The Korean Peninsula Three Decades after the Fall of the Berlin Wall

The fall of the Berlin Wall in November of 1989 ushered in a period of change and reform in Eastern Europe and the former Soviet states. With the collapse of the authoritarian regimes that had dominated the region since the end of World War II, the states of Eastern Europe and the former Soviet Union were able to begin the transition to market economies and democracy.

Despite the political and economic change that began sweeping the world in 1989, the status quo largely remained in place on the Korean Peninsula, with the exception that the end of the Cold War created the political space for both North and South Korea to finally join the United Nations in 1991.

South Korea Emerges on the World Stage

Over the last three decades, South Korea has seen changes in its political structure, economy, society, and role on the global stage. But not all of it has been easy.

Similar to Eastern Europe, South Korea underwent its own transition to democracy. In Seoul’s case the transition took place slightly before the fall of the Berlin Wall. Following Park Chung-hee’s coup in 1961 South Korea had been ruled by an authoritarian regime. However, mass protests in June 1987 forced the government to undertake democratic reforms and hold direct elections that resulted in Roh Tae-woo becoming South Korea’s first democratically elected president.

Since that initial election in 1987, South Korea has worked toward consolidating democratic governance and seen a rules-based transition in political power between conservatives and progressives on three different occasions. But the system has also faced its challenges. Political parties on both sides have fractured and all but two democratically elected presidents have faced charges of corruption. In 2016, political protests over an influence peddling scandal resulted in the impeachment of President Park Geun-hye.

At the time of its first democratic election in 1987, Freedom House considered South Korea to be a partially free country in its annual Freedom in the World report, with essentially mid-level scores for civil liberties and political rights. With the passing of its first free and fair election, Freedom House reclassified South Korea as a free country, which it remains today. In the years since 1997, South Korea has also seen improvements in its civil liberties and political rights scores and in Freedom House’s most recent report received marks just below the top score in each category.

South Korea has also seen significant progress on economic development over the last three decades. In 1989, South Korea had the world’s 16th largest economy and a per capita GDP of $5,737 according to the World Bank. Today, South Korea is the world’s 12th largest economy with a per capita GDP of $31,363. Its overall GDP increased by over 560 percent over that same period, placing its economic performance on par with the best of the transition states in Eastern Europe.

While South Korea’s economy has been highly successful over the last three decades, it has also faced challenges. The Asian Financial Crisis of 1997-98 left a mark on South Korea. In exchange for financial assistance from the International Monetary Fund (IMF), South Korea was required to follow a tight fiscal policy to reduce its budget deficit, allow foreign investment and ownership, restructure South Korean firms that were failing, and engage in labor market reforms. The experience was traumatic enough that it is often referred to as the IMF Crisis in South Korea.

When the Global Financial Crisis hit a decade later, however, South Korea fared better than most developed countries and was able to avoid entering a recession.

The last three decades have also reshaped the composition of South Korea’s industries and exports as its economy has expanded and changed. In 1989, South Korea’s top exports included integrated circuits, cars, cargo containers, and textiles. By 2019, South Korea had become one of the world’s leading IT economies with leading firms in smartphones and semiconductors; the world’s second largest producer of ships; and an important player in the petrochemical and automotive industries.

Over the same period, South Korea has built a significant portion of its success on investments in research and development. It invests more as a percentage of its GDP in R&D than most countries in the world and has ranked as the world’s most innovative country in Bloomberg’s Innovation Index since 2014.

As South Korea modernized economically, it has also seen its traditional social structure begin to change. While the IMF reforms helped to revive the economy, they also had social consequences in largely ending lifetime employment and increasing income inequality for what was then a relatively young society.

Now the country is aging, as life expectancy has increased by nearly 15 years for South Koreans born today compared to 1989. Combined with a declining birth rate, South Korea is quickly transitioning into a super aged society. In a society that only introduced a national pension plan in 1988 and only made it mandatory in 1999, there are increasingly fewer young South Koreans to support aging members of society. These demographic shifts mean that South Korea has the highest level of old age poverty in the OECD and increasingly the highest rate of old age suicide as well.

Another social shift has been the rapid change in educational levels in South Korea. South Koreans today are increasingly more educated than just a generation or two ago. Among OECD countries, South Korea has the highest level of tertiary education with 69.6 percent of those between the ages of 25-34 having at least a college education. But it also has the highest gap between generations in the OECD with only 23.1 percent of those between the ages of 55-64 having a similar level of education.

Over the last decade, the cost of private afterschool education has risen by 33 percent and is now beyond the reach of many low income families at more than $1,000 a month. With education taking up an increasingly large portion of families’ income it has become a significant factor in decisions regarding childbirth at a time that has seen South Korea’s total fertility rate has fall from 1.56 births per woman in 1989 to below 1 for the first time in 2018.

For young South Koreans, however, the stress on education has not paid off in an economy that has persistently high levels of youth unemployment. The result has been a sense of disillusionment about a society that at times is still socially rigid in terms of its class divisions and gender inequality, while at the same time lacking professional opportunities commensurate to the hard work put into educational attainment.

Similar to South Korea’s political evolution, South Korea’s role on the global stage began to change in the years before 1989. In 1988, South Korea stepped onto the world stage as Seoul hosted the Summer Olympics. Since those games, South Korea has co-hosted the 2002 World Cup with Japan and the 2018 Winter Olympics in PyeongChang.  

Beyond sports, South Korean culture has begun to take off in recent decades with K-pop and K-dramas initially growing in popularity in China, Japan, and Southeast Asia, but now beginning to spread to the Europe and the United States, where BTS became the first group since the Beatles to score three Number 1 albums in less than a year.

