Cover image for Avoiding the Apocalypse : the future of the two Koreas
Avoiding the Apocalypse : the future of the two Koreas
Noland, Marcus, 1959-
Personal Author:
Publication Information:
Washington, DC : Institute for International Economics, 2000.
Physical Description:
xvi, 431 pages : illustrations ; 23 cm
Format :


Call Number
Material Type
Home Location
Item Holds
HC467 .N658 2000 Adult Non-Fiction Non-Fiction Area

On Order



On the Korean peninsula one of the greatest success stories of the postwar era confronts a famine-ridden--and possibly nuclear-armed--totalitarian state. The stakes are extraordinarily high for both North and South Korea and for countries such as the United States that have a direct stake in these affairs. This study, the most comprehensive volume to date on the subject, examines the current situation in the two Koreas in terms of three major crises: the nuclear confrontation between the United States and North Korea, the North Korean famine, and the South Korean financial crisis. The future of the peninsula is then explored under three alternative scenarios: successful reform in North Korea, collapse and absorption (as happened in Germany), and "muddling through" in which North Korea, supported by foreign powers, makes ad hoc, regime-preserving reforms that fall short of fundamental transformation.

Author Notes

Marcus Noland, Senior Fellow, has been the Senior Economist for International Economics at the Council of Economic Advisers, as well as a visiting professor at Johns Hopkins University, the University of Southern California, Tokyo University, Saitama University, the University of Ghana & a visiting scholar at the Korea Development Institute. He has written many articles on international economics & is the coauthor of Global Economic Effects of the Asian Currency Devaluations (1998), Reconcilable Differences? United States-Japan Economic Conflict with C. Fred Bergsten (1993), Pacific Basin Developing Countries: Prospects for the Future (1990) & Japan in the World Economy with Bela Balassa (1988), the coeditor of Pacific Dynamism & the International Economic System (1993) & editor of Economic Integration of the Korean Peninsula (1998). (Bowker Author Biography)

Reviews 1

Choice Review

Noland reviews the past and analyzes future economic possibilities for the two Koreas. South Korea's successful development model became institutionally obsolete with the challenges of the 1990s. North Korea's centrally planned economy (CPE) stagnated, lost important economic support from other CPEs with the end of the Cold War, and accepted a dysfunctional economy and famine rather than institutional reform. In South Korea, the 1997 Asian economic crisis and the IMF program forced economic and financial reforms, but government and private sector disengagement are still required. Noland contends that reform is critical if the two Koreas wish to consider closer or even integrated economies. North Korea's military and its development of nuclear and missile capabilities pose external threats and result in economic concessions and agreements from South Korea, Japan, and the US. Will North Korea collapse, be absorbed by South Korea, or muddle along? German reunification and Romanian reforms provide a framework to grapple with this question. The author also considers the results of computable general equilibrium models and a social accounting matrix as part of the discussion for prospects for reform in North Korea. This insightful, detailed, and creative study on the two Koreas is recommended for graduate students, researchers, and professionals. B. F. Hope California State University, Chico

