In a previous post, I discussed a Wall Street Journal article that stated that the cost of reunifying Korea could be from 2 to 5 trillion dollars.
Now there’s a Forbes article (page two here) that seems to contradict that by estimating the cost to be 62 billion dollars.
Despite the seeming contradiction, they actually agree on the numbers. They state different goals, and thus come to different costs.
If a more modest goal is adopted focusing on dramatically increasing per capita income in the North—say, by doubling it within 5 or 6 years—instead of equalization with the South, the cost burden decreases sharply to $62 billion.
Right now, the North Koreans are starving, literally. Doubling their income and living standards will have them jumping for joy … for a while.
However, a reasonable estimate of per capita GDP in the North is perhaps $700, in South Korea about $20,000.
Once the North Koreans get used to the idea that they can count on a full belly three times a day, for how long will they be satisfied to have a per capita GDP of $1,400 while their southern brethren enjoy one of $20,000? While they nourish themselves on barley and rice porridge, they’ll look southward to Koreans enjoying kalbi, whiskey, fried chicken, pizza, and pasta. Even though they will be geographically far away, thanks to the Internet, South Korea’s wealth will be in their face. How long will it be before gratitude erodes away into resentment? How long will it be before they start saying things like, “Hey, we could have nuked you when we had the chance, so why don’t you give us some sugar?” For this reason, I would like to re-quote something from my previous post:
I estimate that raising Northern incomes to 80% of Southern levels—which would likely be a political necessity—would cost anywhere from $2 trillion to $5 trillion, spread out over 30 years.
So I agree with the estimate given in the Wall Street Journal article.
And who, according to the Forbes article, will foot the bill?
If and when Korean reunification occurs, the costs will most heavily impact South Korea. But the burden can and should be shared with Korea’s American ally, as well as with the other principals engaged in the Six Party talks, including China and Japan.
Japan. After having its citizens kidnapped and being threatened by North Korea for years, they’ll be asked to pay money to them. They’ll like that.
China. You don’t think they’ll exploit that leverage someday?
U.S.A. Sugar Daddy Sam. The bailout king.