The Search for a Unified Korea: Political and Economic Implications

The Search for a Unified Korea

Eui-Gak Hwang

The Search for a Unified Korea Political and Economic Implications

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Eui-Gak Hwang International Centre for the Study of East Asian Development (ICSEAD) 11-4 Otemachi Kitakyushu Kokurakita 803-0814 Japan [email protected]

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 All rights reserved. This work may not be translated or copied in whole or in part without the written permission of the publisher (Springer Science+Business Media, LLC, 233 Spring Street, New York, NY 10013, USA), except for brief excerpts in connection with reviews or scholarly analysis. Use in connection with any form of information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed is forbidden. The use in this publication of trade names, trademarks, service marks, and similar terms, even if they are not identified as such, is not to be taken as an expression of opinion as to whether or not they are subject to proprietary rights. Printed on acid-free paper Springer is part of Springer Science+Business Media (www.springer.com)

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 fiscal year 2008–2009, 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 bluffing to the world even as the leadership in Pyongyang is incapable of meeting its country’s 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 North’s 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 unified with the unanimous support from neighboring powers. Can North Korea’s implosion or explosion bring a reunification 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 refining the contents of the manuscript, but any remaining errors and shortcomings are solely mine. Kitakyushu, Japan

Eui-Gak Hwang

v

Introduction

North Korea’s brinkmanship diplomacy has continued to disturb the world with its seemingly reckless missile testing, as the country’s 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-Il’s 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 Korea’s implosion, and second to search for a feasible way for Korean reunification 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 reunification. 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 North’s communist system and the South’s capitalist system had led the Korean people to be ideologically split. In North Korea, many hungry people are fighting 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

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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 nation’s 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 reflects a cooler relation between two Koreas since Lee Myung-Bak became the South’s 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 North’s cliff-hanger (brinkmanship) strategy is not likely to end anytime soon. Aid from the South is due mainly to Seoul’s anxieties about the North’s possible implosion and the costs of unification, although the real motive behind Kim Dae-Jung’s 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 Korea’s assistance during a decade of sunshine policy, which amounted to about US 2,902.22 million dollars, the North Korean leadership has been kept afloat. The North’s elites must believe that with their skillful policy toward the South of smiling and bluffing, they can maintain their grip on power for much longer. If aids and grants continue to flow into the North from either the South or Beijing and others, the North’s 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 reunification 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 country’s 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 reunification possible? These are questions to be addressed using to both German and Vietnamese unification models and discussed subjectively at length in this chapter. The author proposes a neutral state for unified Korea briefly here, but will fully discuss this issue in Chapter 8 under the title of “International Politics and a Search for Unified 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

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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-Il’s regime in Pyongyang. In addition, the leadership role in the German unification process is highlighted as a way to help the South Koreans prepare for the possibility of national reunification. Chapter 6 focuses on the political economy of reunification. 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 reunification with references to East and West Germany’s reunification in 1990 and Vietnam’s reunification in 1975. The costs and benefits of reunification are presented both conceptually and numerically, if possible, to draw a conclusion that the sooner the reunification 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 unified Korea in terms of a contingency situation. Post-reunification 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 conflicting stakes among four big powers; namely, China, Japan, the United States, and Russia. This points out that reunification will not be such a simple process as long as there is the perception by the four big powers that a unified 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 unified 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 unified 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 reunification 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-Sung’s 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 North’s Bluffing Mentality? . . . . . . . . . . . . . . . . . . 2.1 The Definition: 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 Korea–China 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-Bak’s Leadership? 2.8 Closing Remarks on Reciprocity Principle . . . . . . . . . .

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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 South’s 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 North–South 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-Il’s 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 North’s 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 Reunification . . . . . . . . . . . . . . . . . . . . . 5.2 The DPRK and Obama Administration . . . . . . . 5.3 Will Kim Jong-Il’s End Differ from Ceausescu’s? . . 5.4 Will Korean Unification Be Welcome? . . . . . . . . 5.5 Leadership Role in German Unification 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

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The Economics of Guns and Bread . . . . . . . . . . . . . . . The Economics of the North’s Nuclear and Missile Tests . . . . The Political Economy of Korean Unification . . . . . . . . . .

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 Unified 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 Unification 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 Korea’s economy (2005) . . . . . . . . . . . . . . . . . . . . . . . North Korea’s 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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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 1945–1948 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 flair up and no real reconciliation was to be found between the two fratricidal enemies. Indeed, just as is it impossible to mix fire 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 North’s 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 imperialist’s 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 Unified Korea, DOI 10.1007/978-1-4419-1562-7_1,  C Springer Science+Business Media, LLC 2010

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days, many conscientious intellectuals in the South had already begun to suspect the sustainability of Seoul’s immature democratic system and thus were inclined to favor the then seemingly efficient 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 flags. 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 North’s security officers 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 confiscate 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 officers 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 officers 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 fill 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 fighting 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 housewife’s naive calculation to raise some extra income. During the 3 years (1950–1953) 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 elite’s 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-Sung’s Miscalculation and the Subsequent Years

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whether past or present, are usually ignorant and indifferent in sacrificing 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 simplified 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 satisfied 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 influence of actors would alter circumstantially depending on whether it is a socialistic theater or a democratic one. The three years of bloody conflict left millions of casualties (deaths, wounded, and missing), devastated economies, north and south alike, and, under a 1953 truce agreement, unresolved battlefields 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-Sung’s 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 South’s system. However, the war brought a tremendous dislocation of leftist supporters from the South. The end of the war provided the South’s 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. Officially, 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. Kim’s words of regret are also based on hearsay circulated among North defectors and North Korean observers in the South. 2

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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 people’s hope for a better economy paved the way for South Korea’s 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 efficiently 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 country’s 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 conflicts 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 conflicting 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 affluence” 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 briefly mentioned above, that there has been no political and human rights suppression in the South. Many children and descendants of those who were classified 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

5

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 insufflated 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 influences 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 ratification. He expressed his deep concern regarding the ever-mounting worrisome number of candle-carrying street demonstrators in fierce 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 reflecting 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 reflects 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 first by Kim Il-Sung in November 1962, the second year of the North’s 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

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Are Koreans Ideological Victims?

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 first 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 North’s per capita income ahead of that of the South until the end of 1974. The people’s 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 fields, but only with diminishing efficiency 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 principal–agent 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 confidence in one another as a whole will begin

4

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 People’s 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 official credo of the DPRK in the 1972 constitution. But Hwang’s world began to erode when an article in Rodong Shinmun (official 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 resident’s association) symposium in Japan in early February 1997. 5 In 1947, Kim Il-Sung borrowed Lenin’s 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

7

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 Mao’s China in 1953–1955, 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-Sung’s first initiative remark at the Workers’ Party Central Committee in 1955. It became the principle guideline in the North’s new constitution promulgated in December 1972, with the “Marxist–Leninist 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 sacrifices 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 finally consumer goods. Consumer preferences were largely placed at 6

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

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Are Koreans Ideological Victims?

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 everyone’s 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 “people’s 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 economy’s downfall, beginning in the mid-1970s. The economic battle between the North and South turned around in 1975–1976 with the capitalistic open market economy far ahead of the autarkic self-reliant one.7 Per capita income evaluated at North’s official 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-sufficiency seeking socialist economy.8

7

See Eui-Gak Hwang (1993), ibid., Tables 3.11(a) and 3.11(b), in pages 121–122, for the percapita GNP estimates for both North Korea, 1946–1990 and South Korea, 1953–1990. 8 See Eui-Gak Hwang (1993), ibid., pp. 60–62 on the functions of money in North Korea and also refer to Hwang (1984), in Korean.

1.6

For Whom the Mourning Bell Tolls?

9

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 1990–2007. North Korea’s 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 Korea’s minimum food requirement for human consumption in 1995–1996 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 2005–2006, 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 officers 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

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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-Yop’s testimony, but was officially designated as his father’s successor in 1980, assuming a growing political and managerial role until Kim Il-Sung’s death on July 8, 1994. Having deteriorated his country’s 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-Il’s 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. North’s 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 flies,” but Kim is afraid that he can be no longer capable to “catch and kill those flies.” 9 Can he dare to follow the path of Mikhail Gorbachev’s “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 People’s 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 flow into China but with “many negative cultures and political elements” (‘flies’). He suggested “flies” could be caught after “fresh air” was introduced. Another famous Deng’s analects is “If a cat catches mice, what does it matter if it’s black or white, which is, “Don’t 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 office 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 world’s ideological conflicts and the North’s 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 People’s Army; Kim Myung-Sup, operation head of DPRK Workers Party (KWP); and about 120 leaders of both the People’s Armed Forces and the KWP.

1.8 Who Will Likely Take Over After Kim Jong-Il? As of mid-2008, the notable figure in North Korea is General Kim Du-Nam who is the third son of Kim Yong-Nam, president of Supreme People’s Assembly (SPA). He is now “general superintendent” of the People’s 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 Korea’s 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 first story on the defection of Mr. Ahn, who made the second defection case of high ranking North Korean officer following Hwang Jang-yup in 1998, was first 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 Korea’s military organization, on May 21, 2008.

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adopted the similar course of the early Chinese economic reform by criticizing the Great Leader’s past policy failures immediately after his father’s 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 Korea’s 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 fight 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 conflicting ideologies. The victimized people are victimizing themselves with no regard to whichever camps they are destined to belong. The resulting inflictions 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 influence 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 Korea’s parliament.

Chapter 2

Inter-Korean Economic Cooperation: The Need for Reciprocity. Does Lopsided Cooperation Soothe the North’s 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 South’s 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 flow 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 efficiency principle. According to the “Law Governing the North–South 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 26–28, 2008, in Washington D.C. The version was later published in International Journal of Korean Studies, Vol XII, No. 1 (Fall/Winter 2008), pp. 101–126.

E.-G. Hwang, The Search for a Unified Korea, DOI 10.1007/978-1-4419-1562-7_2,  C Springer Science+Business Media, LLC 2010

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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, officially being compiled inclusively on the basis of all flows of goods, both commercial trade goods and free donation goods under “cooperative programs,” by the Custom Clearing Office 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 definition. But in reality, inter-Korean trade has so far been loosely used to involve not only commercial transactions but also non-economic flows 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 definitional 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 counterflows 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 definitional distinction, trade and cooperation are often being used interchangeably in the relations between the North and the South. That reflects the peculiarity of inter-Korean relations. If we look at the inter-Korean economic cooperation, the North has always enjoyed assistance flown into the North. Even if the inflows of materials accompanied by the South’s 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 define 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 outflow (or inflow) 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 country’s exports and M imports, and F(r) is net outflows 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 country’s (say, North Korea’s) investment (I) exceeds its

2.1

The Definition: Economic Cooperation Versus Bilateral Trade

15

own domestic saving (S), it has trade deficits; that is, its exports (X) are less than its imports (M). The deficits need to be supplemented by net inflows of foreign capital and foreign aids (in this case “minus F ” meaning net inflows) in order to keep the balance of payments in equilibrium. In the bilateral trade between the North and South, the North’s 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 flows 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 South’s concession. If we include all beneficial returns obtained in the bilateral trade as well as investment and various aids and grants into the category of trade, the money flow into the North has always exceeded the flow 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 flows 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 flow of physical import and export of goods. In the inter-Korean trade, for example, the sale of commodities from the North accompanies its counterflows 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 North’s economy. Meanwhile, in the accounting of the South’s 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 South’s custom clearing office. If all of these are considered together in accounting, the South appears to have a tremendous trade surplus because the South’s 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 flows, the term inter-Korean cooperation inclusive of the loosely defined- trade, investment and other transfers, and so forth, reduces “our confusion” as compared to the counterflows 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.

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2.2 The Historical Outline of Inter-Korean Economic Cooperation The inter-Korean economic cooperation was first 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, Unification 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 offices of the South Korean firms 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 North–South 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 participant’s 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 finance the small and medium firms involved in the North projects. Kim Dae-Jung’s 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 Kim–Kim1 joint communiqué in Pyongyang in 2000, the Mt. Keumkang sightseeing project (first opened in November 1998),

1 Kim Jong-Il and Kim Dae-Jung (DJ) met in Pyongyang and released a joint communiqué 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, DJ’s appeasement policy had mainly focused on helping the Great Dear Leader’s regime in the North, particularly to maintain the political and military status quo in the peninsula. DJ’s 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 South’s investors with various favorable legal systems, procedures, and office openings in the North. On December 24, 2003, two railroads were connected across the “heretofore no-return borders.” On October 28, 2005, the North–South Joint Consultant Office for Economic Cooperation was opened in the Gaesung complex. Mr. Roh Moo-Hyun visited Pyongyang on October 2–4, 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 14–16), followed by Defense Ministers’ meeting (November 27–29). It was also followed by InterKorean Economic Cooperation Committee meeting (December 4–6) and the West Sea Peaceful Cooperation Promotion Committee meeting (December 28–29). The Roh Moo-Hyun government encouraged the South’s Congress to pass the Law for the Promotion of the North–South Relation Development2 in December 2005. Based on the law, the First Basic Plan for the North–South 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 first 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 DPRK’s 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 financial 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

2

Inter-Korean Economic Cooperation

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 Unification: 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

The Status of the Inter-Korean Trade

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 defined (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 profits are expected to return back to those partners who are now extending “don’t-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 firms have learned their lessons and are more inclined to be profit 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

S→N

N→S

Total

89–97

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 Inter-Korean Economic Cooperation

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 unification: 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 The Status of the Inter-Korean Trade 21

22

2

Inter-Korean Economic Cooperation

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 flows of both economic trade and human exchange are obviously the effect of the South’s desire to have friendlier relations, the South’s 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 South’s 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 South’s assistance has so far contributed in some degree to the postponement of friendly diplomatic relations between the United States and the Democratic People’s Republic of Korea. But in 2008 when Lee Myung-Bak, supported by anti-communist conservatives, took his presidency, the South–North 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 1998–2002 and Roh: 3.7 billion dollars in 2003–2006, and the latter’s 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 Korea–China Trade Since 2000, both South Korea and China have been two major trade partners of DPRK. During the period 2000–2005, the marginal increase of North Korean external trade amounting to US 1.6 billion dollars was exactly equal to the increases in both the South–North trade (0.6 billion) and China–North 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 China’s and South Korea’s economic cooperation with North Korea were about 30% before and after 2000, respectively. However, in terms of the contents, the South–North 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 Korea–China 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 insignificant, 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 South’s 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 Korea’s 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 China’s 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 Korea’s pure commercial exports were merely about 1/50 of Chinese exports to North Korea as of 2005. This explains that the South’s influence on the North’s markets has far less impact than that of the Chinese. According to the Chinese People’s 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 Korea’s 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 North’s 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 inflows. 6 North

24

2

Inter-Korean Economic Cooperation

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 South’s government, the South’s 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 South’s and the North’s respective relations with neighboring nations, particularly with the United States, as well as the two parties’ economic, political, and military problems. Once we confine our discussion within the contexts of the motives of the inter-Korean economic cooperation, it would be easier to traffic the respective interests of participating actors. Needless to say, South Korea’s 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 South’s government inclusive of public organizations has approached North Korea to help relieve the latter’s 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 country’s 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 profitability, 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 parent’s native home.” But the main incentive lies in profit-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 business’s profit creation from the intra-Korean trade. Nevertheless, North Korea has enjoyed a considerable benefit 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 North’s indigenous tradable items is the decreasing demand for such goods in the South.