Table of Contents

Prefacep. xi
Acknowledgmentsp. xv
1 Introductionp. 1
Divergent Pathsp. 3
Three Crisesp. 4
Prospects for the Futurep. 7
Tour de Horizonp. 11
2 The South Korean Economy until 1997p. 15
Economic Policy in the 1960sp. 16
Economic Policy in the 1970sp. 19
Economic Policy under President Chunp. 22
The Democracy Pledge and Twenty-five Years of Developmentp. 24
Pre-Crisis Economic Policy, 1987 to 1997p. 29
Conclusionsp. 57
3 The North Korean Economyp. 59
Organization of the North Korean Economyp. 61
Statistical Comparison of the North and South Korean Economiesp. 73
Crisis Responsep. 82
International Economic Relationsp. 87
Current Reformsp. 133
Conclusionsp. 140
4 The Nuclear Confrontationp. 143
The Energy Situationp. 143
The Nuclear Programp. 145
The Agreed Frameworkp. 151
The Suspect Site and the Missile Testp. 158
Evaluationp. 166
5 The Slow-Motion Famine in the Northp. 171
The Food Balancep. 180
Food for Peacep. 182
The People's Republic of Miseryp. 191
6 The Financial Crisis in the Southp. 195
Financial Frugalityp. 199
The Bubble Storyp. 203
The Crisisp. 208
Post-Crisis Developmentsp. 221
Recoveryp. 247
Conclusionsp. 249
7 The Prospect of Successful Reform in the Northp. 251
Reform in the Northp. 252
A General Equilibrium Perspective on Reformp. 266
The Likelihood of Reformp. 281
8 The Implications of North Korean Collapsep. 285
The German Experiencep. 286
Relevance to Koreap. 295
A General Equilibrium Perspective on Collapse and Absorptionp. 301
Conceptualizing the Costs and Benefits of Unificationp. 307
Dynamic Resultsp. 310
Policy Lessons of the German Experience for South Koreap. 318
Thinking Beyond the German Casep. 320
9 Can the North Muddle Through?p. 323
Socialism in One Familyp. 324
Muddling Through in Our Own Stylep. 333
Sustainabilityp. 342
10 Conclusionsp. 347
North Koreap. 348
South Koreap. 352
Other Actorsp. 367
Final Thoughtsp. 375
Referencesp. 377
Appendixp. 401
Indexp. 405
Table 2.1 South Korean tariff rates
Table 2.2 Estimate of tariff-equivalents of Korean agricultural NTBs, 1992
Table 2.3 Producer subsidy equivalents, 1997
Table 2.4 Effective and nominal rates of protection, selected sectors, 1990
Table 3.1 North Korea's central plans
Table 3.2 Composition of output, 1992-96
Table 3.3 Government budget balance
Table 3.4 General government revenues, 1996
Table 3.5 Socioeconomic indicators, 1992
Table 3.6 Educational attainment rates
Table 3.7 Distribution of labor force at time of reform
Table 3.8 Capital stock and GDP regressions
Table 3.9 International income and capital stock comparisons, 1990
Table 3.10 Ratio of South Korean to North Korean GDP per capita income, 1990
Table 3.11 North Korean trading partners, 1997
Table 3.12a North Korean exports by largest commodity groups, 1997
Table 3.12b North Korean imports by largest commodity groups, 1997
Table 3.13 Aid from the USSR
Table 3.14 Aid balance sheet
Table 3.15 Estimated remittances
Table 4.1 KEDO contributions
Table 5.1 Food balance estimates
Table 5.2 Rice and corn per capita daily rations
Table 5.3 Food for talks
Table 6.1 Volatility of macroeconomic indicators and banking aggregates
Table 6.2 South Korean banks
Table 7.1 Alternative reform scenarios
Table 7.2 Actual and "natural" North Korean trade shares, 1990
Table 7.3 Prospective sectors of comparative advantage
Table 7.4 Prospective sectors of comparative advantage
Table 7.5 Prospective sectors of comparative advantage
Table 8.1 Western goods penetration
Table 8.2 East German relative price
Table 8.3 Inter-German and inter-Korean exchange
Table 8.4 Estimated costs of unification
Table 9.1 Romanian macroeconomic indicators
Figure 2.1 Financial development
Figure 2.2 Real interest rates
Figure 2.3 Share of GDP due to top 10 chaebol
Figure 2.4 Purchasing power adjusted real GDP per capita
Figure 2.5 Structure of output
Figure 2.6 Exports and imports as a share of nominal GDP
Figure 2.7 Unionized workers and labor disputes
Figure 2.8 Number of days required for customs clearance of agricultural products
Figure 2.9 Foreign direct investment
Figure 3.1 Estimates of North Korean GDP
Figure 3.2 North Korean trade
Figure 3.3 North Koran arms trade
Figure 3.4 North Korean debt and debt service - export ratio
Figure 3.5 North Korean debt prices in the secondary market
Figure 3.6 Number of South Koreans who visited the North
Figure 6.1 Saving, investment, and the current account
Figure 6.2 Capital inflows by type
Figure 6.3 Unit price of electronics and DRAMS
Figure 6.4 South Korea's nominal exchange rate and stock market changes
Figure 6.5 South Korea's real GDP growth forecast and expected real exchange rate change
Figure 7.1 Model simulation results
Figure 7.2 Food availability
Figure 7.3 Output by sector
Figure 7.4 Relative price of output by sector
Figure 7.5 Percent change in average factor price
Figure 8.1 Capital inflow and exchange rate appreciation
Figure 8.2 External capital flow: composition of output change in South Korea
Figure 8.3 External capital flow: composition of output change in North Korea
Figure 8.4 Rate of convergence and capital investment requirement
Figure 8.5 North Korea: GDP and GNP
Figure 8.6 South Korea: GDP and GNP
Figure 8.7 Factor return equalization
Figure 8.8 South Korean distribution of income
Figure 9.1 North Korean and Romanian growth rates
Box 2.1 The Strange Case of Sausages
Box 3.1 Juche as Theology
Box 3.2 A Tale of Juche Agriculture
Box 3.3 Black, Brown, and Blue Won
Box 3.4 Deadbeat Debtor
Box 3.5 The Narco-state
Box 5.1 Crying Wolf?
Box 5.2 The Issue of Military Stockpiling
Box 5.3 "9/27 Camps"
Box 5.4 Refugees
Box 6.1 Moral Hazard, the Domestic Dimension
Box 6.2 Contagion
Box 6.3 Moral Hazard, the International Dimension
Box 6.4 Shareholder Activism
Box 6.5 The 10-11 Crisis: The Shoe That Didn't Drop