the North than in the South. The recent situation in the South is also increasingly vulnerable with passing of generations. Many social and ideological dissidents
and their offspring are increasingly exposing their leftist (the so-called progressive)
sentiments that are matched only by their anti-conservatism and anti-Americanism.
However, a cataclysmic implosion is much likely higher in a country where people
are being fed poorly under a dictatorial monarchy than in a country where basic
needs are met with increasing wealth despite widening social and class friction.
Regardless of whichever side falls rst, the dramatic reunication will not be so
easily achievable unless the four external powers involved (China, Japan, the United
States, and Russia), all of which have security interests in the divided peninsula, can
agree on a framework for unifying Korea without threatening their own security
and economic interests. Expressed differently, the neighbors would accept Koreas
reunication if and only if its end-product, a reunied Korea, does not serve to
disturb the balance of powers in the region. Otherwise, the vulnerable powers will
oppose reunication. That is why neutralization statecraft is suggested as a workable reunication formula, which must include procedures and outcomes fair to all
parties involved. Indeed, a neutrality proposal can be the only alternative to win
unanimous support from the four powers when a big cataclysmic bang occurs in
the North. Under such a plan the four powers could disengage themselves from
the peninsula without fear that the balance of power in the region would be tipped
against any of them. Thus, a neutralized Korea would contribute to neutralizing their
own conicts and instead enhance good and benecial economic relations among
them in the region.
Finally, we must make three important points here in relation to our proposal
for neutralized Korean reunication. One point is that the big-bang reunication
following a would-be implosion or explosion in the North is endogenous, which
means that the Korean people must be alert and prepared to handle. On the other
hand, the gradual unication approach (such as the Sunshine Policy) based on
mutual exchange and cooperation is largely a government gimmick apparently
designed to prevent any implosion or explosion in the North while setting the illusion of space for the South Koreans. Given this latter case, however, the Norths side
will never abandon its consistent position from which to achieve reunication on its
own terms, and the danger is always there for the North to resort to force, if the
opportunity should arise. Nor will the North agree with the South on the idea of giving up its communist monarch system in favor of an open economic and democratic
system.
Viewed in this light, the famine-stricken North is not likely to be geared for
economic revival nor prompted for political reform regardless of economic aids
provided by the South or others. And the Souths economic provision will hardly
reduce the Norths brinkmanship tactics unless it is on its own terms. It is against
8.3
189
this background that Koreas reunication would be only possible when the Norths
regime falls apart.
Thus, the reunication demands, rst of all, speeding up an erosion of the Norths
power structure through international sanctions and economic hardships followed
by big bang implosion. The collapse may involve some mounting costs, but the cost
will not be beyond the economic resource potentials of the united Korea, nor will
it exceed the benet of reunication when viewed from the psychological boosting
effects of one nation.
When a time comes to make the North implode or explode, Koreans must work
to earn the support of the external powers that have security stakes in the peninsula.
Although Koreans are primarily responsible for securing reunication, they need to
buy the support of the surrounding powers. The most possible bid price would be
for the absorbing party of two Koreas to offer the four powers certain preconditions
favorable to both Koreas reunication and their security such as neutralization of
the peninsula. The idea of a neutralized Korea would be accepted by them only if
a unied Korea would not constitute any destabilization of the balance of power in
the region (which requires a four-power agreement to respect the neutrality of the
unied peninsula).
The second point is that our formula for Korea neutralization is not intended
for permanent neutrality in such cases as adopted by Switzerland in 1815 and
for Austria in 1955. These two countries have been successful in preserving their
unity and independence, respectively, but in reality their permanent neutrality is
no longer any binding concern for the surrounding powers, which are all in the
European Community sharing common peace and security arrangements.
Neutrality could be used as a protective political and military umbrella for a
unied Korea as it would be securing agreements among the four powers to support
the reunication without tipping off the balance of power in the region. With the
changing generations and increasing mutual interactions over time, the international
political environments and relations would be much improved and different from
now into the next three to ve decades. Assuming such a scenario for the changing
world to come, the deal for Korean neutrality may not necessarily be permanent,
but rather it will be a conditional (temporal) neutral state for at least 50 years from
the time of reunication. We cannot predict how the world will evolve regionally
and globally, of course, but the future international environment will surely become
better and more peaceful with mutual cooperative endeavors and shared common
knowledge. At that time, every country will be a cooperative trade partner sharing
and exchanging with each other. Sounds like a utopian dream, but all nations must
work toward such a world.
More importantly, it is now time for both China (with or without Russia) and
the United States (with or without Japan), whether or not acting in their respective
self-interests, to seriously begin a search for cooperative policy conducive to Korean
reunication (as well as to their mutual benets) in such a way that military confrontation could be avoided on the peninsula when an abrupt shakeup erupts in North
Korea. Through such a collaboration, the two sides could promote their mutual
190
cooperative benets in political, military, diplomatic, and economic and cultural