South Korea also grew in stature in international affairs. It first served on the UN Security Council as a nonpermanent member from 1996-1997 and again from 2013-2014. In 1996, it joined the OECD and joined the OECD’s Development Assistance Committee in 2010, becoming the first recipient of international development assistance to transition to a donor country.  It is also a member of the G-20 and host of the UN’s Green Climate Fund.

Three Largely Lost Decades for North Korea

In contrast to South Korea, North Korea has largely experienced three lost decades since the fall of the Berlin Wall.

The end of communism was not kind to North Korea. During the Cold War the Soviet Union had served as North Korea’s patron, providing it economic assistance as well as diplomatic and military support. With the collapse of the Soviet Union in 1991, North Korea lost its most important source of economic aid and security assistance. The new Russian Federation was no longer in a position to support North Korea economically and opened formal relations with South Korea in November of 1992, a step China had taken a few months earlier. In 1996, Russia allowed the 1961 Treaty of Friendship, Cooperation, and Mutual Assistance between the Soviet Union and North Korea to lapse and lessened Moscow’s military commitments to North Korea.

The mid-to-late 1990s resulted in further hardship for North Korea. The combination of the loss of Soviet aid, North Korea’s own economic mismanagement, as well as a mix of droughts and floods resulted in deaths from famine estimated at between 240,000 to 3.5 million.

To survive the period that became known as the Arduous March, North Koreans began turning to markets to meet their basic needs rather than relying on a public distribution system that had broken down. In time, the shift toward markets at a grassroots level would take a stronger hold on the economy. While markets are not always legal in today’s North Korea, Kim Jong Un has been more accepting of their role in the North Korean economy than Kim Jong Il had been.

The growth of markets in North Korea over the last decade has also seen the emergence of a money lending class, or the donju, who are leading businessmen of the private economy in North Korea. On the state side the Kim regime has taken tentative steps to allow farmers to sell a portion of their crops in markets and factory managers more freedom to manage their production and workforce.

Since North Korea does not release economic data, there is no clear answer as to how large its economy is today, but some estimates suggest it may be anywhere from about $2 billion to $10 billion larger than it was at the point of collapse in the 1990s. Regardless of how accurate those estimates may be, it is clear that North Korea remains a poor country today. The United Nations, for instance, estimates that 40 percent of the population is undernourished.

While North Korea is believed to be a younger society than South Korea, in time it will likely face similar demographic challenges. Though there is no reliable data due to Pyongyang’s unwillingness to publish statistics, North Korea’s total fertility rate is estimated to have fallen from 2.3 in 1989 to 1.9 in 2017.

On a political level, North Korea has undergone two dynastic transitions from its founder Kim Il Sung to his son Kim Jong Il in 1994, and then again from Kim Jong Il to Kim Jong Un in 2011. Under Kim Jong Il’s Military First Policy the military grew in prominence in the regime, but Kim Jong Un has shifted more power to Korean Workers Party under his rule.

While interests within the regime have gained or lost influence over time, there have been no efforts at real political reform. In 1989, Freedom House classified North Korea as being not free and gave it the lowest rating possible for civil liberties and political rights. That has not changed; in the most recent report on Freedom in the World, North Korea continues to score at the bottom for the categories for civil liberties and political rights.

The lack of political and civil freedom in North Korea was documented in the 2014 UN Commission of Inquiry Report. The UN report found that North Korea systemically violated its citizens’ freedom of thought, freedom of movement, and freedom of religion and engaged in a series of other human rights violations such as enslavement, enforced disappearance, and murder.

Despite its economic struggles and lack of political change, North Korea has been successful in developing a nuclear weapon and the ballistic missile systems needed to deliver it. But this has come at a high cost. The focus over the decades on the nuclear program has deprived the domestic economy of resources and resulted in a series of UN sanctions that banned key exports such as coal, iron, textiles, and seafood; limited North Koreans working abroad; and capped imports of petroleum, dual use items, and seemingly common items such as solar cells.

Pyongyang has shown a surprising ability to develop computer technology as its efforts at engaging in cybercrimes and development of facial recognition technology demonstrate. But despite these limited successes it has failed to see the economic growth or even a minimal amount of political development that might have allowed its citizens to benefit more over the last three decades.

Will the Two Koreas Continue to Diverge?

If the last three decades have been about change in South Korea and stagnation in North Korea, what might the next thirty years hold? While unification or some form of increased cooperation could occur by 2049, both countries will face challenges even if the political status quo remains.

With the world’s lowest fertility rate, the next three decades in South Korea will largely be focused on how to deal with the challenge of an aging society and population decline. South Korea’s population is expected to peak at 51.3 million people in 2024 and then decline to 47.2 million in 2049, while the percentage of the population over the age of 65 will rise from slightly under 16 percent today to around 38 percent of the population in 2049.

South Korea’s ability to become a world leader in the area of artificial intelligence could also play an important role in the country’s future over the next three decades. South Korea is one of the world’s leading tech powers today, but if it is unable to transition from the production of hardware to a world were data and artificial intelligence are increasingly an important part of economic growth it could see its place as an economic actor, and by extension its international influence, begin to decline over the next three decades.

For North Korea the question is whether it will face another three lost decades or finally begin to make reforms so that the working lifetimes of additional generations are not lost. Without a willingness to engage in economic reforms and reach some kind of understanding with the international community on its weapons programs, it’s hard to see North Korea becoming an economic success.