2.5

The Determinants of Inter-Korean Economic Cooperation

25

The South’s 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 South’s Hyundai. Most South Korean investors build factories jointly with North Korean puppet companies. They import raw and intermediate goods from the South to process finished 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 North’s average monthly wage ($36) is currently about 1.5% of the South’s average monthly income ($2,360) in 2008, there is good incentive for the South’s 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 influenced by noneconomic and political considerations. The distinction is very difficult, 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 North’s 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

7 A 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

2

Inter-Korean Economic Cooperation

regard to ideological differences. Despite the South’s 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 South’s 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 South’s 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 office, 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 North’s denotative move, but it is likely to get cyclically stronger across the landscape during the rest of Lee’s 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 DJ’s 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 influences 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 DJ’s 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 North’s iron stance toward a free and flexible world.11 Nevertheless, DJ’s 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 South’s 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 South’s total trade and 0.09% of the South’s GDP, which is indeed not significant from the perspective of South Korea’s economy. South Korea has annual trade deficits 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 benefits of both its economy and people. The major obstacle now is related to the emotional issues involving the South’s suspicions that the North’s leaders might be diverting the South’s 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 South–North Cooperation fund, which is classified 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 1991–2005, 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 South’s 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

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Inter-Korean Economic Cooperation

Table 2.5 The share of the Inter-Korean trade to the South Korea’s economy (2005)

N–S Cooperation (Trade) Trade Balance (Investment) (Subsidies)

Economic Cooperation ($ million)

Share in the South’s Trade (%)

Share in the South’s 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 unification 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 South’s 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 figure 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 official Cooperation Fund (1991–2005), 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 1991–2005. The aid provided by the South’s private sector was officially 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 official figures. Nevertheless, the government’s 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 Unification, October 13, 2006, and Records of the National Assembly, October 2008.

2.6

The Effects of the Inter-Korean Economic Cooperation

29

cooperation. Many South Korean companies participating in the cooperation projects have not been making profits, 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 DJ’s Sunshine Policy. The right-wing supporters believe that the South’s 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-profit-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 1989–2005, 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 figures, 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 conflicts 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 significant 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 Unification 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-benefit needs

13 According to Kim Young-Yoon’s 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). 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.

14 It

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further analysis to estimate the overall effects of the investments on value added, employment, and net exports of those South Korean participating firms.

2.6.2 The Impact on the North Korean Economy The inter-Korean economic cooperation has increased the North Korean economy’s dependency on the South. Generally, the inter-Korean trade statistics can be reclassified 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 firms 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 simplified approximations as such, the North Korea’s 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 North’s gross domestic products (GDP) or North’s gross national income (GNI). But the aids and grants (which are also de facto aids) constitute those items contributing to the increase in the North’s gross disposable income (GNDI). The net increase in North Korea’s 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 simplicity’s sake, in this analysis.

2.6

The Effects of the Inter-Korean Economic Cooperation

31

Table 2.6 North Korea’s 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

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 unification. This table is based on Lee Young-Hoon’s 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 fill 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 figure 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 latter’s constant bluff to consume it with “fire.”

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).

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2.7 New Policy Paradigm Under Lee Myung-Bak’s Leadership? National unification 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 reunification. (President Lee Myung-Bak’s 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 benefits 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 North’s response to reducing its nuclear projects. The four new principles propose that Lee’s government will cooperate with the North step by step if, and only if, such preconditions as the North’s denuclearization progress, economic feasibility, financial capability, and people’s consensus regarding the inter-Korean economic cooperation are met. As usual, the North bluntly ignored Lee’s 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 first objective targets to facilitate the North’s denuclearization, which in turn consists of (a) achieving the North’s nuclear dismantlement through the inter-Korean relation, and (b) inducing the North’s 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) fishery 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) POW’s 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 Unification, 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 Lee’s 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 leader’s 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, finance, and living conditions within five 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. Lee’s policy toward the North reflects 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, DJ’s 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 beneficiary 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 bluffing the South. The North’s 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 benefits will outweigh the costs in the long run for both South Korea and North Korea. As for the Lee Myung-Bak government’s 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.

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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 North’s campaign to increase this (2008) year’s crop production.18 This reveals that the country is in a severe state of food shortage. Anyhow, Lee’s 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 fiasco 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 first 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 South–North 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 Lee’s 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). Lee’s 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 beneficial for

18 The

Korea Herald, p. 2, June 19, 2008. Myung-Bak’s 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 significantly 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 North’s 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 efficiently, providing both parties with “better understanding” about “economic functioning” of the other system. Learning about the policy efficiency 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 benefits from the reciprocal fair trade instead of beneficiary 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 flaw that is dragging down the realistic reciprocity approach being pursued by Lee’s government. The South’s 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 conflict 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. Pyongyang’s stubborn refusal to embrace Lee’s 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 influence 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 South’s parliament.

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The North’s 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 reflect the unsolved reality stifling 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 Lee’s 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 win–win 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 people’s democracy (that is, socialist) and red flag.” The US-backed Republic of Korea (ROK) was officially proclaimed in the South on August 15, 1948. The Soviet-backed Democratic People’s 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 (1950–1953). 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 first 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 finally realized E.-G. Hwang, The Search for a Unified Korea, DOI 10.1007/978-1-4419-1562-7_3,  C Springer Science+Business Media, LLC 2010

37

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3 The Strain Policy Versus the Sunshine Policy: A Road to Korean Unification

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 one’s 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 fixed capitals. Once the devastating process of such adaptation became entrenched in the society in less than two decades, the North’s 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 1975–1976 period. By the mid-1970s, the North’s Juche (self-independent) economy began to fall behind. North Korea’s gross national income had quadrupled between 1965 and 1976, a highly creditable performance for the near zero inflationary developing economy. But at the same time, South Korea’s inflation-adjusted real GNP more than tripled enough to pass the North in per capita GNP in 1976 for the first 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 North’s 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 20–25% 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 Gorbachev’s brave choice of glasnost and perestroika. The Soviet Union had been North Korea’s 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 flood 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. Gorbachev’s 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 Pyongyang’s allies and Pyongyang from the West, the 1988 Summer Olympics (the 24th Olympiad held on September 17–October 2) in Seoul gave South Korea a valuable opportunity to meet the Socialist countries in transition. South Korea’s move toward relations with Pyongyang’s communist allies in Moscow, Beijing, and other central and eastern Europe and Africa was an increasing turn for the worse in terms of North Korea’s 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 Korea’s policy reversal, the United States moved to open a modest initiative to North Korea with a new policy not only of encouraging unofficial, 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 conflicts 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 North’s 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 first withdrawal by any nation from the NPT. The world reacted with shock and dismay, with North Korea’s nuclear program suddenly becoming the top issue on the international agenda. In an effort to stop the North’s 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’ official dialogue, and in return, North Korea’s suspension of its withdrawal “as long as it considers necessary.” The US-DPRK talk, however, did not lead to the abandonment of the North’s nuclear program. Since the early 1993 encounter, DPRK had been using its nuclear card as a bargaining chip in exchange for security and economic benefits from the United States

40

3 The Strain Policy Versus the Sunshine Policy: A Road to Korean Unification

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 wasn’t 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 North’s 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 North’s stance, explaining the North’s nuclear program as self-defensive necessity.

3.2 How Long Will the Red Flag Fly with the South’s 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 fled their country in search of food. From 1996 to 2006, a total of 8,675 from an unknown number of North Koreans fleeing their country have been officially 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

1

Oberdorfer (2001, p. 305). Official 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 unidentified 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 South’s military camps since she officially defected in 2004.

2

3.2

How Long Will the Red Flag Fly with the South’s 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 9–24, 2008.3 Instead of attempting to fix 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 flag fly 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 fix, 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 flee from the hell at the risk of their own and their family’s lives. Many people are still being starved to death. Nevertheless, the North’s regime mobilized all its resources to have its red flag fly in Beijing’s 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 fire 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 fatherland’s unification and that the South’s regime is the whole cause of national tragedy. The North Korea has its raison d’etre 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 fire of hatred flares up. Ironically, the South has supported the North’s brinking economy with dollars and in other ways in international affairs.

3

South Korea ranked number 7 with 13 gold, 10 silver, and 8 bronze medals at the Beijing Olympics.

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3 The Strain Policy Versus the Sunshine Policy: A Road to Korean Unification

In between the Nordpolitik euphoria and due concerns about the North’s sea of fire threats, South Korea has prevailed upon the North to accept economic cooperation since the late 1980s. The Special Declaration for National Unification and Prosperity made by the South Sixth Republic President Roh Tae-Woo on July 7, 1988 was the first aggressive gesture made to North Korea. In fact, changes in the Soviet Union, China, and Eastern Europe as well as South Korea’s economic miracle and enhanced national confidence, gave rise to South Korea’s 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 office in 1998 with his priority Sunshine Policy. The officially 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 (1998–2007) 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 officially equal to the intra-trade balance plus commission-based processing revenue accrued to North Korea, is roughly estimated to account for about 2–3% 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 official trade windfalls gone to the North, the figures 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 North’s 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 people’s confidence in the state. The sure way for the North to keep alive is, therefore, to change its political paradigm and economic

4 Kim Dae-Jung regime provided a total of 1,331.05 million (US dollars) to North Korea during 1998–2002. 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 2003–2007 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 finish 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 DJ’s 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 officially employed by ROK army to collect troop information and offer educational lectures in many of the South’s military camps. In due course, it was discovered that she had collected confidential information in exchange for sexual favors from dozens of army officers for several years.5 Contradicting the South’s news report, North Korea’s spokesman for the National Peaceful Unification 5

Refer to footnote 2 above.

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3 The Strain Policy Versus the Sunshine Policy: A Road to Korean Unification

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 2006–2007 in Seoul, telling a lively story of prison conditions, not many people went to see the play, quite contrary to attendance expectations. This reflects that most South Koreans are no longer interested in the North’s 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 Korean’s opinions on who-is-our-national-enemy only to find that more than 60% regard the United States as “our nation’s number one enemy.” More surprisingly, nearly one third of freshmen at the Military Academy responded similarly. This reflects a notable shift in the young folks’ wonky national security perception that has evolved greatly in recent years. Many innocent young students are surely influenced 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 South’s 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 flag flying 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 reunification? Then a question arises: Is it better to shorten the life of a fading patient or to prolong the patient’s longevity by the injection of outside blood into the weak

6

See Meil-Kyung-Jae (daily), September 4, 2008. See Kang and Pierre (2001). 8 The Mt. Keumgang sightseeing business is being operated by the South’s Hyundai Corporation, but tourists are completely isolated from any of North Korea’s 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 Korea’s demanding mentality. Whenever the North is dissatisfied with the South, it always comes up with driving-to-the-edge tactics, sometimes with the bluff of turning Seoul into a sea of fire. The economic gap between the two Koreas is comparable to the situations between the two divided Germanys before their reunification 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 conflicts between the United States and Soviet Union erupted with the US deployment policy of nuclear missiles to NATO members. West Germany had to accept NATO’s nuclear weapons reinforcement decision while keeping close contact with the Warsaw Pact members in accordance with earlier line of the Brandt’s 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 Germany’s focus was to plant the recognition among East Germans that Western democracy is superior to the East’s 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 office 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

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3 The Strain Policy Versus the Sunshine Policy: A Road to Korean Unification

North Korea with only incentives. He must prepare himself to brook strong and lingering defiance 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 benefit 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, first 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 latter’s economy. By providing the North with as much aid as possible, they argue that unification 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 North’s economy gets better with unconditional support from the South, will the two Koreas’ approach toward national unification 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 North’s system does a complete reversal. The improvement of the North’s economy with the South’s 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 South’s market-oriented economy in terms of per capita income and its peoples’ welfare. The widening gap in per capita income means that the unification cost is getting greater over time. Then, how long will the red flag fly in the sky of the North with the continuing inflows from the South’s 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 conflicting 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 North’s red flag 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 North’s internal strains to oust the regime.

3.4 What Exacerbates Internal Tensions? North Korea’s Kim Jong-Il has witnessed how the old Soviet Union disintegrated, how the Berlin Wall fell to the capitalistic West, and how his father’s 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 flies 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 Xiaoping’s 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 China’s 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 People’s 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-Il’s personal health and his incumbent power structure began to circulate throughout the world. Speculation about the Dear Leader Kim Jong-Il’s health intensified throughout September after he failed to show up at the communist state’s 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 Kim’s 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.

9

In his proposition of Chinese economic reform and open policy in 1979, Deng Xiaoping said that “flies 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 profit-in-command, rather than Mao’s dictum of politics-in -command, is now called the “Great Father of Chinese Economic Development.”

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His absence at the North’s 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 North’s 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 inefficient 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 Korea’s 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 unification 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 regime’s 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 reunification 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 officers may attempt to secure their survival, recognizing that further lock step with Kim will only end with their demise. A coup within Kim’s 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 fight, which may take a form of uncontrollable résistance 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, what’s next? Where will North Korea go with such an internal upheaval? Will it, in fact, lead to a new crisis that still threatens the peninsula’s security and stability? Will new power elites rule North Korea independently with a new paradigm on politics and system? Will it be placed under influence of a third country? Will the two Koreas be united under one flag 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-Il’s 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 Pyongyang’s inner power circle. The first 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 it’s 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 five emergency situations in North Korea. The five situations included (1) coup d’etat or uprisings of armed civilians that would fire 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

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3 The Strain Policy Versus the Sunshine Policy: A Road to Korean Unification

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 administration’s 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 officials 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 flow 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 official 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-Il’s regime has owed its longevity to generous economic assistance from both the South’s 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 official 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, floods, 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 8–10 nuclear bombs of average size with 20 kilotons of nuclear explosive power. In addition, Kim Jong-Il’s regime has produced numerous short (300–600 km range such as DF-61, SCUD-B, SCUD-C), intermediate (1,300–2,500 km range such as Nodong-1 and Daepodong1), and long range (3,000–11,000 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 first meeting on August 27–29, 2003, until its last held in July 10–12, 2008. The goal of the Six-Party Talks has been to develop a comprehensive package relative to North Korea’s denuclearization and the verification protocol. During its fifth round of meetings held in Beijing on February 8–13, 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 first Bush presidency, the rest presumably built over the last 5 years (2002–2006). The Bush administration consistently demanded that North Korea permit spot verification of the North’s 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 verification 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.

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inside real contents were already eliminated on November 28, 2007) on June 27, 2008 based on the Six-Party Agreement made at their fifth 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 fight 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 can’t 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 Pacific 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 first 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 “official” 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 North’s 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 verification of the North’s 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.

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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 fired 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 North’s nuclear proliferation and the suspected transfer of nuclear technology to the third world countries; it, however, failed to see beyond North Korea’s 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 Jintao’s 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 people’s 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 North’s plutoniumbased nuclear program and its alleged uranium enrichment. In the end, a weary United States would concede North Korea’s nuclear position under the condition of no technology or nuclear exports to Middle East states by the North.

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3 The Strain Policy Versus the Sunshine Policy: A Road to Korean Unification 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

North’s 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 state’s 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 reunified, they must find a definite solution to their conflicts with one another. The military or “coercion” option is not feasible, because this course of action does not rule out the North’s continued irresponsible retaliation threats to place the South into the sea of fire. 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 people’s 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 North’s 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 reunification defined 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).

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the longevity of the North, which involves rather higher opportunity cost of delayed unification 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-Il’s regime. History will tell us that the sticks approach could work not only for complete elimination of North Korea’s 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 21:34–36.