elds, not to mention contributing to world peace and security.
The last point is related to the disposal problem for the stock of weapons in
the two Koreas when they are united into a neutral state whose security will be
supported by the power balances in the region. Most redundant arms and weapons
must be destroyed, while sample collections may be placed on display in a future
military museum possibly located somewhere in the current demilitarized zone area.
The Demilitarized Zone can also serve as a wonderful ethological and ecological
museum of nature that would attract many tourists after the reunication. Needless
to say, many secret hideout palaces used by the Norths leadership could also provide
tourists with points of interests in addition to existing natural and historical assets
in the North after the reunication. In addition to the tourism revenues, income (or
saving) expected from restructuring the two governments and military forces into
one could cover a considerable portion of reunication costs.
8.4 Concluding Remarks

Amid reports that a total of about US 6,959.5 million dollars worth of cash and material aids were ofcially provided to the North by the South between 19982007,
Pyongyang has been repeating its nuclear tests and missile launches.16 Despite
the Norths buoyant military shore-ups, the current overall situation in the North
is reportedly deteriorating to the point where its people are turning against the leadership. But none of this is new, and the dictatorial leadership in Pyongyang appears,
nonetheless, ready to use its nuclear and missile rhetoric to prepare for its power
transfer. Whether the transition of power from ailing Kim Jong-Il to one of his three
sons will occur successfully is indeed a big question.
The events now occurring in Pyongyang do, however, foretell that the end of the
regime is approaching. Whatever skillful tactics are adopted by the Norths leadership to retain its grip in the North, an eternal truth says that the sovereign power is
not in the hands of men, but the decision is in the judgment of God.
Time is running out for the North Korean system to implode. Under this possible
scenario, the reunication of Korea will likely have a great chance. A reunied
Korea will, however, have a great impact on the region, and it will not be easy for
the new country if its neighbors fear that the unied Korea might upset the balance
of these neighbors powers.
Against this background, we propose a workable reunication formula for temporal neutrality of the Korean peninsula until a peaceful international environment
is rmly established in time.
This kind of neutralization will contribute to stabilizing any possible international
situation where there is a fear of coercion. By allowing the emergence of a unied
16 The Kim Dae-Jung administration supplied $ 2,488.4 million and Roh Moo-Hyuns administra-
tion provided $ 4,471.1 million to North Korea.
8.4
Concluding Remarks
191
Korea in such a way that neither side could gain at the expense of the other, those
competing powers can look forward to seeking a more harmonious and mutually
constructive cooperation in the region in place of the expensive military hostilities
that once existed.
As such, neutralization is likely to offer the common ground where it would not
only make Koreas reunication achievable but would also be mutually benecial to
all concerned powers. Importantly, this idea of a neutralized Korea is possible only
if neighboring countries ultimately and unselshly agree to endorse Korean reunication. Therefore, a concluding message is that Koreans must wake up and watch
how the United States, Japan, and China will conduct their trilateral collaboration
on the future of Korea as well as how they will jointly or separately react when a
big bang occurs in North Korea. And nally, Koreans must endeavor to obtain every
possible advantage to support reunication from all interested neighbors by offering itself as a unied in the form of a neutral Korea. One day when Korea rises as a
new unied nation, the world will awaken to see the song by the great Indian poet
Rabindranath Tagore come true, In the golden age of Asia, Korea was one of its
lamp bearers. And that lamp is waiting to be lighted once again. For illumination in
the East
Appendix
A Short Chronology of Early Stages of German

Unity (19891990)
October 18, 1989: An unprecedented exodus from the East into the West and a few
months of mass demonstrations force the head of state and of the Communist
Party, Erich Honecker, to step down in East Germany.
November 9, 1989: East German politburo member Guenter Schabowski mentions
that the borders have been opened with immediate effect. Not long afterward,
thousands of East Germans ood across the borders. After 28 years, the Berlin
Wall comes down.
November 13, 1989: East Germanys Communist Party head Hans Modrow is
tasked by the East German Parliament to form a new government. At the mass
demonstrations that have been running for months there are banners reading
Germany united fatherland.
December 3, 1989: Under pressure from the party rank and le in East Germany,
members of the Politburo and Central Committee resign.
December 7, 1989: A round table a forum of representatives from old and new
parties and organizations convenes under the auspices of church representatives
to put forward proposals to resolve the national crisis.
December 19, 1990: West German Chancellor Helmut Kohl arrives on his rst
ofcial visit to East Germany. In Dresden, he is enthusiastically received with
calls of Hermut, Hermut and chants of Germany united fatherland.
January 15, 1990: Some 2,000 demonstrators storm the headquarters of the Stasi
secret police in East Berlin while about 100,000 demonstrate in front of the
building.
January 28, 1990: Representatives of the political parties agree on the formation
of a transitional government. Representatives of civil rights groups are part of
the round-table talks.
February 1, 1990: Modrow as East Germanys prime minister puts forward a
draft for German unity to Parliament based on military neutrality and a federal
structure.
February 7, 1990: The West German government decides to offer East Germany
immediate talks on a currency union.
March 18, 1990: The rst free elections take place in East Germany, with a
conservative alliance headed by the Christian Democratic Union taking a clear
victory.
E.-G. Hwang, The Search for a Unied Korea, DOI 10.1007/978-1-4419-1562-7,

