1. The Costs of a Korean Reunification
Japan’s defeat in World War Two brought a new chapter in the history of the Korean peninsula.
While the Koreans were hoping for a brighter future after decades of Japanese rule, that hope
blew away when relation between former allies the U.S. and the Soviet Union quenched quickly.
The intended temporary division of the Korean Peninsula was never reversed and the Korean War
(1950-1953) turned the countries into a bitter rivalry that continues to this day.
When talking about the future of the Korean peninsula the ongoing question is often “When will the
North Korean regime collapse?” or “How will the North Korean collapse?”. While this question
proved to be impossible to answer, an even more complex question will be the very next to answer:
How much will a Korean reunification cost? This article will set out the context of answering this
question.
Division of Germany vs Korea
In the case of the German reunification in 1990, estimates vary in term of costs. The IWH Institute
estimated that an amount of $ 1,9 trillion flew from the former West to the former East and still
today the effects can be felt. Comparing the German with the Korean case seems tempting for
scholars, but besides the difference in population 16 to 63 million in Germany and 22 to 48 million in
Korea) and economy (the difference between former West and East Germany was around 1:2 to 1:3
and in the Korean case it is estimated at 1:15 to 1:40) the underlying dynamics make the German
example less relevant.
In the case of Korea, many scholars already tried to predict the costs for a Korean reunification.
Estimates in the Korean case vary from $ 0,2 trillion to $ 5 trillion. In 2010 the Federation of Korean
Industries consulted 20 Korean expert about their thought on unification costs. The average turned
out to be a $ 3 trillion. In early 2011 Nam Sung-wook from the governmental Institute for National
Security Strategy presented his prediction which was $ 2,1 trillion. The outliers can be found in the
Korea Economic Institute $ 0,2 trillion (2012) and Peter Beck from Stanford University $ 2,0 to $ 5,0
(2010). Compared to the ROK’s $ 1,12 GDP, one sees that the impact will be felt fiercely.
Reunification defined
While calculating these figures is, due to the complexity a highly speculative activity in the first place,
talking about the costs is also already a step too far, because this question implies that there is a
desired reference which we can call “reunification”. Removing the DMZ would cost much less than

2. providing the North Koreans with the same degree of wealth the South Koreans enjoy today. Also
definitions as “a unified and stable society” which were used in some of the above mentioned studies,
do not reveal much about the desired outcome of the reunification let alone the costs.
So if someone tries to answer the question “what will a Korean reunification cost?” one should try to
define a “national reunification” in advance. But if we have a definition for such a large scale complex
phenomenon which should be able to be generalized to past cases like Germany, Yemen or future
cases like e.g. China, the definition will be too general to make any difference. In other words, if the
above mentioned scholars would have used a common definition of the term “national reunification”
as a starting point in their studies, this would not have decreased the great difference among their
final results.
Do predictions of costs matter anyway?
While looking at the costs of a future reunification, it is tempting to put a heavy weight on main
macro economical indicators of the post reunification era, which will be both relatively easy to obtain
(note that the current statistics about the North Korean economy are very unreliable) and are backed
by economic theories and empirical data. Although it can tell us something about the costs, the
underlying societal disorder will affect the costs of a reunification even more. Therefore focusing on
the “easy to obtain” macro economical statistics do not make much sense if the underlying social
disorder affecting them will be ignored. For example the cost of a year of reeducation is easier to
calculate, than a lowering economic growth due to very low degree of trust (one of the most
fundamental economic principles) among the civilization.
So when talking about a Korean unification these future societal problems should not be ignored.
Underlying principles like trust can have a huge influence on a country’s performance and many of
them seem to affect the potential growth in the post reunification era negatively. This of course can
be regarded as a cost as well (according to the used definition of course). North Koreans anyway, will
be attracted by the great affluence of the South. Although the younger generation (in contrast to the
older generation), knows all too well that they are lacking behind the South and the idea that they
will enjoy the same level of wealth after reunification won’t make the reunification easier.
Unfortunately they will soon realize that this is just partly the case.
Some social disorder in practice
While it is likely that the level of wealth of the vast majority of most North Koreans will increase
dramatically soon after reunification it is also likely that their relative social status does not. Many
North Korean engineers and medics will soon find out that their practical knowledge will be

3. completely useless in the post reunification era (which will soon be dominated by the South Korean
companies). The majority of the North Koreans will find themselves suitable for low skilled labor,
which is obviously not what the (naïve) Northerners would have expected when they came to the
South. The sweet dream of a reunification will soon be gone and even though they would enjoy all
the promises (e.g. seven days a week meat) Kim Il-sung never fulfilled it can turn into a nightmare.
And if a Northerner fights him or herself into a job, the South Koreans will not be happy to see them
taking theirs and this will not contribute to a mutual understanding either.
The North Korean refugees already living in the South do not predict a smooth transition. In many
cases they struggle with adapting themselves to a modern capitalist society. North Korea has its own
“way of life” which is reprehensible in almost all of its aspects, but the country managed to create a
system which is relatively stable. This way of life however, will not work in South Korea which society
is fundamentally different. Northerners, not familiar with the South Korean way of life will therefore
be an easy target for South Koreans with bad intentions (let alone the claims of land some South
Koreans are keeping for decades). It will be really hard for Northerners to withstand the fierce
competition in the South Korean society and find their way up (and if they do their South Korean
peers will probably not cheer for them).
Conclusion
The above mentioned social problems are only a small indication of problems who will appear in the
post unification era. Also the fact that social problem rather behave like molehills with two new ones
pop up for each one crushed will predict a mess that will take generation for all Korean to clean. In
the long run (very long run) the country will be reunited and the division has made its move from the
people’s heads into their children’s history books. This however will take generations to be true.
Above we can see the context of what a Korean reunification will cost. As outlined above, the cost
will be gigantic in the first place. Even the smallest estimates are already 20 % of South Korea’s GDP,
but more realistic estimates show that the true costs will be much more. However, when discussing
the costs of a Korean one should not emphasize on the costs too much, because calculating them,
even at hindsight will be rather speculative than realistic. Solving the underlying social disorder will
be the most challenging aspect of the post reunification. How smooth a possible transaction will be,
will also be heavily determined by the way the Kim dynasty will end and the developments in both
North and South Korea in the next few years or decades. The debate about the future of the Korean
peninsula and a future reunification should therefore focus on solving the coming social problems
instead of calculating costs. Talking about costs will quantify a problem that cannot be quantified.