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 state’s 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 financed by the West German Ministry of Education during July–September, 1989, most German scholars told me that German reunification, if possible, would come far later than the Korean E.-G. Hwang, The Search for a Unified Korea, DOI 10.1007/978-1-4419-1562-7_4,  C Springer Science+Business Media, LLC 2010

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reunification. They all appeared to have given up hope that their split nation would be unified 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 (1946–1948), 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 artificially 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 West’s news media including television shows. This led to the dramatic collapse of the East’s communist regime, which had survived for nearly 40 years since 1949. The relatively quiet grassroots’ revolution within the East and the subsequent German unification were, of course, greatly attributed to Gorbachev’s 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 first official 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 Germany’s suspension of traffic 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 first 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 Moscow’s right to intervene in the affairs of other socialist states. 1

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Historical Evolutions of the North–South Korean Relations

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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 unification 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 unification 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-Il’s heredity power is nearing its end. If North Korea faces a big-bang scenario with a sudden end to the now ailing Kim Jong-Il’s 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 North–South Korean relations. Second, we will review the implications of Gorbachev’s 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 North–South Korean Relations Two states, the North and the South, have maintained bilateral interactions chronologically through different stages consisting of mutual conflict, mutual competition, mutual collaboration, and mutual cooperation ever since the division of the nation in 1948. The so-called butterfly 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 briefly introduce the historical stages of the two Koreas’ relations, we will express the relations in terms of four different definitions. First, “conflict or clash” relation is meant when the two states interact with each other seeking mutually different goals with mutually different means. Second, when the

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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 first 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 definitions in mind, the evolution of the relationship between the two Koreas over the last 50 years can be largely classified into four stages. The first stage was the “period of hostility” from 1948 to the early 1970s, when the North’s Kim Il-Sung antagonized the South’s 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 Park’s Yushin regime and the Kim’s 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 reunification. The relationship had flickered into life in a tangible and tantalizing fashion with the light switch permanently on since then. The third stage (1987–1997) began with the “collaboration” among the North’s regime under Kim Il-Sung–Kim Jong-Il and the South’s 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 economy’s sustainability. The two Koreas perceived the bilateral collaboration, in terms of non-aggression principle, human exchange and economic cooperation (trade), very beneficial 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 North’s Kim Jong-Il and the South’s Kim Dae-Jung (1998–2002) and Roh Moo-Hyun (2003–2007). 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 North’s leadership. But during this period, South Korea’s leadership (Kim Dae-Jung), by agreeing to pursue confederation in 2002, adopted a road map to unification that was first proposed by Kim Il-Sung and that had become part of the “progressive” agenda in the South. Kim’s successor, Roh Moo-Hyun, attempted to implement it and also pushed for political change that would harmonize the South’s politics with those of the

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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 South’s 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 overconfident 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 Korea’s state media have been churning out near-daily criticism of Lee, calling him a “traitor” and “human scum.” In the first two months of 2009, the North’s main Rodong Shinmun newspaper accused Lee of driving the Koreas “to the brink of war.” While Lee has kept relatively calm despite the North’s irritation, North Korea has, in fact, been beefing 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 significantly 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 system’s fundamental reform, whether the Soviet Union’s model or China’s model, can be attributed to the socialist system’s 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 communism’s 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 Marxist–Leninist 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 Marxist–Leninist ideology, all of these countries have

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now shed their old failed systems to assimilate into the market-oriented free competitive one. However, this is not saying that the influence 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 difficulties in job markets and the income gaps become greater after reform. In fact, when the 2008 financial 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 flock 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 fittest. But it doesn’t mean that free market aspirations are less than egalitarian socialism aspirations in today’s world. Even the Libyan leader Colonel Muammar-el-Qaddafi, 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. Qaddafi had already criticized his own socialist economic system as “not functioning efficiently,” and opened Libya to a more flexible 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 Libya’s model of first 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. Qaddafi 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 man’s power much similar to Kim’s 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 flowing into the country since 2003. And it was not surprising for the world to see that Qaddafi had face-to-face talks with the US Secretary of State, Condoleezza Rice, on September 5, 2008, the first 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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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 people’s 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 reunification 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 1970–1990 periods or an abrupt implosion, an event which the North’s leadership is afraid of happening. If the latter happens, does the North’s 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. Gorbachev’s radical reform policies in the late 1980s on most Soviet bloc countries.

4.3.1 Gorbachev Phenomenon and Communist Bloc Change Mikhail S. Gorbachev’s 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 Soviet’s 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

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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 Gorbachev’s 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 Gorbachev’s divorce from the “Brezhnev Doctrine” forced East Germany to approve the policies of perestroika and glasnost, which resulted in big-bang German unification 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 1985–1988. 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 region’s communist parties were granted far more autonomy than they had before; it was not primarily their responsibility and not the Soviet Union’s to improve economic performance under (if at all possible) stable conditions. Gorbachev’s apparent intention was to accelerate the bloc’s decentralization that had begun after Stalin’s 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, Gorbachev’s affirmation 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 region’s communist parties was a hopeful sign of the fading of Moscow’s imperial mentality.6 Whatever Gorbachev’s early intention was, his new mindset definitely 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 East–West 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, Gorbachev’s 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 country’s pre-World War II history. Alexander Dubcek, the leader of the Czechoslovak communists and the symbol of the Prague Spring, personified 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 Gorbachev’s call for change brought only a massive, bloody civilian revolution in December 1989 that finished the tyranny – and this tyrant, on Christmas Day. 6 Gati (1990, p. 78).

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ethnic, economic, and security interests, but no longer on behalf of its real or perceived ideological interests, as the world learned from the Red Army’s overnight invasion into ethnically split Georgia during the Beijing Olympics in the summer of 2008. The important point is that Gorbachev’s foreign policy with its well-disciplined tolerance contributed to the socialist bloc’s rapid decentralization that has since driven them to assimilate into the free market system. Indeed, nations are reshuffling 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 first as a result of mounting inside leftists’ uprisings and ongoing anti-government strikes that could fundamentally shake the South’s 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 Power’s) economic rise and fall and its growth and decline as an important military power (or world empire).” This, too, is hardly surprising, since it flows from two related facts. The first 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 1036–1101. 8 Holbrooke (2008, p. 4).

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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 Korea’s 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 Korea’s 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 South’s unstable economy, but since the mid-1970s the North’s 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 North’s self-imposed isolation, severe natural disasters such as yearly floods 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 overflowing for more than a decade since the mid-1990s. This wealth transfer from the South is now suspected of making it possible for North Korea’s

9

Kennedy (1987, p. xxii).

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The Spillover Effects of Perestroika and Glasnost

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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 officials and traders and thus eventually reduce public confidence 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 world’s last controlled Stalinist regime and it has remained resolutely closed off from the world. Over the past 60 years, it has defied 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 first 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 Korea’s 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 Korea’s approach is, “know thy enemy, but don’t 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 Kim’s whereabouts underscores the difficulty 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

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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 North’s 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 first 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 North’s economy. But Pyongyang always manages to shy away from real peace and security with its brothers in Seoul despite its often rhetorical stance: “Let’s Go Together as One Nationality.”

10 A month earlier, North Korea’s Ro-Dong Shin Mun (North Korean Official Newspaper) reported in its October 16 (2008) edition that the North is seriously considering suspending all fronts of North–South Relations because the South Lee Myung-Bak regime insult denounced North Korea’s dignity with its anti-communist posture. See http://blog.Yonhapnews.co.kr/king21c/. 11 On November 24, 2008, the North’s 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 Seoul’s confrontational and betrayal policy toward the communist North. Furious with the South for its sponsorship of the U.N. General Assembly’s 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 fifth 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 South’s staffs will be expelled in early December and that any resumption of joint tour and other projects depends on Seoul’s 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

The Spillover Effects of Perestroika and Glasnost

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 finally 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 flawless 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 Kim’s dominance in the well-sheltered society. North Korea’s elites do not dare to challenge Kim, and they, feeling cornered, understand that unity under Kim’s 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 unofficial 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 trafficking, 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 North’s 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

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Korea’s 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 South’s 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 South’s 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 Kim’s 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 flows 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 reunification would be much less. The South Korean government’s 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 South’s 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 briefly 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, first in the history of the DPRK. Official commodity prices were raised for the first time in more than three decades. Rationing – formally known as the Public Distribution System – was cut

12

In addition to the South’s 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 leaflet dissemination proves that such efforts are an extreme irritancy to the North’s regime. Making North Korean people know about the “truth” constitutes a “hostile challenge to the North leadership’s dignity.”

4.3

The Spillover Effects of Perestroika and Glasnost

71

way back. The farmers’ markets were made legitimate, and the secondary markets began to activate wherever needed by unofficial 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 North–South 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 South’s prosperity. Sooner or later, the population would come to seriously question the North Korean regime’s 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 regime’s 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 government’s lies. This fear makes it impossible for the North’s 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 official 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).

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4.4 Can Kim Jong-Il’s Regime Last Much Longer? For decades, both father Kim and son Kim have discouraged any number of predictions about their regime’s sustainability. The North Korean economy has been unproductive since the late 1970s. The North’s economic landscape was rendered completely desolate in the 1990s because of the system’s inherent inefficiency coupled with nature’s wrath. During the last decade, the state was incapable of meeting its most basic needs, including feeding its people. The North is keeping afloat 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 first 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 classified people largely into two groups. One group belongs to people close to Kim’s 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 Korea’s 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 fire” 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 trafficking 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-Il’s 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 North’s 2002 July price reform initiatives and the reform’s eventual frustration. Perhaps many North Korean technocrats do not understand both basic economic principles and markets. But the frustration was rather caused by the leadership’s lack of confidence (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 selfish 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 “Kim’s 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 regime’s 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 doesn’t listen. If we threaten him, he listens even less.” Nevertheless, China keeps the constant flow of aid, whatever Kim’s 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 North’s 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 afloat 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 South’s Sunshine

14

Noland (2002).

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Policy15 in his favor until the South Korea’s 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 DaeJung’s 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 confident 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. Lee’s 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 world’s 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 traffic 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 North–South transaction. South Korean side did, however, tolerate the North’s 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 first 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

Can Kim Jong-Il’s Regime Last Much Longer?

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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 South–South conflicts (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 (1950–1953), which began with the North’s 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 North’s 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 fire 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 afloat. 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 benefiting 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).

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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 Lee’s 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. Obama’s emphasis on cooperation and partnership in foreign policies means closer ties with China and Russia, two of North Korea’s 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 “don’t-ask aids (or aids without conditions)” as did his former two governments. Many progressive journalists in the South seldom criticize North Korea’s hostile policies toward the South. Instead, they direct the fault to the South’s 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 finely balanced between progressive

18

All social conflicts began to explode in the South since Kim Dae-Jung (called DJ), the longtime fighter against Seoul’s military regimes, took office 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 modified version of Kim Il-Sung’s “confederation approach” as a road map to unification, which lay a stepping stone for the “progressive” or “leftist” agenda in the South. His successor Roh Moo-Hyun vigorously promoted DJ’s 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 South’s National Security Law, which dates back to 1948 and was used by military governments to stifle 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 officially 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).

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and conservative elements. And South Korea’s 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 North’s official KCNA about Kim’s 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 Korea’s official efforts to show Kim’s 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 country’s nepotism-centered governance has a hidden resilience that defies outsiders’ prediction. From the stance of both the North–South 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 unification, (6) European Union integration-type unification, (7) reunification by all Korean ballots under the U.N. supervision, and (8) unification following a sudden collapse of either the North or the South. From the standpoint of the Korean people, the best unification 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 unification 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: 1–8.

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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 reunification. 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 reunification at all. In this work, the author places more weight on the unification approach assuming possible collapse of the North’s regime any time now. We regard the North’s leadership as incapable of accomplishing the very objective that justifies its existence. We will hypothesize a few scenarios of the North’s 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 find 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 North’s sudden collapse may be approached in three ways. The first one is a collapse due to mass revolts against the leadership. We like to think that people don’t 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 people’s 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 fire 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-Il’s 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 conflicting and diverse interests among political factions, perhaps hidden and self-constrained for now. Amid reports that Kim Jong-Ils’s health is not in good shape and that his succession is in question among family factions, conflict 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

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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 fighting 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 conflicts 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 Korea’s nuclear proliferation issue since the first meeting in August 2003. The talks have stalled over finding an acceptable procedure through which to verify the North’s 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 “scientific 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 Japan’s 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 Office 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 figure 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 reflect Japanese worries over the US policy changes over North Korea. (See The Japan Times, December 8, 2008, p. 2, for further detail coverage.)

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appears in the conference room, lost to shame,” a Foreign Ministry spokesman was quoted by the North’s official 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 five-nation group) were willing to provide Japan’s share of the aid to the North’s blackmailing or that the impoverished nation stands desperately near bankruptcy? Or was the North’s anti-Japan complaint anticipating that the Six-Party talks would be futile once again22 since North Korea would never open its remote land to foreigner’s inspection? If foreigners come to verify the North’s nuclear project sites, perhaps they would find something else, namely, poppy farms, which the North does not want to be exposed. North Korea is known to have operated “the white bellflower 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 Korea’s 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 significantly 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 conflicting 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 8–11, 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 figure 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 North’s nuclear information) that does not have the word “sampling” but instead uses the phrase “international standards that include scientific 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 Pyongyang’s nuclear declarations, scuttling the Bush administration’s hopes for a diplomatic success before it handed over to the new President Barack Obama who took office on January 20, 2009.

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Economic Dialogue held in Beijing on December 4–5, 2008, to promote prosperity and growth of the world economy and trade.23 The neighbors, first 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 influx of refugees or internal riots due to regime changes in North Korea, China and South Korea will duly worry more than other nations. Securing influential 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 influence Korea would be placed if reunified 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 briefly 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 first 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 IAEA’s 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 North’s denuclearization is settled, Pyongyang cannot avoid international economic sanctions, which shall drive the already broken economy into a corner. The North will also find it is increasingly difficult to trade its nuclear weapons for foods with the rest of the world. The second dynamite is closely related to the North’s extensive state controls of the masses along with the Kim’s 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 financing to boost commerce and economy at the meeting in Beijing, held against the backdrop of the worst global financial crisis in decades.