193
194
Appendix
April 12, 1990: The rst freely elected East German Parliament elects Lothar de
Maiziere (CDU) as prime minister in East Germany.
April 23, 1990: The West German government agrees on the basis of a treaty for
currency union.
May 5, 1990: First round of talks of the Two-plus-Four conferences (East and
West Germanys, the United Kingdom, France, Soviet Union, and the United
States) gets under way with the six foreign ministers in Bonn. The main point of
discussion is that of allegiance.
May 18, 1990: Signing of a treaty for economic, currency, and social union marks
the birth of a free and united Germany.
July 1, 1990: Currency union is implemented, and the East German mark changes
to the deutsche mark. People are permitted to cross the inner German border
freely.
July 2, 1990: Discussion begins in East Berlin regarding second treaty; that is, the
Unication Treaty.
July 16, 1990: Helmut Kohl and Soviet leader Mikhail Gorbachev announce a
breakthrough in the allegiance issue. Germany is to remain a member of NATO
after reunication.
July 22, 1990: The East German Parliament approves legal actions on reestablishing the state council within the country.
August 23, 1990: The Peoples Council of East Germany decides to reunite with
the West effective on October 3 and to hold a general election (on December 2).
August 31, 1990: The two Germanys conclude a reunication treaty.
September 12, 1990: West and East Germany, the United Kingdom, France, Russia
(the Soviet Union), and the United States remove all the impediments to the
reunication of Germany by signing the Two-plus-Four Treaty in Moscow.
October 3, 1990: Political reunication of the two Germanys is nally achieved.
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Index
A
Absorption, 63, 77, 82, 102, 104, 161
Acheson, D., 91
Ahn Young-Chul (pseudo-nym), 10
Algeria, 61
Ally, 49, 73, 8384, 87, 107, 110
American pragmatism, 9091, 183
Antagonism, 37, 41, 96, 184
Antagonistic hostility, 3
Appeasement policy, 17
Architecture, 113, 173
Arrival of socialism, 175
Autogenous capacity, 77
B
Ballistic missile, 61, 114,
134135, 139
Bank of Korea, 28, 31, 128129,
131, 159
Bankruptcy, 53, 80
Bear Stearns, Lehman Brothers and AIG, 143
Beijing (Peking), 6, 10, 39, 41, 48, 51, 53,
6566, 73, 7981, 8386, 88, 94, 97,
106107, 110111, 136, 152, 176178,
180181, 183
tutelage, 104, 138, 155
Berlin Wall, 38, 46, 57, 6364, 96, 116117,
145, 157, 178
Bible (Scriptures), 151152
Bibow, J., 143
Biden, J., 107
Big bang on the Korean Peninsula, 94, 118
reform, 12, 61, 63, 7071, 73, 78, 92,
102103, 163
Bilateral
trade, 1315
Blufng mentality, 1337
Blumenthal, D., 182
and Kagan, R., 182
Border, 7, 9, 14, 17, 2425, 35, 45, 50, 68,

