August 17 – North Korea

On August 17, 1945, Korea was officially divided by the victorious powers of World War II, namely the Soviet Union and the United States. The dividing line was the 38th Parallel. This has led to an incredible natural experiment. North Korea has been government by a command economy, built around a collectivist, communist ideology. South Korea has incorporated many institutions of a free economy, including private property and markets. No other major differences, apart from political and economic institutions, separate the two. They have the same people, language, customs, climate, and natural resources. In 1945, North Korea was wealthier than the South. Yet their economic trajectory, symbolized by the nighttime satellite phone above, has been remarkable different. South Korea is all lit up. North Korea is completely dark. This tells us something about the institutions necessary for prosperity.

During crisis, sometimes even the most unseemingly people can work together to help each other out. There are opportunities during the pandemic of 2020 for North and South Korea to work together. North Korea has unused production facilities while the South has global distribution centers. If the United Nations would allow, the two sides could explore how to use their comparative advantages in aiding not only each other, but exporting vital resources in high demand all over the world.

Another proposed plan is to set up a coronavirus research group, setting up laboratories in the North and pulling scientists from both sides. An inter-Korean summit in April 2018 set up a liaison office which could facilitate talks between the North and South amid the crisis. Although a crisis can be bleak, there are opportunities for different people, having different skills, to come together to work towards a common goal.

Questions

  1. Think about several reasons why North Koreans produce so much less than South Koreans. What would have to change, for this to be different? Why doesn’t it?
  2. Do you think it is possible for people with nothing in common, maybe even enemies, to come together to produce something of value in a market?