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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 affluence and individual freedoms that would be unthinkable in North Korea. The people will be tempted, sooner or later, to join in the South’s 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 unified Korea. The issue may be considered in terms of two hypothetical scenarios related to an implosion (and explosion) model. The first one is the case of uncontrolled implosion, which is defined 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, floods of unsettled refugees within and across the border, and weapons disposal problem as well as lethal weapons trafficking. 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 unified 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 fit 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 first 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 People’s 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 significantly benefited 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 (1912–1994) for the Democratic People’s Republic of Korea, Chairman

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Mao Zedong (1893–1976) of the People’s Republic of China (founded on October 1, 1949) unsparingly sacrificed about 921,836 Chinese soldiers (deaths: 184,128, wounded: 715,872, missing: 21.836) on the Korean Peninsula. One of Mao’s sons died in the Korean War. On November 25, 1950, the People’s Liberation Army of China entered the war with initial some 300,000 Chinese “volunteer” troops led by General Peng Dehuai. China’s intervention placed North Korea in the role of a junior brother tied to the elder’s 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 influence whereas US-Chinese and Japan–Chinese 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, China’s 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 Korea–China transactions. But officially, the Chinese say that they have no reason to oppose Korean reunification 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 North’s 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 other’s internal affairs, China is not supposed to intervene in the North Korean implosion even if the North’s situation does not fit Chinese tastes. But it is very doubtful that China would keep away from its old ally when the North’s 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 five 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

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its own interests, of course. Said differently, China will never tolerate being pushed aside if South Korea or South Korea–United States–Japan 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 fight 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 faction’s 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 first and then unification 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 latter’s 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 North’s 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 influence over Pyongyang, not to mention breaking regional stability. In return, Pyongyang is also careful not to exhaust Beijing’s patience too far as revealed in the Pyongyang’s attempts to often comply with the latter’s 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-Il’s 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 first negotiations on North Korea’s 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 find common ground between North Korea’s position on one side and the United States’s position on the other. In this regard, Chinese positions were close to those of South Korean officials 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. China–North 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 first official 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 North’s 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 Pyongyang’s 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 North’s 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. Influence in Asia? Brookings Institution (http://www.Brookings.edu/opinions/2001/0504china_gill.aspx?p=1)

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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 influence 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 China’s key concern is to keep its strong leverage politically and economically on the Korean Peninsula because of the peninsula’s 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 influence more readily, while keeping some distance from the advancing American– Japanese hegemonic ventures into the mainland. China will contribute to the North Korean regime’s 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-Il’s regime, or a change in its political system becomes inevitable, China will definitely 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 Beijing’s influence 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 first 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 North’s 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, first led to American acquiescence in Japan’s oppressive colonization of Korea, and second supplied all negative sources to deter national unification. 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 South’s 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 first 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 nation’s 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 first 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.

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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 five 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 North–South train trips and Gaeseong tourism effective December 1, 2008. Instead, most progressive news media in Seoul poured criticism on President Lee’s 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 MooHyun’s 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 redefinition whose effect expanded into other areas. When Roh Moo-Hyun’s progressive government volunteered to take over the American control of the joint ROK-US military operation from the year 2012 (which most South’s 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 reflected the Bush administration’s 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 Roh’s political aspiration to obtain “independence” and “sovereignty” in its national defense was well synchronized with the Bush administration’s 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 Korea’s 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 2003–2008 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, reflecting the climate change in the ROK-US relations.29 Amid mutual pique and bashing, however, the two governments agreed on principles of redefined 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 fifth round of the Six Party Talks during February 8–13, 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 2005–2008, 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 Pyongyang’s oral commitment to a verification plan. But since then, the Bush administration made no progress on a so-called verification 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 administration’s hopes for a last diplomatic success and it wanted to wait until the Obama administration took over the US Oval Office. Yet it is too early to predict if the North’s denuclearization process will enter a “bridge of no return” or if it will normalize North Korea’s 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 five working groups and one separate forum. The five working groups are for (1) the denuclearization of the Korean peninsula; (2) the normalization of DPRK-US relations; (3) the normalization of DPRK–Japan 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.

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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 benefits” 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 regime’s 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 “benefits 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 country’s Korean Peninsula policy and manage conflicts 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 financial and real estate crisis, shying away from such troublesome issues such as a rogue regime’s 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 Korea’s ship will sink soon after that dramatic change happens within the North’s regime. Otherwise, the whole Korea would unavoidably enter Beijing’s orbit in the new geometry of international politics. Older Koreans remember the sacrifice 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 Korea’s 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 reunified Korea as equally unacceptable for obvious reasons. A nuclear reunified 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 reunification 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-influential 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 Kim’s 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 “Acheson’s error in drawing a line to retreat from Korea.”34

4.5.6 Japan and the Korean Peninsula Korea has endured five 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 1904–1905, in which the Japanese humiliated Moscow’s forces. As a result of US President Theodore Roosevelt’s 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 China’s 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 North’s 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.

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today; to list a few, they include complete “obliteration” of national integrity, family separation, ideological conflicts, 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. Korea’s 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 North’s 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 justified Japan’s 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 KaiShek’s 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 Tamogami’s 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 Pyongyang’s Taepodong missile test in 1998, the prime minister Junichiro Koizumi (who took office in 2001) had his first 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 father’s 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 five children of the abductees and the Pyongyang’s 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 North’s 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 Korea’s abductions of Japanese nationals in response to Pyongyang’s reluctance to launch a fresh investigation into the abductees, despite its promise made in August 2008 to do so. The LDP’s 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 financial 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 confinement” against North Korea is contrasted with the outgoing Bush administration’s softening position toward Pyongyang. Meanwhile, Japan has been strengthening its Self Defense Forces (SDF) capabilities after Pyongyang’s 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).

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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 unified Korea may take. A unified Korea’s political and economic systems, defense posture, and relations with other countries will affect Japan’s national security and the well-being of citizens. Although Japan has limited direct influence over the future of Korea, Japan may like to clarify its national interests in a unified Korea and must take necessary measures to help ensure that unified 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 sufficient 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 reunified 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 win–win 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 Japan’s 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 Japan’s largest trading partner in 2007 and Korea’s 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 first 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 five principles of openness, transparency, mutual trust, common benefits, and respect of diverse cultures, not to mention agreeing on currency swaps arrangements among them. The three countries account for 75% of East Asia’s gross domestic product and about 17% of the world’s 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 unified Korea are so important to the interests of Japan, not to speak of its dynamic in affecting the Japanese scope of activities and influence 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 1904–1905 in which the Japanese defeated the czar’s army. Japan

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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 firing 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 officials 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, Russia’s 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 influence. However, South Korea is economically more important than North Korea to pragmatic Russians. Unlike China, today’s 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 floods 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 Russia’s 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 unified Korea would be exceptionally important because this planned project can connect to Japan and the other Pacific countries in future. To the eyes of Russians, the Korean Peninsula is important mainly because of its economic and

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strategic importance rather than Korea’s 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, first 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 unified nation despite many stumbling blocks, impending obstacles and problems ahead. Otherwise, the Korean ship would soon sink and fall apart again under the conflicting influences and leverages of alien engagements. Given the diversity of anticipated alien influences from China, Japan, the United States, and Russia, Koreans must be ready to harmoniously utilize them in favor of building one unified 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 reunification arrives suddenly and unexpectedly. If South Korea fails to integrate all aspects of its relationship with those countries in the course of reunification, 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 proclaim“neutrality” in international politics. However, a reunified 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 conflicts 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 Korea’s 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.

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terms of a “work in progress” rather than a “well-defined 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 floods of refugees, and so forth. To finance the cost of reunification, 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 reunification process. Taking account of many lessons from German reunification 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 People’s Republic of China (PRC), the Democratic People’s 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 Pacific 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 reaffirmed their common goal and will to achieve early denuclearization of the Korean Peninsula in a peaceful manner and reiterated that they would earnestly fulfill 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:

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(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 verification 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 DPRK–Japan relations. Economy and Energy Cooperation. Northeast Asia Peace and Security Mechanism.

The WGs will discuss and formulate specific 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 five 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

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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 confirm implementation of the Joint Statement and explore. Ways and means for promoting security cooperation in Northeast Asia. VI. The Parties reaffirmed 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 3:5–3:8.

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, defining 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 world’s most powerful president was a sure rejection of the policies of the former administration and affirmation of the values of his immediate tolerance and sacrifice for the common good. Standing on the west front of the Capitol as the first 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 president’s 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 reunification scenario would come in a different type and with a very improbable expectation, if not a distant future one. Because the first priority is domestic business for President Obama, South Korea, as well as the North E.-G. Hwang, The Search for a Unified Korea, DOI 10.1007/978-1-4419-1562-7_5,  C Springer Science+Business Media, LLC 2010

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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 verification for several years in the face of George W. Bush’s demonizing the North’s 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 first, then we will talk nuclear issues with you” is agreed upon with the Obama administration. This deal would be a complete reversal from Bush’s 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 North’s Dear Leader Kim Jong-Il, who had reportedly suffered a stroke in August 2008, met Mr. Wang Jiarui, the head of the Chinese Communist Party’s 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

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is, a gradual and controlled glasnost and perestroika, would likely fit 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 Xiaoping’s 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 world’s 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 China’s 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 financial turmoil of 2008, there are many Chinese people coming to the global tour business and markets. Why can’t 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 regime’s 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 unification 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.

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In terms of time cost of reunification, 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 flexible 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 Korea’s responses, the Obama government will be willing to normalize bilateral relations, replace the peninsula’s 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 reunification. 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 reunification, 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 reunification (or continued division) would reach astronomical figures 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 conflicts, struggles, and agonies would remain with a “destroyed and unfinished dream” in the minds of all Korean people. Who shall or can pay for the psychological and social costs and sacrifices imposed on Koreans due to delayed unification? Perhaps (North and South) Korea’s political leaders and hard-headed national ideologists must assume the responsibility first 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 unification or constituting the misty and rugged road to the unification 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 unification. But from the standpoint of a sure and least difficult way to unification, 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 regime’s legitimacy is still on the brink, and its deep-rooted problems would not be easily resolved in the absence of both Washington’s and Beijing’s tutelage. The South Korean authority must look at all possible cost-efficient ways in controlling North Korea in the event that the North implodes. For this, South Korea’s diplomacy is so important in assuring its neighbors that a unified Korea will remain as “a land of peace, cooperation and friendship” in the region. A unified Korea must secure international trust and seek “comprehensive promotion of mutually beneficial strategic relations,” particularly with China and

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Japan. If China, Japan, and Korea cooperate for a peaceful and jointly cooperative coexistence in a better and friendlier East Asian regional environment, Korean unification 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 official Wang Jiarui’s 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 Obama’s flexible 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 Pyongyang’s 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 confirmation 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 verification regime – was never achieved. The likely twists in US policy do not reveal if Washington is seriously questioning whether Pyongyang might have bought sufficient 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 Korea’s government in an “all-out confrontation” for tying aid to disarmament.3 A little into 3 Richardson

(2009).

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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 Pyongyang’s 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 Korea’s 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 “North’s 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 Pyongyang’s harder line will be the Obama administration’s first 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 North’s rhetoric often sounds foolish. Domestic issues will be the first 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-Il’s 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 president’s approach vis-à-vis past policies. Caught in the middle, the Obama administration is likely to need a more active cooperation with China to find 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 government’s 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.

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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 China’s economic woes on US-led western financial institutions, suggesting “a lack of self-discipline” and “blind pursuit of profit.” US Vice President Joe Biden and Treasury Secretary Timothy Geithner fired back at Beijing for manipulating its currency. What’s more, Geithner further claimed that the Chinese manipulation was the most important cause of the financial crisis. China’s 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 2005–2007, when China was flooding 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 Washington–Beijing 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 Bush’s 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 North’s 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.

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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 flexible 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-Il’s End Differ from Ceausescu’s? 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 North’s energy production, not for further nuclear weapons proliferation. In order to secure an acceptable verification 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 first,” 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-Pacific region will still remain vital to US security and well-being. But all success of Obamas’s new policy paradigm for the region will greatly depend on how tactfully Pyongyang will respond to reduce the lingering tensions.

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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 Korea’s 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 Pyongyang’s 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 Romania’s 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 fist 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 16–22, 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 Ceausescu’s orders. The then- Romanian military de facto coup shall be a lesson for North Korea if a widespread anti-communist unrest would result in Kim’s collapse. Likewise, in North Korea, if a popular demonstration breaks out, the military may want to ensure the demise of Kim Jong-Il’s 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 God’s 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 reunification. 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 Reunification of Korea, the North Korean agency in charge of relations

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with South Korea, accused South Korean President Lee Myung-Bak of not holding to the South’s 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 fire against fire, 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 North’s 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 reunification.” 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 flag. The road to such a transition and transformation toward one unified 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 first 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

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way. Beijing leaders, therefore, have been telling the outside world, and especially anxious Americans, that they cannot control Kim’s wily son.4 But the Chinese are by far North Korea’s largest source of foreign food and energy, which helps sustain the North Korean People’s Army. Kim Jong-Il is still ruling today thanks to Chinese material and diplomatic support. If China really wants, it can enable the blinking Kim’s 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 Obamas’s 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 Pacific forces. No country will dare invade China; in fact, no country today, but for some exceptional cases like the century-old Israeli–Palestinian conflict as well as the 2008 Russian– Georgian clash, would cast a covetous eye on another’s 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 flow 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

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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 reunification 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. “Bluffing” is often North Korea’s 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 Korea’s bluffing 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 conflict between China and the United States. When the United States establishes diplomatic normalization with North Korea, future Korean unification would track on gradualism instead of the “big bang explosion model.” Given such scenario, how to approach Korea’s reunification, 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 reunification issues, including the renewal as well as re-evaluation of Kim Dae-Jung’s 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 unification could be reflexive in such discussion, while the European Union 6 On March 6, 2009, the North’s Committee for the Peaceful Reunification of the Fatherland issued a threat against South Korean civilian planes that fly through the North’s 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 traffic 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.

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(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 reunification 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 artificially divided by alien conflicting ideologies and political forces. The proposed multilateral commission may function to secure a peaceful and continuously unified 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 unified 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 reunification 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 reunification 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 reunification 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 unification 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 (1950–1953) that failed to reunite the two states. In order for this model to work with Pyongyang’s 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 North’s 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 fire, 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 bluffing against the South. Even if it continues to provoke an armed clash with the South

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while preparing to test-fire 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 South’s conservatives and military ranks may want and are waiting for the economically battered North military to pull the trigger first. Then the unification 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 first. 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 unification model is alternatively considered as a positive and negative lesson for Korean reunification. Some positive lessons from the initial stage of German unification will be briefly 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 efficiently 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 reunification. As discussed briefly 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 reunification might be misty and very rugged indeed. South Korea’s diplomacy and professionalism in the region must be core prerequisites for the Korean reunification policy to hold. South Korea should maintain a balance by providing new, non-partisan, innovative, and firm 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

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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 unified 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 Korea’s 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 Korea’s nuclear weapon, which is a real “Korean bomb,” nor about the conflicts between the two Koreas. Nevertheless, the Korean reunification 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 people’s 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 reunification if it is accompanied by an implosive regime downfall in the North with as little sacrifice 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 reunification, as already briefly discussed in Section 2. With no regard to models, timings, and ways, future reunification will critically depend on, first, 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, first 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 unification-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: 32–37.

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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 North’s regime and society is to be dissolved any time. It should try to persuade all neighbors to participate in the unification process as a positive way to help the Koreans. However, if the reunification 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 generation’s task for national reunification 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 unification 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 1945–1948. 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 unfinished conflicts 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 unification 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 conflict on the Korean Peninsula. Germany’s unification 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.

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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 Gorbachev’s 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 unification less than a year after the fall of the Berlin Wall had it not been the truly gigantic effort of the officials working in individual nations and in the European Community. German unification 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 America’s influential 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 unification 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 Germany’s 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 unification process to be easy and swift. The lesson for Korea is “the art of

8 Kaiser, 9 Ibid,

K. (1990/1991) Germany’s Unification. Foreign Affairs, 70(1), p. 179. 1990/91, p. 180.

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diplomacy” employed by German leaders and their capability to overcome issues “seemingly difficult-to-compromise.” The international environment faced by the two Koreas today is not exactly the same as the two Germanys had in 1989–1990. 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 difficult conditions to work favorably to the needs of the nation, not to mention the importance of turning seemingly impossible circumstances to become the nation’s potential resources. The historical wisdom that German leaderships conducted in the initial course of the unification 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 reunification. 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” (1998–2007). The 2009 Pyongyang’s 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 overflow 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

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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 reunification, and in 1973, he presented the “6.23 Principles,” which stated that South Korea did not oppose North Korea’s participation in international organizations. He proposed competitive coexistence in the open atmosphere of the international community. The Park administration policy targeted more practical “construction first, unification 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 firmly 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 North’s Kim Jong-Il responded to the South’s 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 North’s 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 flourished between the two states. Nor did the North’s 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 Korea’s 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, Seoul’s 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 naïve 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 overflow with the wrong sentiment in favor of the North’s communists after the June 2000 summit between Kim Jong-Il and Kim Dae-Jung, which was matched by a torrent of South Korea’s 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.