7475, 80, 8283, 8586, 95, 110112,
125, 133, 135, 154, 163, 175, 178
Brandts neu ostpolitik (new eastward policy),
45
Brezhnev Doctrine, 58, 64
Bridge of no return, 89
Brinkmanship, 6869, 71, 81, 109, 120,
132134, 138, 150151, 180181, 188
Buffer zone, 70, 111, 175
Bulgaria, 61, 64
Bush, G. H. W., 117
Bush, G. W., 10, 5153, 62, 8081, 8789, 93,
102, 105, 108, 176, 185
C
Capitalism, 62, 165, 174175, 187
Capitalistic democracy, 1
yellow winds, 133
Carte blanche, 7
Ceteris paribus, 185
Chang (Jang) Sung-Taek, 137, 154
Charles Darwins theory of HomoSapiens
evolution, 120
Cha, V. D., 54
Chiang Kai-Shek, 92
China, 7, 911, 2223, 31, 36, 40, 42, 4648,
5051, 5354, 61, 63, 65, 6970,
7273, 7677, 8086, 8889, 9192,
9497, 102112, 114116, 118, 133,
135136, 144, 150151, 153, 155, 165,
171, 173186, 188189, 191
Chinese, 10, 43, 4748, 50, 53, 66, 70, 73,
8087, 91, 9394, 96, 102103, 105,
107108, 111, 114, 136, 139, 155, 175,
177178, 180181, 183184, 186
Choi Seung-Chul, a Norths architect, 154
Cho Myung-Rok, 11
Christianity, 75
199
200
Chul-Bong-Kak (iron-hill-palace), 11
Clinton, B., 105
Clinton, H., 105
Coexistence, 35, 60, 77, 105, 119121, 163
Collective slogan, 6
Colossal bloodbath, 109, 154
Commodities, tradable, 15, 30
Communist, communism, 112, 22, 2627,
33, 3739, 43, 4547, 49, 54, 5759,
6165, 6769, 74, 7678, 82, 8687,
95, 102, 105, 109, 114, 117, 119,
123125, 129, 132, 134, 136, 144,
149150, 154158, 163, 179180, 188
Communistic monarchy kingdom, 6
Condoleezza Rice, 62
Confederation approach, 76, 112113
Contingency action, 183
5029 concept plan, 49
plan, 49, 77, 80, 86, 91, 96, 122, 155
Control by Won, 162
convergence, 147
Corruption, 34, 9, 42, 49, 57, 63, 67, 69,
133, 165
Cost of reunication, 54, 70, 97, 104, 146, 148
Coup detat, 49, 154
de-facto coup, 154
Cumings, B., 3, 27
Custom clearing ofce, 1415
Czechoslovakia, 58, 61, 64
D
David C.K., 54
Davos, Switzerland, 107
Dear Leader, 6, 11, 17, 22, 26, 3334, 4748,
67, 102, 125, 133, 135, 137
Declaration of war, 40
Demilitarized zone, 67, 190
Democracy, 1, 5, 37, 45, 54, 7677, 87, 89,
102, 117, 121, 127129, 132, 145, 157,
168, 170, 174175, 180, 187
Democratic system, 12, 5, 77, 156, 179, 188
Deng Xiaoping, 1012, 4748, 103
Denuclearization, 3234, 51, 53, 79, 81, 89,
9798, 102, 105106
Deterrence, 173, 183
Deutsche Mark (DM), 45, 58, 143, 145
Devastated economies, 3
Dokdo (Takeshima), 92, 94
Dong-A Ilbo, 12
DPRK Workers Party (KWP), 11
Dubcek, A., 64
Index
E
Economic backlash
cooperation, 58, 114
integration, 58, 114
policies, 58, 114
Economics
of guns and bread, 133138
Egalitarian communism, 1
ideology, 9
paradise, 46
Empty stomach, 13
Environment, 5, 24, 35, 65, 78, 101122, 179,
185, 189190
Environmental, 45, 126, 184
Ethnic characteristics, 147
European Community, 117, 189
Exchange and cooperation, 13, 17, 46, 168,
170, 187188
Experience-based knowledge, 4
Explosion, 82, 112, 122, 141142, 180,
187188
F
Fighting for foods, 12
Fighting against foods, 35
Fiscal-monetary policy paradox, 142
Foreign policy, 54, 62, 65, 71, 8283, 88,
90, 95, 101, 105, 111, 114, 122, 174,
177178, 180
Fratricidal enemies, 1
Free market, 4, 43, 62, 65, 103, 121, 147148,
