Two Koreas: The Waning Possibility of Korean Reunification

Stephanie Seo, Apr 29, 2024

During the Cold War, there was a schism on the Korean peninsula along the 38th Parallel between the North (backed by the Soviet Union) and the South (backed by the U.S.). Following the schism, the North Korean People’s Army invaded the South on June 25th, 1950, marking the beginning of the Korean War. Nearly three years after the beginning of the War,  an armistice was agreed upon, splitting the peninsula into current-day North and South Korea. Given the nature of the Korean split, relations between the North and South have remained at a standstill since 1953. The Demilitarized Zone (DMZ) between the North and South persists as one of the most heavily armed borders worldwide, indicative of the remaining hostility either side holds toward the other. Both hold the belief that they are the rightful government of the whole Korean nation. 


The Arch of Reunification was erected in 2000 in the Northern capital of Pyongyang, following the 2000 inter-Korea summit as a representation of hope for reconciliation and reunification with the South. Recently, however, North Korean Dictator Kim Jong Un and his regime have insinuated that the North no longer holds intentions of restoring relations. Sometime in January of 2024, the Arch of Reunification was demolished, potentially symbolizing the end of cooperation or reunification aims with the South. In addition to the removal of the arch, Kim has constitutionally declared the South as their “primary foe and principal enemy.”  


This move from the North rejects the history of inter-Korean reunification and has posed heightened geopolitical risks to South Korea [1]. Given this hostile declaration and explicit shift in attitude, it is expected that a new era of intensified tension will ensue, possibly escalating into a more significant conflict. Anticipation of worsening conflict between the North and South calls to attention the ever-diminishing probability of a unified nation on the Korean peninsula. 


In the foreseeable future, the economic costs of Korean reunification, rising from the wealth gap between the two countries along with the expected difficulty of social integration, will continue to impede the accomplishment of reunification.  


The Economic Barriers  


Despite sharing a peninsula, the lives of Northerners and Southerners are absolutely worlds apart. There is wide discourse over the potential smoothness of the economic and social integration of the North and South, as the two nations have progressed in total opposite directions after the cessation of the Korean War. Under the assumption that unification would occur under South Korea absorbing North Korea through a collapse of the Northern Kim regime, Northerners will transition from totalitarianism to the constitutional democracy that the South practices. Further, social integration is expected to be quite challenging because Northerners will transition into the South’s ultra-competitive capitalistic society that even Southerners feel is suffocating and overbearing. Given that even the vast majority of Southerners struggle to make ends meet and survive their societies, the majority of Northerners will likely encounter tremendous struggle to adapt and function in a self-sustaining manner.  


The South boasts an approximate GDP of $1.8 trillion compared to the North’s significantly smaller $48 billion GDP. South Korea is home to some of the most established conglomerates, such as Samsung and LG Group, which have driven the nation’s economy to become the 13th largest worldwide. Its economy specializes and excels in technological exports, which has rescued the South from extreme poverty following the Korean War. The nation’s aggregate exports were valued at $505 billion in 2016, a number that rose to $653 billion in 2021 [2]. 


In contrast, North Korea’s GDP has averaged a 0.67% annual contraction from 1990 to 2022 [3]. The nation’s severely underdeveloped economy stems from Kim’s regime, in which military spending is prioritized over spending that would boost production, employment, and development [4]. Clearly, as a failing country in economic terms, there is an immense gap in wealth and economic development between the North and its Southern neighbor. 


This gap implies that there is a wide disparity in standards of living, and therefore skills and knowledge, between the two nations. Due to differences in poverty levels, access to education, and overall skills, a discrepancy in human capital serves as a deterrence to reunification and successful integration. If reunification were to occur, the mending of this gap would require government funding that supports educational opportunities, rehabilitation, and assimilation into a capitalistic society. A 2004 study indicated that in determining the fiscal burden of Korean reunification, the expected increase in social welfare expenditure for North Koreans plays a larger role than reforming the North Korean economic system [5]. Thus, reunification would be a significant collective detriment when it comes to the economy of South Korea due to the massive government expenditure it requires to facilitate Northerners and bridge the current economic gap. 


Considering these findings, the possibility of reunification is further hindered by the likelihood of the imposition of a “reunification tax.” This idea was first proposed by the 2010 South Korean President Lee Myung-Bak, and some believe the tax would entail up to $1 trillion collected from South Korean taxpayers [6]. This proposal was met with criticism, as many in 2010 (and even more today) perceive the issue of reunification to be an issue lacking in urgency or simply not plausible. Simply, the reunification tax is a cost that South Koreans seemingly are not willing to finance, indicating another barrier to reunification. 


German Reunification vs. Korean Reunification


When discussing the idea of Korean reunification, a comparison is often drawn to the successful reunification of West and East Germany in 1990. In both scenarios, the westernized half of the country is (or was) allied with the U.S. and much wealthier than their counterparts. If Germany was successful, what is stopping Korea? 


One stark difference is that East Germany was performing much better economically than current-day North Korea. Today, North Korea’s GDP per capita lies around $1,700 while that of East Germany in 1989 was approximately $10,000. Consequently, North Korea is comparatively lacking in areas such as education, technology, health care, and infrastructure than old East Germany [7]. 


