North Koreas Economy and Nuclear Testing

This past Tuesday the North Korean government announced that it would proceed with the testing of a nuclear weapon sometime in the future. Since the release of that statement there has been a lot of speculation concerning whether North Korea really would carry out its plans for testing the device. In the last 24 hours there have several news reports that the test would take place sometime this weekend. Here's the question: What would be the consequences for the North if they followed through and carried out the test in economic terms?

It's well known that North Korea's economy collapsed with the fall of the former Soviet Union and the Warsaw Pact. Since then North Korea has struggled to develop any kind of coherent economic policy let alone a stable economy that allows them to exist without the economic assistance of China and since 1988 South Korea. You must realize that I'm no economist that can offer charts and graphs to show you any kind trends. What I'm attempting to do is look at from the prospective of the person on the street. Here's an example of what has happened since 1988.

 Following a 1988 decision by the South Korean Government to allow trade with the North , South Korean firms began to import North Korean goods. Direct trade with the South began in the fall of 1990 after the unprecedented September 1990 meeting of the two Korean Prime Ministers. Trade between the countries increased from $18.8 million in 1989 to $333.4 million in 1999, much of it processing or assembly work undertaken in the North.

During this decade, the chairman of the South Korean company Daewoo visited North Korea and reached agreement on building a light industrial complex at Namp'o. In other negotiations, Hyundai Asan obtained permission to bring tour groups by sea to K?mgang-san on the North Korea's southeast coast (see K?mgang-san Tourist Region), and more recently to construct the 800 acre (3.2 km2) Kaes?ng Industrial Park, near the Demilitarized Zone (DMZ), at a cost of more than $1 billion.

In response to the summit between Kim Jong-il and Kim Dae-jung in 2000, North and South Korea agreed in August 2000 to reconnect the section of the Seoul-P'y?ngyang Gyeongui Railway Line across the DMZ. In addition, the two governments said they would build a four-lane highway bypassing the truce village at P'anmunj?m. Once these projects are complete, the Kaes?ng industrial park will have ready access to South Korean markets and ports

Has you can see their economies have been become much more integrated since the late 1980's. So looking at this from the view of the average person in East Asia they don't want North Korea to become a nuclear power but at the same time they don't want North Korea to collapse under economic reprisals from various western powers and Japan. Japan is mentioned because there is a large group of Pro-North Koreans living here and they send remittances to their relatives still living in North Korea. If those were to be cut-off which the government here has threatened it would have a grave effect on the economy of North Korea. As it is the only link between the two countries ( A ferry) was cut-off on July 6th two days after the launch of the North Korean missiles.

As for the people of South Korea its a very delicate balancing act. Because they want to continue to have ties with the north which as stated above allows them not only to visit as tourists but to have reunions with their relatives still living their. But at the same time they don't want their country put into a position where it would feel the need to develop its own nuclear weapons.

North Korea has put all of these countries into a rather difficult position. So the question is what will the rest of the world do? A better question what will the United States do?

I know I don't have the answer nor do I have the answer to the 10 million Yen question will North Korea go through with the test

Tags: Japan, North Korea, South Korea, United States (all tags)

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