152, 165166, 187
Functionalism, 25, 84, 90
G
Gaeseong (or Gaesung) industrial complex,
6768
Gaesung (alternatively written as Kaesung or
Gaeseong), 9, 13, 1719, 21, 23, 25,
29, 31, 34, 42, 112, 160
GDP (Gross Domestic Product), 2728, 30, 94,
103, 128, 142144, 146, 159
Geithner, T., 107
Geneva Accords in July 1954, 144
German
Bundesbank, 142143, 145,
161162
Doppelbeschluss (double-decisions), 45
Mark, 145, 161
unication, 5859, 64, 112, 114, 116117,
142143, 161
Germany
east, 58, 64, 145, 161162
west, 45, 57, 117
Index
G-2 group, 178
Ghaussy, A. G., 161
Gil, B., 85
Shanghai Five, 8586
Gorbachev, M., 10, 3839, 5759, 6365, 117,
178179, 186
Governance and transparency, 164
Gradual reform, 61
Grain Management Special Account, 28
Grass-roots, 2, 7, 46, 49, 58, 73
Greater Leader, 7
Gross value of social product (GSP or GVSP),
129130
H
Hannara (Grand National) Party, 26
Han river, 2
Harrison, A., 126
Heavy fuel oil (HFO), 51, 9899
Hermit Kingdom, 57, 22, 38, 4748, 65, 95
Hill, C., 52, 80, 97
Ho Chi Minh Government, 144
Holbrooke, R., 65
Homogeneity, 58
Honecker, E., 64, 117
Hu Jintao, 53, 85, 155
Human derailment, 4
Humanitarian aids, 25, 28, 30, 32, 81
Human rights, 45, 32, 36, 40, 45, 5758, 64,
68, 74, 78, 93, 102, 105, 109, 145, 150,
155, 175
Human trafcking, 69, 133
Hwang, E.-G., 3, 78, 26, 123, 129131
Hwang Jang-Yup, 11
Hyundai Corporation, 44
I
IAEA (International Atomic Energy Agency),
17, 39, 81, 98, 150151
Ideological leaders, 2
Ideological norm(s), 174
Implicit social contract, 157
Implosion
dynamite implosion model, 8182
Incentive-oriented free market, 4
Income gap, 48, 54, 62, 104, 121, 146147
Income standard deviation, 5
Indigenous identity, 13
Institutional factors, 157
Inter-German exchange and cooperation, 46
Inter-Korean economic cooperation, 1336,
42, 45, 48, 118
201
Inter-Korean trade, 1319, 21, 2224, 2728,
3031, 60, 74
Internalized positive externality(external
benet of the re-unity), 147
Internal tensions(strains), 4650
International Atomic Energy Agency(IAEA),
17, 39, 81, 98, 150151
Intransigence, 184
Investment
cost, 146147
Irving Fishers equation of exchange, 159
J
Japan
J-ALERT, 137
Japanese, 1, 11, 53, 63, 71, 76, 7980,
8687, 9195, 105, 107, 115116,
136137, 169, 177, 183185
The Japan Times, 52, 79, 92, 135, 176
PAC-3(Patriot Advanced Capability-3),
137139
SM-3(Standard Missile-3), 137, 139
Jing Zhiyuan, 111
Jo Myong-Nok(alternatively written as Cho
Myong-Rok), 71
Jordan, M., 181
JSA (Joint Security Area), Pan-Mun-Jum, 151
Juche ( alternatively written as chuche)
doctrine, 123, 133, 150, 156
economy, 9, 60
farming, 11, 12
idea, 67, 123, 132
ideology, 11
Kingdom, 47, 109
system, 72, 133, 152
K
Kaiser, K., 117
Kang C.H., 44, 150
and Pierre R., 44
KCNA (Korea Central News Agency), 68, 77,
80, 136
KEDO, 18
Kennedy, P., 57, 6566
Kim Dae-Jung, 5, 1617, 22, 2526, 33, 40,
4243, 4546, 50, 60, 6566, 71,
7476, 8788, 96, 112113, 119, 132,
140, 163, 190
Kim Du-Nam, 11
Kim Gye-Gwan, 52
Kim Il-Sung, 37, 1011, 44, 48, 60, 65,
7677, 82, 91, 95, 110, 123, 125, 134,
137, 154155, 168, 177
202
Index
Kim Jong-Il, 6, 1012, 1617, 22, 2627,