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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, first 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 unification. 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 North’s communists and the South’s 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 North’s brinkmanship and closed door policy. Those who insist that “inter-Korean cooperation and talks will be ‘the only option for peaceful unification’ are those who believe that Charles Darwin’s 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 South’s advocates of the “unconditional-talks for national unity” understand the communists in the North. The South’s 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 regime’s longevity in the North. No one can

10 Old

Testament: Proverbs 16:9.

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repute the fact if he or she is concerned with Pyongyang’s recent return to its serious provocation against Seoul. Instead of supporting its survival, therefore, what if the South just chooses to induce Pyongyang’s illegitimate regime to collapse? A continued ignorance may be one option that would contribute to the saber-rattling provocative regime’s 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 South’s 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 reunification 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 reunification policies have been based on the assumption that national unification could only be pursued in a cooperation mode via talks between the two conflicting states. And the inter-Korean relations were developed within the backdrop of the discourse on unification. 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 unification, 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 unification in the absence of the participation of the international community. It is becoming clear that the stubborn economy cannot be fully rebooted; even the officials seem to care about seeking their safety havens when the regime explodes. From the standpoint of those wishing early national reunification, the best option must be helping the North’s 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 Kim’s regime followed by a unification 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 South’s generous economic assistance towards its stability. In conclusion, it must be emphasized that the South’s 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

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to retain its grip on power for a longer period. The North’s 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 unification, the South’s administration must firmly 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 unification 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 unification.

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 difficulties 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 modified (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 country’s 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), diversified 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 insufficient 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 influences. For more details, see Hwang (1993).

E.-G. Hwang, The Search for a Unified Korea, DOI 10.1007/978-1-4419-1562-7_6,  C Springer Science+Business Media, LLC 2010

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inflation, 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 South’s economy has mostly run on the basis of market functioning. North Korea’s economy, on the other hand, has been more centralized, more controlled, more ideologically monocratic, and more internationally isolated than those of any of the world’s 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 industry’s 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 Korea’s 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 government’s 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 beneficiary 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 flows 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. Briefly speaking, the markets are mostly buyer markets in a capitalist system but for a number of natural monopolistic goods or

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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 North’s 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’ fulfillment of obligatory plan targets, usually defined 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 fulfillment 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 overfulfillment 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-fulfillment 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 inflationadjusted 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

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(GSP or GVSP in a socialist system) can be viewed as a flow 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 + (X−M) = 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, (X–M) 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 difficult 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 significantly contributed to the contrasting economic performances between two comparing economies. For illustration, recent literatures (Sachs and Warner, 1995; Harrison, 1995; Sebastian, 1992) tried to find that various measures of openness increase economic growth significantly 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 Korea’s rate is 6.6%, almost three times higher than the former. In this chapter, we demonstrate that Korea’s 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).

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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 α H β L1−α−β−δi i Xiδi ]/(Lα Lβ Lδi L1−α−β−δi )} =A( · )kα hβ i xiδi (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 specified 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 capital–labor 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 Solow’s residuals can be measured from the aggregate growth accounting equation as follows: Y/Y = A/A + ε K/K + τ L/L + θ X/X, where θ = i θi and X = i Xi , (i = 1 . . . n)

(6.3)

and ε = (∂Y/∂K)(K/Y) = A(∂f /∂K)(K/Y)

(6.4)

τ = (∂Y/∂L)(L/Y) = A(∂f /∂L)(L/Y)

(6.5)

θi = (∂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.

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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 difficult. Using available South Korean macro-economic time-series data (1985–2005), 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 Office (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 − lnyt−1 and ln indicates natural log and y = Y/L (that is, per capita output); all estimates are significant at 95% level except ethnicity variable, A = technological efficiency parameter (as defined 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 final consumption expenditure of non-profit institutions serving to households); and x6 = ethnic diversity derived as {N (1−γ i) − 1} where N is the number of ethnic groups and γ i is the ratio of ith ethnic group to total population. As the estimates show, the contribution of technological efficiency 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 efficiency 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 efficiency, it would definitely start to catch up with South Korea.

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In order to apply the production function approach to find 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 significantly contributing to the contrasting economic performance of the two Koreas will be of no significant 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 insufficient availability of needed data for North Korea. Nevertheless, some efforts have been made to estimate the North’s annual values of total production based on partially and officially 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 (profits 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. 93–145, for the Estimates of North Korea’s National Income of 1946–1990; and Estimates of North Korea’s Income, released by the Bank of Korea since 1991. It must be noted that BOK’s estimates of North Korea’s income is made in terms of South Korea’s monetary values. 5 Socialistic economy’s 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 flow 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 profits 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 defined 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.”

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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 flour, of which 5 units are consumed within the mill. Next, a bakery purchases 15 units of wheat flour 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 figures in terms of wage and reward (bonus) payment increases. But all these released data is often expressed in terms of the workers’ overfulfillment 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 overfulfillment rate. The state basic assignment rate for work fulfillment is determined on the basis of 100% of the base target, while the overfulfillment 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 fulfillment is 110% over plan target, it means 10% overfulfillment as compared with the targeted 100% fulfillment plan. But it is equivalent to just 10 times or 1000% overachievement if measured in unit of every 1% of overfulfillment basis. This complicated method for computing the labor productivity growth and output rate is the source of overstating the North’s 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 Korea’s 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.

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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 Korea’s 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 1946–1990, Eui-Gak Hwang, The Korean Economies: A Comparison of North and South, (Clarendon Press· Oxford, 1993), Chapter 3, pp. 93–145. For 1991–2008, The Bank of Korea, North Korea’s Major Economic Indicators, Principal Economic Indicators (monthly). Note the current per-capita GNP (or GNI) figures 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 1946–90, Eui-Gak Hwang’s estimates use “trade exchange rate” instead of North Korea’s official exchange rate; for 1991–2008, it is from the Bank of Korea’s 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.

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economic policy could be more efficient 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 1990–1998, North Korea’s 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 Korea’s 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 1990–1998 to plus growth in 1999 might be somewhat related to the pouring of money into the North under the South’s Kim Dae-Jung regime’s 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

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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 Korea’s state-run economy of steel mills and coal mines are almost dead as their operation rates are less than 20% of their capacity. The North’s 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 “unofficial 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 officially introduced its market promotion measure in March 2003, but enlarging markets made it increasingly difficult 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 North’s 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 trafficking.

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 North’s 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

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personality cult of their leader, the ruling class’s 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 state’s assurance of victorious military strength. For illustration, let’s 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 insufficient food supply, and we know with absolute certainty that if it is successful, it can establish a strong state that will receive sufficient 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 selfish 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 confirmed that the rocket (which the United States and Japan regarded as a disguised ballistic missile test) apparently fizzled into the Pacific without successfully reaching orbit, the North demonstrated its improvement in missile range. The rocket’s second stage

9

In reality, it may be also risky if one shows inactive or indifferent response to what the communist regime does.

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landed in the Pacific 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 North’s rocket cost the regime about US 300 million dollars, totaling the North’s 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 North’s 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 China’s 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 Fatherland’s Unification in Seoul), hailed the launch openly. South Korea’s Yonhop news agency reported that Mr. Shin Son-Ho, North Korea’s 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 leadership’s two trump card bets: one a domestic bet to enhance the “regime’s military and science first 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 fatherland’s 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 populace’s 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.”

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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 Council’s response to North Korea’s rocket (disguised missile) launch appeared initially very strong confirming 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 five permanent Security Council members: Britain, China, France, Russia, and the United States) took positions of much muted response to the North’s rocket launch in sharp contrast to other nations. Such factors were probably figured into the North’s calculations to fire 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 Korea’s leadership could also continue to carry out other provocative acts, such as a second nuclear test, if its rocket launch doesn’t produce what it wants such as direct talks with the United States. This is indeed a new unpredictable playing-field that US President Barack Obama must deal with in East-Asian affairs. Unless the United States can persuade China to take a firmer position in dealing with North Korea,11 it will be difficult for an inconsistent US policy to be successful until the North’s regime collapses. More significantly, the defining 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 Korea’s 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 official 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 justified. 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 Korea’s 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 Korea’s launch violated U.N. Security Council Resolution 1718, which was adopted following North Korea’s 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 North’s April 5 rocket launch.

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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 North’s 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 defiant 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 first 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 Kim’s illness and age.13 It may be noted that the North’s 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 fifth 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 North’s April 5th missile launch, the Japanese government moved immediately to set aside additional fiscal spending to help each of all municipalities (local governments) introduce a satellite-based warning system for missiles and natural disasters. Japan intends to finance 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 fiscal 2010. Japanese enhanced 12

Kim Jong-Il, having had a stroke in summer 2008, has been less influential 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 North’s Parliament reappointed the senior Kim as the commission’s chairman on April 19, 2009. 13 Kim Jong-Il appointed his brother-in-law Chang Sung-Taek (63) (who is the husband of Kim’s 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 Kim’s 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 Kim’s 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 father’s 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.

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military expenditure can be interpreted as one good evidence of prolific economics involved with military preparedness, which is partially attributed to the North’s ploy with its economics of guns.

6.4 The Economics of the North’s 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 influence everywhere in either degrees depending upon the wave of its “bang effect.” The effects of the North’s nuclear and missile tests on the world financial markets are mixed. Immediately following August 31, 1998, when North Korea launched its Daepodong 1 missile, the world’s 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 significant influence on South Korean markets as well as world financial 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 Korea’s real capability of threatening the world politically and economically. If it were not under Beijing’s tutelage, the North’s existence would largely be ignored whatever brinkmanship the deformed regime may employ. South Koreans are much more unresponsive to the North’s scoundrel which, in fact, lacks any robustness in terms of physical strength. With no regard to the North’s 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 South’s short-term economy is more dependent on both domestic and world finance 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.

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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 beefing-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 worker’s productivity in North Korea (only one-twentieth) than that of average human capital in South Korea. Inefficient use of resources for “military-first” tenacity at the cost of daily necessities is certainly the main cause of the “dichotomy” of North Korean policy makers. The North’s “military-first 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 North’s 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 North’s missile power is an integral part of a nuclear threat. While South Korea is exposed to the North’s 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 (officially, Republic of Korea) to intercept any of the North’s 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 Korea’s 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 Korea’s defense depends greatly on ROK–United States missile defense cooperation, although the proximity to North Korea (officially, Democratic People’s

16

SAM-X is the codename for South Korea’s 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.

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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 flight 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-fighter (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 profile 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 ROK–United 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 flexibility policy taken after the September 11, 2001 terror attacks.

17 See

Kim (2008), p. 51.

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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 200–300 kilometers (estimate) Kwangmyungsung-2 Maximum 1000 kilograms (estimate) North Korean Scientists 2009. 4. 5 (actual)

Source: South Korea’s Space Research Bureau (April, 2009).

Refer to http://kr.news.yahoo.com/etc.text.htm/articleid=2009040602535562210 (2009-04-07) South Korea’s missile development had been so far restricted only to its capacity limits of less than 180 kilometer range and 500 kilogram weight by the ROK–United 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 North’s April 5th rocket launch, new voices are emerging in Seoul asking for the recovery of “nation’s missile rights,” which are still being regulated by the ROK–United 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 reunification must be balanced, as in all political affairs as well as in individual behaviors, in terms of potential benefits 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

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in gradual mode or in a big bang. The lighter side of the unification 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 benefits (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 unification. With the fall of the Berlin Wall in 1989 and the ensuing reunification 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 significant, German industrial efficiency 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 unification, as Germany suffered poor economic performance and rise in public debt on unification for nearly the entire 1990s. The deterioration in public finances and the country’s exceptionally poor economic performance during most of the 1990s was a direct and apparently inevitable result of German unification. But the German government and its Bundesbank (Germany’s central bank) soon put in place fiscal and monetary policies; that is, higher taxes, increased social security contribution rates, spending cuts, aimed at reducing borrowing, and in turn, containing the inflationary pressure. The overall results were low inflation and sound financial and structural balances, which provided somewhat for unified Germany to travel a long way to reach to about US 40,000 dollars per-capita income in 2008. Nevertheless, the unified Germany continues to have lingering negative results, including relatively high unemployment, slow growth, and the disappointing economic developments in eastern Germany since unification. A few years after the unification, West Germany’s economy coped rather smoothly with the strains that unification 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 classified as structurally unemployed. Moreover, the influx of labor from former East Germany provided important supply-side relief, so that general labor market pressures were abated. But soon Germany’s misguided macro-economic policy paradox (mixed with pro-cyclical fiscal policy and counter-cyclical monetary policy) began to harm the post-unification era of German economy. If it had not been for the fiscal-monetary policy paradox where the German government embarked on fiscal consolidation in a pro-cyclical and inexplicably aggressive way and while the Bundesbank, in turn, magnifying the depressive effects of fiscal policy by tightening money supply, the economic performance could

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have been much better.18 More cohesive policies could effectively have stabilized the economy as it absorbed the cost of unification. Jorg Bibow (2001) argued that tight, pro-cyclical fiscal and monetary policies that dampened economic activity after the rest of 1990s were major causes of anemic growth and high unemployment for which the country’s finance department and central bank were responsible rather than two Germanys’ unification.19 The counterproductive results of high unemployment, slow growth, and fiscal deterioration were mainly due to the Bundesbank, because the German central bank was obsessed with controlling inflation 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 fixing the economics of a nation is very important. No less important is, of course, the nation’s 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 financial institutions everywhere, as small groups of traders and business executives in these once venerable institutions brought global financial 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-unification economic policy is one of the most important factors that Korea must consider in order to minimize the negative externality and loss of efficiency that will be accompanied by the unification process. Official estimates of fiscal transfers from western to eastern Germany are about DM 180 billion per year since 1991, or roughly 6.5% of western Germany’s GDP. This figure is the sum of all unification-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 120–140 billion per year since 1991, or roughly 4.5% of western Germany’s GDP. Considering such figures (4 or 5% of the South’s GDP) applicable to the Korean case, some may argue that unification will likely bring too heavy an economic burden on the shoulders of South Koreans who are supposed to absorb the North. Although such a fiscal transfer from the South to North Korea may constitute a big share of unification burdens, the amount of such net transfers is not an appropriate measure of the

18

Jorg Bibow, The Economic Consequences of German Unification: 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 selfish 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.

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financing requirements resulting from unification. Income and employment multipliers to be generated from gross fiscal transfers to North Korea will also benefit South Korea’s public finance sooner or later by raising exports to North Korea and abroad as well. Therefore, actual financing requirements would be expected to be considerably “lower” than any total numbers suggested in terms of actual transfer money. The unification will balance the pecuniary benefits 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 flag 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 unification 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 conflicts 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 reunification also suggest some inference for Korea. Vietnam today after its reunification in 1975 does present very challenging economics of hope (or no-worry) for Koreans even if the latter’s path to national unification 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 unification overcoming and solving many problems thereof, while accelerating its “economic reform,” adopting open-door policy, free pricing system, and financial 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 overflowed 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 flexible and pragmatic political and economic policies than when the two were divided and fighting against one another.