In addition, North Korea has a larger population relative to South Korea than East Germany had relative to West Germany at the time. It is projected that the costs of Korean reunification would be more burdensome than it was for Germany due to differences in economic performance coupled with differences in population size. 


From 1990 to 2010, approximately $1.7 trillion flowed from the former West Germany to the former East Germany [8]. Despite this, East Germany still lags behind West Germany in terms of employment and income. Data from 2017 and 2018 shows that the unemployment rate in East Germany is roughly 2% higher than in West Germany, and that East Germans, on average, earn roughly $4,000 less than West Germans [9].  


If German reunification cost well over $1 trillion, it appears that the cost of Korean reunification will well exceed the aforementioned $1 trillion reunification tax estimation given the larger disparity between the Korean nations than the German nations. When compared with German reunification, even if the Koreas eventually reunite, it will require much more time and money to close the economic gap and achieve a somewhat integrated society. However, a 2011 study found that only 10.8% of the 1,015 participants want to pay reunification taxes or believe the cost of reunification should be fronted by taxpayers [10]. Thus, the sheer cost and burden of Korean reunification makes the issue not comparable to German reunification. 


Another difference between East Germany and North Korea is the power of their respective allies. In the 1990s, the Soviet Union was declining following the expensive arms competition with the West, which weakened East Germany to this day. Conversely, China, a strong ally of North Korea, has been a continuously rising world power that could be able to challenge the U.S., an ally of South Korea. China supports North Korean interests because North Korea serves as a buffer between itself and the heavily U.S.-backed South Korea [11]. The U.S. supports South Korea on the basis of a shared ideology of free-market capitalism and historical ties dating back to the Korean War. Both countries on the peninsula have incredibly powerful allies that have strong grounds to support one side of the peninsula. 


Further, German reunification was unintentionally jump-started when East German leaders loosened travel restrictions across the Berlin Wall. This policy was merely meant to appease East German protesters, but it ultimately led to the crumbling of the wall when crowds stormed to the border. A similar situation along the DMZ would likely not emerge considering the active mine sites and Kim’s indoctrination of North Korean citizens, gathered from the testimonies of defectors. 


Therefore, the economic and geopolitical circumstances surrounding German reunification and Korean reunification vary, and the German example of reunification cannot be directly followed by Korean reunification. 


What Reunification Would Mean


Despite the downsides to the actual process of achieving reunification, there are considerable foreseeable benefits that would accompany a unified Korea. 


Most of the peninsula’s natural resources lie North of the DMZ, with experts estimating that it houses approximately 20 times the mineral value of the South [12]. With the South’s strong industrialization, access to resources across the peninsula in a unified nation would be capitalized on and boost productivity. In addition, the unified nation would, in theory, benefit from the expanded labor force and subsequently the boosted productivity levels. This is especially important considering the South’s aging labor force in the face of its extremely low fertility rate of 0.78 [13]. While optimists highlight the impending benefits of reunification, the more realistic or practical downsides and barriers to achieving it must be centralized. The cost of actually achieving a unified Korean nation far exceeds these potential long-term benefits. 


Though it appears that Korean reunification is unattainable in the near future, circumstances could drastically change in the distant future, whether that would entail the collapse of the Northern regime or a possible war. Thus, the dream of a unified Korea should not be entirely abandoned by aspiring Koreans because economics aside, there is still a belief in cultural and ethnic homogeneity that should bring the two nations together again. 


“Eventually, peoples do tend to unify, one way or another.” 


[1] “Explained: Kim Jong Un Reportedly Tears down Father’s Reunification Monument. Why Is It a Big Deal?” January 29th, 2024. WION.

[2] “South Korea (KOR) Exports, Imports, and Trade Partners.” 2022. The Observatory of Economic Complexity.

[3] North Korea GDP annual growth rate. Bank of Korea.

[4] Boehm, Sean. “Poverty in North Korea: Everything You Need to Know about It.” The Borgen Project, November 19th, 2023.

[5] Auerbach, Alan, Young Jun Chun, and Ilho Yoo. The fiscal burden of Korean reunification: A generational accounting approach, August 2004.

[6] Hong, Joon Seok. “The Economic Costs of Korean Reunification.” October 6th, 2014. FSI.

[7] Kelley, Robert E. “Comparing North Korea to East Germany.” East Asia Forum, December 7th, 2023.

[8] Blau, John. “Reunification: Trillion Euro Bet – DW – 09/24/2010.”, July 23rd, 2019.

[9] Gramlich, John. “East Germany Has Narrowed Economic Gap with West Germany since Fall of Communism, but Still Lags.” Pew Research Center, November 6th, 2019.

[10] Kim, Christine. Paying for unification: Only 10.8 % want taxes, March 3rd, 2011.

[11] Girard, Bonnie. “Would Korean Reunification Threaten China?” – The Diplomat, June 23rd, 2018.

[12] Yu, Woo-ik, Bae-ho Hahn, and Jung Ha Lee. “Resources and Power.” Encyclopædia Britannica.

[13] Poston, Dudley. “South Korea Has the Lowest Fertility Rate in the World and That Doesn’t Bode Well for Its Economy.” Texas A&M University College of Arts and Sciences, June 27th, 2023.