29, 34, 4647, 4951, 53, 55, 5960,
6667, 69, 7181, 8486, 88, 90, 93,
96, 102, 105106, 108111, 113, 119,
125, 133134, 136137, 153156, 163,
176, 181, 190
Kim Jong-Un, 137, 181
Kim Kyong-Hui, 137
Kim Myung-Sup, 11
Kims love-mate Kim Ok, 154
Kims pancreatic cancer
post-Kim Jong-Il, 153156
Kim Yong-Chun, 11
Kim Yong-Nam, 11
Kim Young-Sam, 60
Kim Young-Yoon, 29
Koizumi J., 71, 93
Korean War, 2, 4, 8, 37, 75, 8284, 87, 95, 110,
175, 177, 179
Korea-US FTA ratication, 5
KOTRA, 31
Marx-Engels intrinsic philosophy, 6

Mass exodus, 49, 117, 163
Mass starvation, 5, 9, 61
Meat soup, 5, 9, 43
Megumi Yokota, 93
MESU (monetary, economic and social union),
145
Military academy, 44
Military confrontation, 26, 108, 173, 183, 189
Military rst policy, 139, 151, 154
Military museum, 190
Mindsets, 3637, 41, 62, 64, 73, 90, 120, 132,
157, 184, 187
Ministry of Unication, 18, 21, 2829, 3132
Mt. Keumkang (alternatively, Kumgang or
Diamond mountain), 13, 16
Keumgang (Kumkang) sightseeing
(tourism), 16, 1819, 22, 42, 44
Keumkang (Kumkang) mountain resort,
68, 88
Murrel, P., 138
L
Laissez-faire policy, 166
Lankov, A., 182
Leadership, 6, 3233, 4041, 4344, 4648,
5254, 57, 60, 63, 6566, 6973,
7576, 78, 86, 90, 97, 102103,
108109, 111114, 116119, 122, 124,
132137, 148, 150152, 154155,
165166, 175, 177, 180184, 187188,
190
Lee Jong-Suk, 50
Lee Myung-Bak, 5, 12, 17, 22, 26, 3236, 42,
45, 50, 53, 61, 68, 74, 76, 94, 110, 136
Lee Young-Hoon, 23, 31
Legitimacy, 67, 71, 73, 103104, 124, 133,
154, 156
Legitimacy eroding, 154
Leonid Ilyich Brezhnev, 58
Liberal Democratic Party (LDP) of Japan, 93
Liberalism, 25
Libya, 6162, 136
Libyas model, 62
Li Changchun, 136
Lopsided aids, 14, 45
Lower stage of federation, 163
Lucas, R. E., 126
N
Nam Sung-Wook, 27
National reunication, 44, 48, 63, 78, 110,
113116, 118, 121, 146, 152153,
155156, 160, 162, 164, 168, 173174,
185
NATO, 45, 179
Neighbors, 2, 59, 66, 7879, 8182, 84, 92, 94,
9697, 104, 113118, 174, 177, 188,
190191
neighboring nations (powers), 11, 24,
7996, 121, 173174, 185, 187
Neo-classical economics theory, 14
Neutrality
conditional (temporal) neutral state, 189
neutral (Greater) Korea, 113, 185, 187, 191
neutralization, 186, 188191
permanent (1896), 189
Nicolae Ceausescu, 10, 46, 64, 109, 145
Nikita Khrushchev, 58
Non-Proliferation Treaty, 1617, 39
Nordpolitik euphoria, 39, 42
Northeast Asia
region, 95, 173
North Korea (DPRK)
Defense Standing Committee, 137
National Defense Commission, 11, 137,
153155
National Peaceful Unication Committee,
4344
satellite Kwang-myong-sung-2 into orbit,
134
M
Madeleine Albright, 71, 182
Mao Zedong, 83
Marcus Noland, 73
Marginal capital-output ratio, 146
Index
12th Supreme Peoples General Assembly,
137
Norths First Seven Year Plan, 5
NorthSouth Joint Consultant Ofce
Relation Development, 17
Nuclear (nuke)
bomb (weapon), 26, 51, 61, 80, 106, 135,
150, 176
proliferation, 53, 79, 90, 176
O
Obama, B., 62, 76, 80, 8990, 101102,
104110, 112, 135136, 180, 183
Oligarchs and elites, 143
Orthodox, 6, 64, 117
P
PAC-2s and PAC-3s, 139
Palace coup within Pyongyangs inner power
circle, 49
Paradigm
shift, 35, 6263, 87, 91, 103, 118122
Park Chung-Hee, 4, 60, 119
Park Suk-Sam
and Mueller, R., 161
Paulson, H., 81
Peculiarity, 1415, 24
Pecuniary
and non-pecuniary, 13, 145
Peng Dehuai, 83
Peninsula, 18, 34, 5797, 101, 103, 107,
110114, 116, 118, 123, 129, 138, 148,
155, 163, 173187
Perceptions, 50, 7475, 8283, 96, 104, 106,
111, 115, 119120, 153, 174175
Perestroika and glasnost, 10, 33, 59, 6171
Pivotal, 106107, 185
Play with re works, 178
Policy priorities, 125, 149166
Political ideology, 1, 3, 5, 8, 175, 187
disputes, 1
dissentients, 1, 76
terrors, 62, 138
Poverty, vicious circle of, 34, 36, 87
Power elites, 9, 49, 69, 78
politics, 9, 49
Prague Autumn, 6364
Prague Spring, 58, 64
Preemptive strike, 81, 112, 182
Presbyterian church in Seoul, 75
Pritchard, C. L., 90
Privatization, 157, 164165
Pro-cyclical scal and monetary policies, 143
Proletarian cadres, 8
203
PSI (Proliferation Security Initiative), 160, 176
Psychological burden, 178
Pyongyang, 6, 1112, 1617, 22, 26, 34,
3840, 44, 4749, 5154, 59, 66, 68,
70, 7175, 77, 7981, 8385, 8993,
98, 102103, 105108, 110115,
118119, 121, 134, 136137, 150151,
153, 155, 163, 166, 169, 176, 178182,
187, 190
Pyongyangs high-pitched whining