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Likewise, the reunification of Korea will induce all Koreans to work together in unity with a new hope and dream and the first unified 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 reunification (possibly due to either total collapse of a regime reminiscent of Romania’s 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 reunification 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 benefits involved with the South–North monetary, economic, and social integration process. As an example, East and West Germany officially 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 unified system, Germany took, first 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 Germany’s Mark and West Germany’s DM (Deutsche Bundesbank Mark). The reunification cost can be considered largely of two categories: consumptive cost and recoverable cost. The benefit 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 benefits 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 benefit but are dynamic over time. Therefore, any attempts to estimate the would-be cost-and-benefit of Korean reunification is very challenging, but the results would likely not be of any useful 21

See the appendix on chronology of the German reunification 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, financial 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 reunification treaty. In Moscow on September 12, 1990, two Germanys, the United States, the United Kingdom, France, and Russia removed the impediments to the reunification of Germany, by signing the 2+4 Treaty. The political reunification of the two Germanys was finally achieved on October 3, 1990. 22

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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 benefit categories, needless to say. Broadly speaking, the cost must be equal to the benefit if measured at the end point of the unification process. For example, we will employ a somewhat simple but realistic approach to estimate a pecuniary amount of money (dollars) for national reunification. First of all, we will define the cost (or benefit) of reunification 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 flow 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 reunification (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-fixed values of marginal capital–output 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 benefit in a national unity) in the formula as follows. Note that I = Kt − Kt−1 =  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 capital–output ratio (K/Y) is approximately about 3 and North Korea’s 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 North–South per capita income gap in 2007 was US 18,905 dollars (= $20,045−$1,140), and the North’s 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 Korea’s 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.

Total sum of continuous investment cost will be estimated by the formula: IT = Ai (1 + ri )t , where IT is total investment, Ai is flow 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. 314–317, for earlier estimates using a range of incremental capital–output ratios. 23

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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 findings 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 figure will expand to a far greater figure, 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 figure in terms of lump-sum money. If anyone is opposed to the reunification 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 benefit 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 benefit of the re-unity) thereof. But as already mentioned briefly, the internalization for all externality (both positive and negative) accompanied by the reunification process is literally immeasurable, if not impossible. In conclusion, the costs of transition and reunification are going to be either much higher depending on what are included as costs, or much smaller if the cost is counted as a benefit 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 reunification 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 β convergence (in economist’s jargon that convergence applies when a poor economy

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tends to grow faster than a rich one) will occur on the Korean Peninsula. It is likely that the incumbent North’s leadership will never risk its status quo by loosening its fist on its current political and economic system. If so, the cost of reunification will get smaller, the sooner it is achieved. Thus, the economics of attempting “early reunification” 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 today’s 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 unified 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 nation’s 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 unselfishly unite. After the first cornerstone was mistakenly placed and fixed, it was not possible for the leaders to acknowledge that a mistake had been made. In addition, the special interest groups as well as specific 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 conflict and have maliciously blamed each other for the nation’s 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 E.-G. Hwang, The Search for a Unified Korea, DOI 10.1007/978-1-4419-1562-7_7,  C Springer Science+Business Media, LLC 2010

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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 People’s Republic of Korea,” which is, in fact, neither “democratic” nor a “people’s 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 inefficient. The North is incapable of meeting its people’s 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 regime’s brutal political rule and ruthless suppression of human rights,1 (2) Kim’s gift for political manipulation, (3) North Korea’s use of brinkmanship diplomacy, and (4) China’s 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 North’s 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 Council’s non-binding presidential statement (condemning the North’s 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 Pyongyang’s 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 North’s 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).

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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 North’s “military-first 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 officers to death in Panmunjum JSA (Joint Security Area) on August 18, 1976; by shooting down a Korean civilian air flight 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 (1993–2009); and (2) harmonizing its brinkmanship diplomacy with country risk management (2003– 2009). In the end, North Korea’s 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 sacrifice others thoroughly for the sake of achieving their “selfish-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 North’s rocket launch was well prepared and calculated in advance for what it could gain. Kim’s 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 China’s military presence. Instead, the US may prefer “to take a back seat” if possible in most Asian problems. If so, North Korea’s 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 fierce 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 reunification either through the North’s 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 North’s paranoid ruler is not likely to turn away from his evil, nor to reform his ways and actions. The North

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regime’s collapse to be followed by national reunification 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 reunification 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 reunification 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 unified land is another important matter to take into consideration. In this section, therefore, unification policy issues (priorities) will be discussed in a general framework with no regard to the speed and mode of reunification, although we hold out hope for the sudden collapse model for the incumbent Kim’s regime in the North. One possible proposition is that the nation will be absorbed into South Korea’s free democratic market economy, although politically the unified 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 Korea’s 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 reunification; namely, a model of implosion that is to be ignited as the masses rise up against the North’s 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 Korea’s 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 Korea’s 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 Korea’s 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: 25–27.)

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Contingency Tasks for a Post-Kim Jong-Il Era

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important, it is almost impossible to get Korean communists to compromise with the South’s capitalists, just as it is impossible to mix fire and water. Those who support a gradual approach are miscalculating that the North and the South could converge into one unified philosophy over time. Otherwise, they must be favoring permanent division instead of national reunification, because they believe that the reunification 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 Korea’s 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 office, 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 North’s 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 reunification. But North Korea made it clear that inter-Korean relations and cooperation are one thing, and “our fatherland’s reunification 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 country’s reunification.” See National Reunification and Conclusion of Agreements on Traffic, Correspondence and Trade, Information Bulletin: The Secretariat of the Committee for Peaceful Reunification of Fatherland (Pyongyang, DPRK), No.86, April 1990. pp. 6–11. Refer to the Appendix of this chapter at the end of this chapter. 4 To secure such support and cooperation, a unified Korea must proclaim its neutrality stance in the regional and international politics, keeping its policy of non-partisanship after national reunification.

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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 Kim’s 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 Kim’s love-mate Kim Ok, and some senior military heads working with one of, or more of, Kim’s 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 conflicts 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 Kim’s sudden death or implosion backed by an inside coup d’etat will lead to the total collapse of the North Korean regime, similar to the fall of Romania’s Nicolae Ceausecu’s 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 Korea’s military eventually side with: Kim’s 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-Il’s death or incapacitation due to his health, depending on the worsening conditions threatening the North Koreans’ survivability. The latter case is like an overly inflated 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 North’s leadership has become increasingly aware that the North–South often contacts are contributing to the social erosion in the North. It was unofficially reported that Choi Seung-Chul, a North’s architect who promoted the inter-Korean relation, was executed in late 2008 for misguiding the people in the North. As a communist regime’s legitimacy erodes swiftly, the masses are likely to fight 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 North’s military protects the civilians by staging a de-facto coup against the ruling class. Despite Kim Jong-Il’s tactics to buy its military favors through his so-called military-first 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

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Contingency Tasks for a Post-Kim Jong-Il Era

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led by General Victor Stanculescu avoided escalating civilian casualties by standing firm 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 Kim’s pawn, the military (despite of Kim’s 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 people’s 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. Officially, 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 unified, contrary to their rhetoric of supporting Korean reunification. 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 Council’s Presidential announcement condemning the North’s 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 reunification of Korea, preferring a divided Korea on which it can exert its military influence more readily. The juxtaposition of its two-Korea policy is not so encouraging for all Koreans who put priority on a national reunification. 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 benefit and for the future. In brief, China may want the two Koreas remain divided, by which it can manage the conflicts 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 Beijing’s 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

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may regard the Korean reunification as helpful for their security only if it is unified 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 Korea’s nuclear, missile, chemical, and bacteriological arsenal being on the loose. To effectively control these problems, the South’s military may need to cooperate with the North’s military by ensuring a timely and legitimate promise to accommodate them into various posts in the post-unified 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 reunification 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 reunification. And it is believed that most Koreans, the North and the South, are willing to do this, only with the exception of North Korea’s 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 unified abruptly as the North’s communist regime collapses one day due to neither reforming the current inefficient socialist system nor improving the standards of living.6 And it is assumed here that post-reunification measures will be mostly assigned to the responsibility of South Koreans. Despite the probable advantages of softlanding, North Korea’s adherence with its untenable juche doctrine, which has for nearly five 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-reunification economic measure is indifferent with regard to the mode (either gradual or sudden) and method of the reunification. 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 unification.

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Approach for Economic Integration

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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 significant 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 Korea’s conditions and Europe’s policies in mind, this section will discuss such important priority issues as they relate to the South–North currency and financial integration and privatization of state-owned enterprises in the northern part. Other issues such as North–South 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 flow 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 unified.

7.3.1 Economic and Monetary Integration for the Unified Korea As a point of departure, we define the concept of “integration” in terms of static sense as a situation in which the national components of unified 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 unified Korea) over time. Even if the two Koreas are politically unified 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 “flow (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).

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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 unified 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 nation’s central bank) is commonly accepted and circulated as ubiquitous means of transactions for all walks of life within the country. When a unified Korea is to be set up, therefore, the first 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 first is what shadow (real) exchange rate we would have to be used to convert the unit value of the to-be-absorbed side’s (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 one’s productivity such as to justify “fairness” of each individual’s 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 Kim’s 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 South’s 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 unified Korea. This wealth redistribution issue will be one of the most important among former North Koreans in the post-reunification era. Going back to the first 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.

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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 country’s trade sector is less than 13% of its GDP in contrast to more than 70% in South Korea. However, since the North has its official 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 official 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 Korea’s 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 (2003–2007) 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 North’s nominal GDP (say, Y=py) and a well-known Irving Fisher’s 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 Korea’s 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 North’s 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 South’s 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 defined 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 reflected by an increase in the real exchange rate index, while a decline represents a real depreciation of foreign currency vis-á-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).

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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 figures 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-reunification process. If the absorbing entity (South Korea) is confident 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 reunification. The cost thereof, as well as other unification costs may be in part met from savings that could be available by reforming theretofore military, diplomacy, and other duplicative expenses. Both unification 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 inflation 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 North’s workers into various economic activities in the unified economy, then inflationary pressure will be surely mitigated. As long as nation’s productivity growth matches the growth rate of money, demand-side inflationary pressure is no longer of a problem.11 All our discussions above are made on the assumption of a “big-bang reunification (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 inflation rate plus overall productivity growth minus change in velocity rate. If dV/V = 0, then inflation rate (dp/p) would be zero if dM/M = dy/y.

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case, dual economic systems are often presupposed to coexist separately in a unified 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 firm’s 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 unification 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 unified German government and people. There are no longer two systems nor two people with different German flags. Therefore, such proposition for maintaining any dual systems (like a “confederation”) as a transitory process if made in any unification discussion must be cautioned as “unrealistic and irrelevant” for a unified Korea, which will take sole charge with one central government under one unified political and economic system in place of two separately independent local (regional) systems. The monetary integration may necessitate the financial integration along with other economic integration between South and North Korea.13 If a big-bang reunification is to occur, financial integration will also be achieved in one stroke by South Korea’s absorption of North Korea as happened in Germany in July 1990. Then, financial integration will be just a part of the overall process of economic integration in terms of South Korea’s absorption. We briefly summarize here the German unification 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 German’s wages; (4) the huge infusion of financial 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 inflationary pressure on Deutsche Bundesbank,

12 Ghaussy

and Schaefer, eds. (1993). researches are made on gradual financial 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. 1–27.

13 Some

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which, in turn, ended up with Germany’s macro-economic policy mismatch in early 1990s.14 The current banking (financial) 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 financial 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 financial services. National reunification 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 reunification will make it possible for the overwhelming side (that is, the South

14 See the chapter on The Political Economy of Re-unification between Two Koreas, Section 5 in relation with the Germany’s misguided macro-economic policy paradox mixed with pro-cyclical fiscal 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 fixed assets. Control by Won is indeed meant by the national (state) control that applies to those economic enterprises and institutes within the monetary domain.

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Korea) to assume financial and economic sovereignty over the eroding side (North Korea). This scenario is much simple and a sure one that will lead to one unified Korea versus an uncertain gradual approach scenario. The gradual reunification scenario for Korea is based on the so-called June 15th Declaration jointly signed by the South’s Kim Dae-Jung and the North’s Kim Jong-Il in Pyongyang in 2000. The two leaders recognized a basis for common understanding in the Kim Dae-Jung’s suggestion of a confederation and the North’s suggestion of a lower stage of federation, and both leaders agreed to pursue reunification. 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 financial 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 reunification after many years of confederation? Or will a time come to make the majority of South Koreans accept the North’s 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 North’s Kim wanted to get much economic aid from the South with which the North could strengthen itself militarily and economically, while the South’s Kim wanted to further his personal ambition (that is, to win a Nobel Peace Award) by showing his initiative for peaceful coexistence. But seemingly, reunification was not a real desire in their hearts, if not in words. The North’s 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 people’s longed-for hopes of reunification? 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 reunified in “gradual mode,” but in “bigbang mode.” Nevertheless, many so-called Korean specialists and experts have been nibbling at “gradual reunification” on the peninsula. Such a discussion on assumed “gradual reunification” 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 reunification has to come like a whirlwind some day in an unknown future.

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7.3.2 Economic Restructuring and Privatization The post-unification policy will highlight integrating the North Korean collective economy into open market system of the South. Systemic transformation may be very difficult, 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 difficult 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 unified 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 reunification. The unified 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 North’s 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 finding its new system. The North Koreans can draw on South Korea’s creditability on basic economic foundation, although it could never be perfect in many aspects. Particularly, the South’s capitalist economy embodies many problems and shortcomings from a normative perspective of start up fairness and social righteousness. The shortcomings inherent in the South’s capitalist economy must be managed by all people’s 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 reunification 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 difficult task in post-unification Korea. This privatization must be implemented in the most honest and fair way, while maintaining an “efficient 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.

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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 efficiency if the post-unification 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 influenced 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-unification 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 unification will depend on what policymakers and technocrats do in the post-unification process and era. While free-market capitalism would be a long-term ideal for a unified 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 traffic 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, inefficiency, 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 confidence in the free-market model, driving socialist countries like China, Russia, and other states to blame American-style capitalism for the slowdown. The US government’s huge investments to buyout the failing companies’ assets aroused a debate as to whether the US is still a free market economy.

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A first 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 conflicting interests have so far exercised disproportionate influence on academic and public debate about Korea’s unification 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 Korea’s 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 reflecting its official position on National Reunification. 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-Woo’s 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 traffic, correspondence, and trade” between the north and the south and clamoring that this year they would “conclude” an “Agreement on Traffic” even if they could not do other things. Today, our nation is confronted with the supreme task of national reunification and, accordingly, the establishment of any relation between the north and the south should proceed from this fundamental aim of national reunification 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 reunification 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 reunification 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 traffic,” “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.

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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 reunification. 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 country’s reunification. For the peaceful reunification 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 significance 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 reunification 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, first 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 reunification is opened. In particular, as the South Korean authorities pursue the “two Koreas” policy, the “three agreements” will only result in maintaining and fixing the present state of division. Although the South Korean authorities never miss a chance to talk about unification, their talk is nothing but a deceptive trick to cover up their splitter’s 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

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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 reunification and perpetuate the division. As long as the South Korean authorities seek “two Koreas,” the “three agreements” will only realize partial traffic, correspondence and trade under the present conditions of split but will not serve to open the door of reunification. The South Korean authorities keep in force the “national security law,” which defines 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 traffic, correspondence and trade among a few people under the control of the “government” and not to make a breakthrough for reunification. According to South Korean publications, the agreement on traffic, 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 traffic, correspondence and trade to the patriotic people who oppose flunkeyism and treachery and “two Korea” plot and call for independence, democracy and reunification but only to those who follow their anti-reunification 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 reunification 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 reunification during their visit to the north. From this we can know that the South Korean authorities are completely separating artificially the question of “conclusion of the three agreements” from the question of national reunification. 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 reunification but to maintain the present state of division as it is and open the road of pure traffic, 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 reunification 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 reunification 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 reunification proposal for demolishing the wall of division between the north and the south, first 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 difficulty lying in the way of reunification and bring about a fundamental change in the solution of the reunification 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 nation’s desire for reunification, join its strength, repulse the foreign interference and realize the reunification of the country independently and peacefully. For its feasibility and fairness our new reunification proposal enjoys the warm welcome and support of the entire Korean people and the world’s 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.

