Inter-Korea railroad investigation committee rode a train from South Korea to North Korea the other day. South Korea’s Moon Jae-in government appears to be bent on these events in the hopes of speeding up the NK denuclearization process.
Moon is pushing for inter-Korea economic cooperation with full speed ahead, but the question is—will the inter-Korea economic cooperation process benefit the Korean peninsula? There is nothing absolute in this world. Neither is inter-Korea economic cooperation. If inter-Korea economic cooperation were to become a good strategy, it must benefit the people of North Korea as in enhancing their quality of life. But I seriously doubt that the plans as currently configured will help the people of North Korea.
The plans call for building special economic zones like Kaesong Industrial Complex. The trouble with these special zones is that they only act as cash cows for the North Korean regime. Proponents of Kaesong clamor that North Koreans get to learn about capitalism via its operation, but I doubt if they believe that themselves. If they actually believe that is the case, they are not businessmen. If South Korea insists on economic cooperation like Kaesong, North Korea will be moved farther away from the possibility of open reform. An open economic system will benefit the people, not the state-controlled projects. A well-financed dictatorship does not give its people freedom. In short, Kaesong is harmful for the people of North Korea.
Will the economic cooperation benefit South Korea?
Often the proponents speak about the roles the North and the South could play, such as providing low labor cost in the North with available capital in the South. Further, they say that the South Korea can focus on higher skilled jobs for its own labor force. But this is only an abstract theory. When the low-skill jobs go to the North, what happens to those laborers in the South? Nobody talks about this. Millions of laborers in the South won’t be able to switch to new high-skilled jobs, nor will they be able to follow the jobs to the North.
Of course, South Korean corporations will benefit from the cheaper labor cost for the shorter term. The North Korean labor force is more competitive than others as far as the South Korean corporations are concerned because of the common language and the proximity of the labor pool.
Having said that, where and how will the products be marketed and sold? North Korea’s consumption market is insignificant. The products manufactured in North Korea must be exported to markets pioneered by South Korean corporations. But the market is always saturated. In terms of the supply-demand equation, excessive demand is a thing of the past. The overall market is limited, and corporations and nations compete for their share of the market to survive. There are exceptions, of course, such as the smart phone which creates its own market.
So, unless the inter-Korea economic forum can develop and expand its export market, Koreans themselves will end up dividing the goods between them.
The Moon government is incensed with the idea of building this economic cooperation, but it is merely a political idea with little consideration for economic realities. It is headed for disaster with a potential to harm the people of the North and the South alike, rather than creating a win-win situation they are imagining.
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