provocations and threatening, 118
Daepodong-2 (alternatively written as
Dapodong 2 or Eun-Ha 2 or Unha
2), 51, 134, 141
Nodong-1 (alternatively written as
Rodong-1) missile, 51
Scud-B, Scud-C missile, 51
Pyongyang University of Science and
Technology, 75, 119
Q
Qadda, 62
R
Rack-dong (Nak-dong) river, 2
Reciprocity
relationship, 184
Reconciliation, 1, 34, 43, 76, 92, 110, 119,
163, 170
Red ag, 2, 37, 4044, 46
Reichsmark (RM), 58
Remnant, 49, 110, 116, 150, 187
Reunication, 32, 4445, 48, 54, 57, 60,
63, 70, 7778, 83, 91, 9697, 101,
103104, 109116, 118119, 121,
123148, 151153, 155156, 158,
160164, 166170, 173174, 177180,
182, 184191
Rhee Sung-Man, 60
Richardson, M., 105
Rodong (alternatively, Nodong) Shinmun
(newspaper), 61, 71
Roh Moo-Hyun, 4547, 50, 60, 6566, 76,
8788, 140, 176, 190
tragic suicide, 176
Roh Tae-Woo, 16, 25, 42, 60
Romania, 10, 46, 49, 61, 64, 73, 93, 109,
114115, 118, 145, 154155
model, 144
Roosevelt, F. D., 9192
Russia, 10, 23, 36, 46, 51, 54, 7677, 83, 86,
89, 91, 9496, 105, 110, 112, 114, 116,
118, 136, 141, 143145, 150151, 153,
165, 173177, 179182, 186, 188189
204
S
Saber-rattling, 106, 121, 181
Sachs, J., 126, 157
SAM-X system, 139
Sanction(s), 40, 46, 53, 81, 88, 93, 121,
135136, 150, 176177, 180,
182, 189
Scenario(s), 49, 59, 7779, 8182, 101, 103,
109, 112, 152, 155156, 161, 163, 166,
189, 190
Schaefer, W., 161
Sea of re, 41, 45, 54, 72, 113
Self Defense Forces (SDF), 93
Self-reliance (Juche), 57, 12, 38, 40, 43, 48,
123124
Shadow (real) exchange rate, 158
Shin Son-Ho, 135
Shock therapy, 147, 157
Short food supply, 9
Six-party talks, 10, 51, 7981, 85, 105106,
136, 150, 180
Socialism, 62, 64, 83, 144, 174175
Socialist bloc, 8, 65
economy, 6, 8, 129, 142, 157, 160, 162
paradise, 6, 133
system, 7, 9, 43, 57, 6162, 123,
126, 156
Solidarity, 90, 173
South Korea (ROK), 37
South Koreas anti-Americanism, 119
South Koreas evangelical Christian church
leaders, 119
Sarang Community Church, 119
So-Mang Church, 119
Stake-holding powers (countries), 77, 173
Stake(s), 49, 5859, 6364, 77, 7980, 8990,
94, 103104, 106, 113, 156, 173, 175,
185187, 189
Stalinist control, 6
State(s)
egoism, 173
State Sponsors of Terrorism list (2002 axis of
evil brand), 51
State-to-state pact on monetary, economic, and
social union (MESU), 145
Status quo, 1011, 17, 48, 53, 70, 78, 108, 120,
148, 152, 185
Strain policy, 3755
Strategic competitor, 91
Strategic partner, 53, 83, 86, 91
Structural unemployment, 145
Sudden collapse (fall), 7779, 152, 173
Index
Summit, 17, 26, 34, 39, 68, 71, 76, 88, 9394,
119, 176, 184
Sunshine policy, 1617, 22, 2627, 29, 33,
3755, 61, 74, 76, 112, 118119, 132,
188
Sustainability, 2, 60, 72, 78
Su Tung-pao, 65
T
Tamogami, T., 92
Taro, A., 76, 94
Technocrats, intellectual, 8, 73, 165
Technology, 10, 38, 53, 61, 63, 7475, 82, 106,
108, 111, 119, 127128, 136, 138, 141,
184
Tiananmen Square, 73
Tile-roof house, 5
Time consuming experiment, 157
Time structural costs and benets, 145
Trade
commercial (CT), 1415, 1819, 22, 27,
30, 42, 159
commission-based processing (CPT), 16,
19, 23, 30
general (GT), 1819, 23, 30
Transfer payment, 1415, 30, 126, 161
Treuhandanstalt of Germany, 164
Tug-of-War, 175185
U
Unication
formula, 185190
United States (U.S.), 45, 1012, 1617,
22, 24, 27, 3536, 39, 4446, 5053,
58, 62, 66, 71, 74, 77, 7980, 8291,
9397, 101, 104109, 111114, 116,
118, 134137, 139141, 143145,
150151, 153, 155, 165, 173175,
177186, 188189, 191
U.N, sanctions
Security Council, 40, 93, 135136, 150,
155, 176177, 180
Security Council Resolution 1718, 136,
150
Security Council Resolution 1874, 180
World Food Program (WFP), 134
Uranium enrichment, 53, 105
U.S. beef imports, 5, 12, 26, 32,
3436, 88
V
Vasile Milea, 109
Verrechnungseinheit (VE), 58
Victim(s), 112, 74, 88, 92
Index
Vietnam, 40, 61, 70, 112, 113, 136, 144
model, 113
unication, 112, 113, 144
Violation of the law, 168
W
Wang Qishan, 81
Washington, 13, 52, 54, 71, 76, 81, 86, 88, 92,
94, 104107, 110, 117, 123, 138, 152,
178, 180183, 185
Wen Jiabao, 94, 107
Wi-Hwa Island in the Yalu River, 111
205
WMD (Weapons of Mass Destruction), 54,
160, 176
Workers Party Central Committee, 7, 123
World environment, 101122
World politics, 138, 152, 178, 186
Y
Year of Cow, 101, 109
Yongbyon nuclear complex, 51, 80
Yonhap News, 150
Yugoslavia, 61