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While clamoring about the home-visit of separated families, they opposed the performance in south Korea of the Opera “Flower Girl,” an art work reflecting the our country’s 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 traffic and correspondence,” calling for “realizing first 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 difficulty. 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-reunification nature opposing our epochal reunification 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 reunification though it is belated. The South Korean authorities should clearly announce the reunification 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 reunification, and “unified channel of dialogue” internally. Thus, they should heighten the atmosphere of reunification 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 difficulty lying in the way of reunification and open up the highway to the reunification 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 Reunification 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 reunification.

(B) The July 7th Declaration entitled “Special Declaration for Korean Self-Existence and Prosperous Unification” The first reunification policy of South Korea’s President Roh Tae-Woo made on July 7, 1988 was embodied in the “Korean National Commonwealth Policy”

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presented on September 11, 1989, which proposed the three principles of independence, peace, and democracy to establish a piecemeal reunification strategy. In October, 1989, based on July, 7, 1988 declaration, the South proposed the North to make the South–North Exchange and Cooperation Agreements focusing on “traffic, 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 unification 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 inflicted 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 unified 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 unification through our independent capabilities. We must all work together to open a bright era of South–North 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 engulfing peoples of different historical and cultural backgrounds. I believe we have now come to a historic moment when we should be able to find a breakthrough toward lasting peace and unification 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 unified 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 fields. 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 other’s 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, unification 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:

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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 North–South 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 find 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 unification. 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 confident 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 reunification entails thought about the course and political form of the unified 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 North’s 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 unified Korea. Indeed, a future unified Korea could become an important spot where no neighboring power would want to give up its solidarity and influence. Current international politics makes it even more difficult for the two Koreas to get unified and to stand alone, as long as the world is still divided in military confrontation as well as in mutually conflicting state egoism. This is why a future Korea preparing for reunification must seriously contemplate both its political stance and security architecture in East Asia. E.-G. Hwang, The Search for a Unified Korea, DOI 10.1007/978-1-4419-1562-7_8,  C Springer Science+Business Media, LLC 2010

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History teaches us that an entity’s 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 unified 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 unified 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 conflicting one another in the region. In the following sections, we will briefly 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 reunification 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 conflicts and clashes between any two groups of people. The sources of both peoples’ conflicts 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 benefits 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 benefits 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)

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and the private ownership system are the most powerful tools to enhance economic efficiency 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 “efficiency” 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 benefits. However, as long as the respective ideological perceptions among neighboring countries continue to be diverse, those nations would find it difficult 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 briefly 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 Pacific 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 Pacific 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 conflicts (that is, Sino-Soviet border disputes and the North leadership’s 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 (1950–1953). 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

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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 Korea’s defiance 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 Council’s non-binding presidential statement (April 29) denouncing North Korea’s 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-Hyun’s 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 notifies 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 North’s unprecedented defiance contrary to other nations’ shocked responses. With the North’s second nuclear test, China must face a policy dilemma internationally as to whether it would or would not oppose any U.N. Security Council’s 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 Korea’s 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 Korea’s 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 five-year term as South Korea’s 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: “Don’t 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 South’s 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 first nuclear test was made on October 9, 2006. In response to the North’s 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 trafficking and the transfer of weapons of mass destruction (WMD).

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rounds of sanctions against North Korea would ineffective. North Korea’s 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. China’s traditional alliance with North Korea dates back to the Chinese sponsorship of Kim Il-Sung’s anti-American and anti-Japanese stance before and after World War II. Even more than Russia, China has maintained a warm official friendship with North Korea through most of Korea’s 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 (1950–1953) has grown in the course of the protracted struggle against their common potential enemies, US and Japanese capitalists, even after Beijing’s 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 influence 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 China’s 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 People’s 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 Korea’s stocks of deadly weapons as well as the North Korean rush into China’s 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 China’s northeast regions, which were mostly territories of old Korean ancestors until AD 915. China’s position may pose stumbling blocks in the rugged road ahead of not only the Korean reunification but also a unified Korea’s future policy direction. The question of which country – China or the United States – will make the 21st century its own will no doubt influence the future path of Korea. The international community

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recently began to call the United States and China a “G-2” group.5 Indeed, China’s 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 reunification. The hopeful possibility is, however, that there appears to be a slight shift in the Chinese thinking about Korea. With North Korea’s 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 unified 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 Korea’s 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 fireworks,” China will not be able to stall international expectations by repeatedly saying that “North Korea does not listen” or that “we have no influence.” 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 unified 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 Obama’s 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 China’s growing importance in world politics and economy. The new US–Chinese bilateral keen cooperative partnership would surely pave a relatively easy road leading to Korean reunification 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 financial crisis, limit the proliferation of weapons of mass destruction, tackle climate change, and help resolve ongoing international conflicts.

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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 field with other countries. This suggests that Russia will not be much concerned with the future political status of a unified Korea as long as it can secure a good relationship with united Korea so as to promote mutual economic benefits. Russia will be inclined to seek its benefits 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, Russia’s 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 Korea’s reunification in a coordinated manner with other countries, including the United States, Japan, and China. Of course, Russia’s 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 Russia–US, Russia–NATO, Russia–China as well as Russia–Japan 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 unified 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 reunification 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 influence 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.

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South Korea, the existence of American troops is without question the main support backing up Seoul’s 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 reunification of two Koreas would of course cross “the river of no-return” for the time being, if not forever. Then the strategy of Korean reunification 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 Pyongyang’s 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 North’s 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 North’s fireworks, 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 North’s second nuclear test. Moscow’s 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 Korea’s reckless test made it difficult 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 Council’s 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 North’s 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 North’s 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 1950–1953, 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 unified 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 unified Korea to be more helpful for the economy and security of Chinese people in the region. If a unified 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 Pyongyang’s 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 North’s 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 North’s 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 North’s closed mouth (which favor “tasty chosen beef” instead) with “carrots,” and instead use “sticks.” The best policy option for the

9 The North’s saber-rattling in April – June 2009 was believed to be part of its succession campaign. According to outside rumors, Kim Jong-Il’s 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 first 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 official visit to Pyongyang can achieve breakthroughs in negotiations with the North. This does not mean that Washington must ignore its past lessons about Pyongyang’s 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 reunification be placed on a long drawn out table. Most telling, these experts on North Korea do not really understand why North Korea’s 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 Washington’s 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 North’s regime either to

10 Blumenthal

and Kagan (2009), p. 16..

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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 conflict with Chinese military forces in the Asian theater, which is largely beyond Washington’s reach. Of course, the United States will not want to frustrate Japan in terms of the US–Japanese 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 unofficially 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 world’s 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 Korea’s 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 “reaffirm U.S. commitment to security assurances,” including “extended nuclear deterrence” to its allies,11 it now seeks to reinforce its defense system after North Korea’s 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 Beijing’s growing hegemony than North Korea’s 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 deterrence” refers to the idea that the United States would retaliate if its allies are attacked.

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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 unified 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 first 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 China–Japan–Korea trilateral harmony will also contribute to mitigating “political conflicts” 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 reunification 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 today’s 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 today’s 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 Korea’s 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

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What Is the Unification Formula: Option for Colorless State?

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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 reunification 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 reunification, 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 unified Korea will depend largely on its survival strategy as it seeks balance between flanking powers. The conflicting gravity of neighboring powers will influence 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 reunification. A SinoJapanese rivalry would enforce the necessity for a would-be unified Korea to keep a neutral and nonpartisan profile. 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 reunification to the free choice of both North and South Koreans, the reunification 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-first-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 reunification. In other words, when the North implodes or explodes, what unification 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 first floated by China to the former US President George W. Bush. But it was shelved due to Washington’s concern that such forum might trigger a negative reaction from South Korea if the issues on North Korea were included in its principal agenda.

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Peninsula.13 Of course, neutrality does not necessarily reflect a majority of the unified Korean nation’s 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 reunification when the North implodes or explodes. If a unified 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 Union’s 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 unified 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, reunification 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 unified Korea is firmly 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 unification 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 unification 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 defined 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 specified state actions in a specified 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.)

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reunification 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 won’t solve both the Korean strife and the North’s nuclear ambitions, that country’s 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 Korea’s national integration, the situation must be addressed in a roundabout way through prior diplomacy that a unified Korea will keep its “neutrality stance” in international conflicts.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” floats, first of all, in a hope that a negative reaction from neighboring powers will not be triggered by an upcoming chance for Korean reunification.15 The proposal does not rule out, of course, that a unified 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 conflicting 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 neighbor’s, Koreans must positively grab such a rare pragmatic opportunity. Korean reunification will be achievable if first, 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 North’s communists and the South’s 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 conflict of interest comes across one another. This says that the probability of Korea’s reunification by way of such seemingly nationalistic appeal is almost nil at least under the contemporary situation. Korea’s reunification 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 official 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 unified Korea in form of neutrality. We simply assume this system will face the least resistance to a reunification opportunity, assuming a bang occurs soon.

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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 first, the dramatic reunification 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 Korea’s reunification if and only if its end-product, a reunified Korea, does not serve to disturb the balance of powers in the region. Otherwise, the vulnerable powers will oppose reunification. That is why neutralization statecraft is suggested as a workable reunification 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 conflicts and instead enhance good and beneficial economic relations among them in the region. Finally, we must make “three important points” here in relation to our proposal for neutralized Korean reunification. One point is that the big-bang reunification 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 unification 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 North’s side will never abandon its consistent position from which to achieve reunification 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 South’s economic provision will hardly reduce the North’s brinkmanship tactics unless it is on its own terms. It is against

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this background that Korea’s reunification would be only possible when the North’s regime falls apart. Thus, the reunification demands, first of all, speeding up an erosion of the North’s 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 benefit of reunification 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 reunification, 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 Korea’s reunification and their security such as neutralization of the peninsula. The idea of a neutralized Korea would be accepted by them only if a unified 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 unified 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 unified Korea as it would be securing agreements among the four powers to support the reunification 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 five 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 reunification. 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 reunification (as well as to their mutual benefits) 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

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cooperative benefits in political, military, diplomatic, and economic and cultural fields, 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 reunification. Needless to say, many secret hideout palaces used by the North’s leadership could also provide tourists with points of interests in addition to existing natural and historical assets in the North after the reunification. 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 reunification 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 officially provided to the North by the South between 1998–2007, Pyongyang has been repeating its nuclear tests and missile launches.16 Despite the North’s 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 North’s 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 reunification of Korea will likely have a great chance. A reunified 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 unified Korea might upset the balance of these neighbors’ powers. Against this background, we propose a workable reunification formula for “temporal neutrality” of the Korean peninsula until a peaceful international environment is firmly 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 unified

16 The Kim Dae-Jung administration supplied $ 2,488.4 million and Roh Moo-Hyun’s administration provided $ 4,471.1 million to North Korea.

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Concluding Remarks

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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 Korea’s reunification achievable but would also be mutually beneficial to all concerned powers. Importantly, this idea of a neutralized Korea is possible only if neighboring countries ultimately and unselfishly agree to endorse Korean reunification. 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 finally, Koreans must endeavor to obtain every possible advantage to support reunification from all interested neighbors by offering itself as a unified in the form of a neutral Korea. One day when Korea rises as a new unified 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 (1989–1990)

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 flood across the borders. After 28 years, the Berlin Wall comes down. November 13, 1989: East Germany’s 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 file 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 first official 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 Germany’s 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 first 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 Unified Korea, DOI 10.1007/978-1-4419-1562-7,  C Springer Science+Business Media, LLC 2010

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April 12, 1990: The first 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 Unification 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 reunification. July 22, 1990: The East German Parliament approves legal actions on reestablishing the state council within the country. August 23, 1990: The People’s 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 reunification 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 reunification of Germany by signing the Two-plus-Four Treaty in Moscow. October 3, 1990: Political reunification of the two Germanys is finally 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, 83–84, 87, 107, 110 American pragmatism, 90–91, 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, 134–135, 139 Bank of Korea, 28, 31, 128–129, 131, 159 Bankruptcy, 53, 80 Bear Stearns, Lehman Brothers and AIG, 143 Beijing (Peking), 6, 10, 39, 41, 48, 51, 53, 65–66, 73, 79–81, 83–86, 88, 94, 97, 106–107, 110–111, 136, 152, 176–178, 180–181, 183 tutelage, 104, 138, 155 Berlin Wall, 38, 46, 57, 63–64, 96, 116–117, 145, 157, 178 Bible (Scriptures), 151–152 Bibow, J., 143 Biden, J., 107 Big bang on the Korean Peninsula, 94, 118 reform, 12, 61, 63, 70–71, 73, 78, 92, 102–103, 163 Bilateral trade, 13–15 Bluffing mentality, 13–37 Blumenthal, D., 182 and Kagan, R., 182

