[Letters] Learning from the unification of Germany

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[Letters] Learning from the unification of Germany

When Germany was reunified in 1990, Chancellor Helmut Kohl gave a rosy hope that the residents of the areas that used to belong to East Germany would enjoy the abundant lives of West Germany in three to five years. Now that twenty years have passed, it becomes clear that more time will be needed until the income gap between East and West Germany closes. As we look at the process and aftermath of Germany’s reunification, the thoughts naturally move to North Korean issues.

At the time of the reunification, the per capita gross domestic product of East Germany was 33 percent of that of West Germany. The population of East Germany was 26.3 percent of the population of West Germany. However, as of 2008, North Korea has only 5.5 percent of South Korea’s per capita GDP and 48 percent of the population of South Korea. At the time of the reunification, West Germany had the second largest economy in the world and was the number one exporter. East Germany was the most industrialized nation in the socialist bloc.

Since 1978, China has been achieving 10 percent growth annually and became the second largest economy in the world in 2010. The market opening worked as a catalyst, but the most crucial factors were the policy to relax the group farming system and distribute farming lands to civilians. As more full-scale globalization was promoted, the number of poor people has decreased further down to 8.1 percent in 2005.

Meanwhile, the government of Germany led the process of economic integration after reunification. The productivity of East Germany was merely 7 percent of West Germany in the early days of the reunification, but the wage level in East Germany rose to nearly 90 percent of the wage in the West in 10 years through one-to-one currency exchange and wage negotiation. Naturally, East German businesses lost product competitiveness and went bankrupt, resulting in large scale unemployment. The government invested more than 100 billion dollars to boost the economy of former East Germany, the unemployment continued to rise and the income gap between former West and East Germany were not narrowed. The two cases give Korea clear advice. After South and North Korea are reunified, we would be able to have a soft landing by providing incentives to encourage voluntary involvement of civilians in the course of economic integration. Drastic relocation of North Korean population to the South should be minimized. An appropriate currency exchange rate should be set with South and North Korean money, and wage levels should reflect productivity. Also, workers and farmers should be given incentives through shares of privatized corporations or farming lands. Only then, will we be able to prevent the struggles that the Germans had to go through and get over the challenges of reunification.

Cho Yun-soo,

former political counselor of the Korean Embassy in Germany, is currently the consulate general of Korea in Houston.
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