Eui-Gak Hwang - The Search For A Unified Korea

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The Search for a Unied Korea

The Search for a Unied

1 Are Koreans Ideological Victims? . . . . . . . . . . . . . . .

2 Inter-Korean Economic Cooperation: The Need

3 The Strain Policy Versus the Sunshine Policy: A Road

4 What if a Big Bang Occurs on the Korean Peninsula? . . . . . . .

5 New World Environment Surrounding Korea . . . . . .

6 The Political Economy of Reunification Between

The Economics of Guns and Bread . . . . . . . . . . . . . . .

7 Policy Priorities for the Unified Korea . . . . . . . . . . .

8 International Politics and a Search for Unified Korea . . . . . .

Trend of annual intra-Korean trade (unit: 1000 US dollars) .

Are Koreans Ideological Victims?

1.1 The Division and Loss of Indigenous Identity

1 Are Koreans Ideological Victims?

Kim Il-Sungs Miscalculation and the Subsequent Years

1.2 Kim Il-Sungs Miscalculation and the Subsequent Years

Cumings (1990, p. 237).

1 Are Koreans Ideological Victims?

Brief Retrospect of the North Juche (Self-Reliant) Hermit Kingdom

propagated both anti-government and anti-American propaganda to sensitive young

1.3 Brief Retrospect of the North Juche (Self-Reliant)

1 Are Koreans Ideological Victims?

1.4 Different Roads

Hwang (1993), ibid., p. 29.

1 Are Koreans Ideological Victims?

For Whom the Mourning Bell Tolls?

1.5 Mass Starvation Under Plenary Power Elites

1.6 For Whom the Mourning Bell Tolls?

1 Are Koreans Ideological Victims?

1.7 The Shelter for Fearful Leaders

Who Will Likely Take Over After Kim Jong-Il?

1.8 Who Will Likely Take Over After Kim Jong-Il?

1 Are Koreans Ideological Victims?

Inter-Korean Economic Cooperation: The Need

2.1 The Definition: Economic Cooperation Versus

E.-G. Hwang, The Search for a Unied Korea, DOI 10.1007/978-1-4419-1562-7_2,

Inter-Korean Economic Cooperation

The Denition: Economic Cooperation Versus Bilateral Trade

Inter-Korean Economic Cooperation

2.2 The Historical Outline of Inter-Korean Economic

The Status of the Inter-Korean Trade

2.3 The Status of the Inter-Korean Trade

No. 7763, 2005.12.29.

article 13: 3 item of the Law.

Inter-Korean Economic Cooperation

The inter-Korean trade (or economic cooperation) is composed of the following:

The Status of the Inter-Korean Trade

Table 2.2 Inter-Korean trade by major categories (unit: million US dollars)

(Mt. Keum.) (Gaesung)

Source: The same as Table 2.1

Table 2.3 Annual exchange visits of people (unit: numbers)

10,554 148,074 213,009

10,554 148,074 213,009

Table 2.4 Tour visits to Mt. Keumgang and Gaesung region

Inter-Korean Economic Cooperation

2.4 Comparison of the Inter-Korean Trade with the North

Comparison of the Inter-Korean Trade with the North KoreaChina Trade

Lee Young-Hoon (2006).

Inter-Korean Economic Cooperation

2.5 The Determinants of Inter-Korean Economic Cooperation

2.5.2 Trade, Investment, and Economic Assistance