Border, 7, 9, 14, 17, 24–25, 35, 45, 50, 68, 74–75, 80, 82–83, 85–86, 95, 110–112, 125, 133, 135, 154, 163, 175, 178 Brandt’s neu ostpolitik (new eastward policy), 45 Brezhnev Doctrine, 58, 64 Bridge of no return, 89 Brinkmanship, 68–69, 71, 81, 109, 120, 132–134, 138, 150–151, 180–181, 188 Buffer zone, 70, 111, 175 Bulgaria, 61, 64 Bush, G. H. W., 117 Bush, G. W., 10, 51–53, 62, 80–81, 87–89, 93, 102, 105, 108, 176, 185 C Capitalism, 62, 165, 174–175, 187 Capitalistic democracy, 1 yellow winds, 133 Carte blanche, 7 Ceteris paribus, 185 Chang (Jang) Sung-Taek, 137, 154 Charles Darwin’s theory of HomoSapiens evolution, 120 Cha, V. D., 54 Chiang Kai-Shek, 92 China, 7, 9–11, 22–23, 31, 36, 40, 42, 46–48, 50–51, 53–54, 61, 63, 65, 69–70, 72–73, 76–77, 80–86, 88–89, 91–92, 94–97, 102–112, 114–116, 118, 133, 135–136, 144, 150–151, 153, 155, 165, 171, 173–186, 188–189, 191 Chinese, 10, 43, 47–48, 50, 53, 66, 70, 73, 80–87, 91, 93–94, 96, 102–103, 105, 107–108, 111, 114, 136, 139, 155, 175, 177–178, 180–181, 183–184, 186 Choi Seung-Chul, a North’s 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, 119–121, 163 Collective slogan, 6 Colossal bloodbath, 109, 154 Commodities, tradable, 15, 30 Communist, communism, 1–12, 22, 26–27, 33, 37–39, 43, 45–47, 49, 54, 57–59, 61–65, 67–69, 74, 76–78, 82, 86–87, 95, 102, 105, 109, 114, 117, 119, 123–125, 129, 132, 134, 136, 144, 149–150, 154–158, 163, 179–180, 188 Communistic monarchy kingdom, 6 Condoleezza Rice, 62 Confederation approach, 76, 112–113 Contingency action, 183 5029 concept plan, 49 plan, 49, 77, 80, 86, 91, 96, 122, 155 Control by Won, 162 β convergence, 147 Corruption, 3–4, 9, 42, 49, 57, 63, 67, 69, 133, 165 Cost of reunification, 54, 70, 97, 104, 146, 148 Coup d’etat, 49, 154 de-facto coup, 154 Cumings, B., 3, 27 Custom clearing office, 14–15 Czechoslovakia, 58, 61, 64 D David C.K., 54 Davos, Switzerland, 107 Dear Leader, 6, 11, 17, 22, 26, 33–34, 47–48, 67, 102, 125, 133, 135, 137 Declaration of war, 40 Demilitarized zone, 67, 190 Democracy, 1, 5, 37, 45, 54, 76–77, 87, 89, 102, 117, 121, 127–129, 132, 145, 157, 168, 170, 174–175, 180, 187 Democratic system, 1–2, 5, 77, 156, 179, 188 Deng Xiaoping, 10–12, 47–48, 103 Denuclearization, 32–34, 51, 53, 79, 81, 89, 97–98, 102, 105–106 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, 133–138 Egalitarian communism, 1 ideology, 9 paradise, 46 Empty stomach, 13 Environment, 5, 24, 35, 65, 78, 101–122, 179, 185, 189–190 Environmental, 45, 126, 184 Ethnic characteristics, 147 European Community, 117, 189 Exchange and cooperation, 13, 17, 46, 168, 170, 187–188 Experience-based knowledge, 4 Explosion, 82, 112, 122, 141–142, 180, 187–188 F Fighting for foods, 12 Fighting against foods, 35 Fiscal-monetary policy paradox, 142 Foreign policy, 54, 62, 65, 71, 82–83, 88, 90, 95, 101, 105, 111, 114, 122, 174, 177–178, 180 Fratricidal enemies, 1 Free market, 4, 43, 62, 65, 103, 121, 147–148, 152, 165–166, 187 Functionalism, 25, 84, 90 G Gaeseong (or ‘Gaesung’) industrial complex, 67–68 Gaesung (alternatively written as ‘Kaesung’ or ‘ Gaeseong’), 9, 13, 17–19, 21, 23, 25, 29, 31, 34, 42, 112, 160 GDP (Gross Domestic Product), 27–28, 30, 94, 103, 128, 142–144, 146, 159 Geithner, T., 107 Geneva Accords in July 1954, 144 German Bundesbank, 142–143, 145, 161–162 Doppelbeschluss (double-decisions), 45 Mark, 145, 161 unification, 58–59, 64, 112, 114, 116–117, 142–143, 161 Germany east, 58, 64, 145, 161–162 west, 45, 57, 117

Index G-2 group, 178 Ghaussy, A. G., 161 Gil, B., 85 Shanghai Five, 85–86 Gorbachev, M., 10, 38–39, 57–59, 63–65, 117, 178–179, 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), 129–130 H Hannara (Grand National) Party, 26 Han river, 2 Harrison, A., 126 Heavy fuel oil (HFO), 51, 98–99 Hermit Kingdom, 5–7, 22, 38, 47–48, 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, 4–5, 32, 36, 40, 45, 57–58, 64, 68, 74, 78, 93, 102, 105, 109, 145, 150, 155, 175 Human trafficking, 69, 133 Hwang, E.-G., 3, 7–8, 26, 123, 129–131 Hwang Jang-Yup, 11 Hyundai Corporation, 44 I IAEA (International Atomic Energy Agency), 17, 39, 81, 98, 150–151 Ideological leaders, 2 Ideological norm(s), 174 Implicit social contract, 157 Implosion dynamite implosion model, 81–82 Incentive-oriented free market, 4 Income gap, 48, 54, 62, 104, 121, 146–147 Income standard deviation, 5 Indigenous identity, 1–3 Institutional factors, 157 Inter-German exchange and cooperation, 46 Inter-Korean economic cooperation, 13–36, 42, 45, 48, 118

201 Inter-Korean trade, 13–19, 21, 22–24, 27–28, 30–31, 60, 74 Internalized positive externality(external benefit of the re-unity), 147 Internal tensions(strains), 46–50 International Atomic Energy Agency(IAEA), 17, 39, 81, 98, 150–151 Intransigence, 184 Investment cost, 146–147 Irving Fisher’s equation of exchange, 159 J Japan J-ALERT, 137 Japanese, 1, 11, 53, 63, 71, 76, 79–80, 86–87, 91–95, 105, 107, 115–116, 136–137, 169, 177, 183–185 The Japan Times, 52, 79, 92, 135, 176 PAC-3(Patriot Advanced Capability-3), 137–139 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, 6–7, 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, 65–66 Kim Dae-Jung, 5, 16–17, 22, 25–26, 33, 40, 42–43, 45–46, 50, 60, 65–66, 71, 74–76, 87–88, 96, 112–113, 119, 132, 140, 163, 190 Kim Du-Nam, 11 Kim Gye-Gwan, 52 Kim Il-Sung, 3–7, 10–11, 44, 48, 60, 65, 76–77, 82, 91, 95, 110, 123, 125, 134, 137, 154–155, 168, 177

202

Index

Kim Jong-Il, 6, 10–12, 16–17, 22, 26–27, 29, 34, 46–47, 49–51, 53, 55, 59–60, 66–67, 69, 71–81, 84–86, 88, 90, 93, 96, 102, 105–106, 108–111, 113, 119, 125, 133–134, 136–137, 153–156, 163, 176, 181, 190 Kim Jong-Un, 137, 181 Kim Kyong-Hui, 137 Kim Myung-Sup, 11 Kim’s love-mate Kim Ok, 154 Kim’s pancreatic cancer post-Kim Jong-Il, 153–156 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, 82–84, 87, 95, 110, 175, 177, 179 Korea-US FTA ratification, 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 first policy, 139, 151, 154 Military museum, 190 Mindsets, 36–37, 41, 62, 64, 73, 90, 120, 132, 157, 184, 187 Ministry of Unification, 18, 21, 28–29, 31–32 Mt. Keumkang (alternatively, ‘Kumgang’ or ‘Diamond’ mountain), 13, 16 Keumgang (Kumkang) sightseeing (tourism), 16, 18–19, 22, 42, 44 Keumkang (Kumkang) mountain resort, 68, 88 Murrel, P., 138

L Laissez-faire policy, 166 Lankov, A., 182 Leadership, 6, 32–33, 40–41, 43–44, 46–48, 52–54, 57, 60, 63, 65–66, 69–73, 75–76, 78, 86, 90, 97, 102–103, 108–109, 111–114, 116–119, 122, 124, 132–137, 148, 150–152, 154–155, 165–166, 175, 177, 180–184, 187–188, 190 Lee Jong-Suk, 50 Lee Myung-Bak, 5, 12, 17, 22, 26, 32–36, 42, 45, 50, 53, 61, 68, 74, 76, 94, 110, 136 Lee Young-Hoon, 23, 31 Legitimacy, 67, 71, 73, 103–104, 124, 133, 154, 156 Legitimacy eroding, 154 Leonid Ilyich Brezhnev, 58 Liberal Democratic Party (LDP) of Japan, 93 Liberalism, 25 Libya, 61–62, 136 Libya’s model, 62 Li Changchun, 136 Lopsided aids, 14, 45 Lower stage of federation, 163 Lucas, R. E., 126

N Nam Sung-Wook, 27 National reunification, 44, 48, 63, 78, 110, 113–116, 118, 121, 146, 152–153, 155–156, 160, 162, 164, 168, 173–174, 185 NATO, 45, 179 Neighbors, 2, 59, 66, 78–79, 81–82, 84, 92, 94, 96–97, 104, 113–118, 174, 177, 188, 190–191 neighboring nations (powers), 11, 24, 79–96, 121, 173–174, 185, 187 Neo-classical economics theory, 14 Neutrality conditional (temporal) neutral state, 189 neutral (Greater) Korea, 113, 185, 187, 191 neutralization, 186, 188–191 permanent (1896), 189 Nicolae Ceausescu, 10, 46, 64, 109, 145 Nikita Khrushchev, 58 Non-Proliferation Treaty, 16–17, 39 Nordpolitik euphoria, 39, 42 Northeast Asia region, 95, 173 North Korea (DPRK) Defense Standing Committee, 137 National Defense Commission, 11, 137, 153–155 National Peaceful Unification Committee, 43–44 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 North’s First Seven Year Plan, 5 North–South Joint Consultant Office 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, 89–90, 101–102, 104–110, 112, 135–136, 180, 183 Oligarchs and elites, 143 Orthodox, 6, 64, 117 P PAC-2s and PAC-3s, 139 Palace coup within Pyongyang’s inner power circle, 49 Paradigm shift, 35, 62–63, 87, 91, 103, 118–122 Park Chung-Hee, 4, 60, 119 Park Suk-Sam and Mueller, R., 161 Paulson, H., 81 Peculiarity, 14–15, 24 Pecuniary and non-pecuniary, 13, 145 Peng Dehuai, 83 Peninsula, 18, 34, 57–97, 101, 103, 107, 110–114, 116, 118, 123, 129, 138, 148, 155, 163, 173–187 Perceptions, 50, 74–75, 82–83, 96, 104, 106, 111, 115, 119–120, 153, 174–175 Perestroika and glasnost, 10, 33, 59, 61–71 Pivotal, 106–107, 185 Play with fire works, 178 Policy priorities, 125, 149–166 Political ideology, 1, 3, 5, 8, 175, 187 disputes, 1 dissentients, 1, 76 terrors, 62, 138 Poverty, vicious circle of, 3–4, 36, 87 Power elites, 9, 49, 69, 78 politics, 9, 49 Prague Autumn, 63–64 Prague Spring, 58, 64 Preemptive strike, 81, 112, 182 Presbyterian church in Seoul, 75 Pritchard, C. L., 90 Privatization, 157, 164–165 Pro-cyclical fiscal and monetary policies, 143 Proletarian cadres, 8

203 PSI (Proliferation Security Initiative), 160, 176 Psychological burden, 178 Pyongyang, 6, 11–12, 16–17, 22, 26, 34, 38–40, 44, 47–49, 51–54, 59, 66, 68, 70, 71–75, 77, 79–81, 83–85, 89–93, 98, 102–103, 105–108, 110–115, 118–119, 121, 134, 136–137, 150–151, 153, 155, 163, 166, 169, 176, 178–182, 187, 190 Pyongyang’s 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 Qaddafi, 62 R Rack-dong (Nak-dong) river, 2 Reciprocity relationship, 184 Reconciliation, 1, 34, 43, 76, 92, 110, 119, 163, 170 Red flag, 2, 37, 40–44, 46 Reichsmark (RM), 58 Remnant, 49, 110, 116, 150, 187 Reunification, 32, 44–45, 48, 54, 57, 60, 63, 70, 77–78, 83, 91, 96–97, 101, 103–104, 109–116, 118–119, 121, 123–148, 151–153, 155–156, 158, 160–164, 166–170, 173–174, 177–180, 182, 184–191 Rhee Sung-Man, 60 Richardson, M., 105 Rodong (alternatively, ‘Nodong’) Shinmun (newspaper), 61, 71 Roh Moo-Hyun, 45–47, 50, 60, 65–66, 76, 87–88, 140, 176, 190 tragic suicide, 176 Roh Tae-Woo, 16, 25, 42, 60 Romania, 10, 46, 49, 61, 64, 73, 93, 109, 114–115, 118, 145, 154–155 model, 144 Roosevelt, F. D., 91–92 Russia, 10, 23, 36, 46, 51, 54, 76–77, 83, 86, 89, 91, 94–96, 105, 110, 112, 114, 116, 118, 136, 141, 143–145, 150–151, 153, 165, 173–177, 179–182, 186, 188–189

204 S Saber-rattling, 106, 121, 181 Sachs, J., 126, 157 SAM-X system, 139 Sanction(s), 40, 46, 53, 81, 88, 93, 121, 135–136, 150, 176–177, 180, 182, 189 Scenario(s), 49, 59, 77–79, 81–82, 101, 103, 109, 112, 152, 155–156, 161, 163, 166, 189, 190 Schaefer, W., 161 Sea of fire, 41, 45, 54, 72, 113 Self Defense Forces (SDF), 93 Self-reliance (Juche), 5–7, 12, 38, 40, 43, 48, 123–124 Shadow (real) exchange rate, 158 Shin Son-Ho, 135 Shock therapy, 147, 157 Short food supply, 9 Six-party talks, 10, 51, 79–81, 85, 105–106, 136, 150, 180 Socialism, 62, 64, 83, 144, 174–175 Socialist bloc, 8, 65 economy, 6, 8, 129, 142, 157, 160, 162 paradise, 6, 133 system, 7, 9, 43, 57, 61–62, 123, 126, 156 Solidarity, 90, 173 South Korea (ROK), 37 South Korea’s anti-Americanism, 119 South Korea’s evangelical Christian church leaders, 119 Sarang Community Church, 119 So-Mang Church, 119 Stake-holding powers (countries), 77, 173 Stake(s), 49, 58–59, 63–64, 77, 79–80, 89–90, 94, 103–104, 106, 113, 156, 173, 175, 185–187, 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, 10–11, 17, 48, 53, 70, 78, 108, 120, 148, 152, 185 Strain policy, 37–55 Strategic competitor, 91 Strategic partner, 53, 83, 86, 91 Structural unemployment, 145 Sudden collapse (fall), 77–79, 152, 173

Index Summit, 17, 26, 34, 39, 68, 71, 76, 88, 93–94, 119, 176, 184 Sunshine policy, 16–17, 22, 26–27, 29, 33, 37–55, 61, 74, 76, 112, 118–119, 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, 74–75, 82, 106, 108, 111, 119, 127–128, 136, 138, 141, 184 Tiananmen Square, 73 Tile-roof house, 5 Time consuming experiment, 157 Time structural costs and benefits, 145 Trade commercial (CT), 14–15, 18–19, 22, 27, 30, 42, 159 commission-based processing (CPT), 16, 19, 23, 30 general (GT), 18–19, 23, 30 Transfer payment, 14–15, 30, 126, 161 Treuhandanstalt of Germany, 164 Tug-of-War, 175–185 U Unification formula, 185–190 United States (U.S.), 4–5, 10–12, 16–17, 22, 24, 27, 35–36, 39, 44–46, 50–53, 58, 62, 66, 71, 74, 77, 79–80, 82–91, 93–97, 101, 104–109, 111–114, 116, 118, 134–137, 139–141, 143–145, 150–151, 153, 155, 165, 173–175, 177–186, 188–189, 191 U.N, sanctions Security Council, 40, 93, 135–136, 150, 155, 176–177, 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, 34–36, 88 V Vasile Milea, 109 Verrechnungseinheit (VE), 58 Victim(s), 1–12, 74, 88, 92

Index Vietnam, 40, 61, 70, 112, 113, 136, 144 model, 113 unification, 112, 113, 144 Violation of the law, 168 W Wang Qishan, 81 Washington, 13, 52, 54, 71, 76, 81, 86, 88, 92, 94, 104–107, 110, 117, 123, 138, 152, 178, 180–183, 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, 101–122 World politics, 138, 152, 178, 186 Y Year of Cow, 101, 109 Yongbyon nuclear complex, 51, 80 Yonhap News, 150 Yugoslavia, 61