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Economics focus: Parallel economies

What the North and South Koreans can learn from the reunification of Germany

SOUTH KOREANS dread the prospect of renewed fighting across the “38th parallel” that divides their country from the communist North. But not all of them savour the alternative ending for their cold war: rapprochement and reunification.

North Korea’s indigence is almost as scary as its belligerence. The collapse of its rogue dictatorship—improbable but not unthinkable—would replace a military threat with a variety of economic perils, including a possible flood of cheap migrant labour and costly obligations to support the North’s people and infrastructure. Germany’s example is hardly reassuring. Two decades after reunification, the East still subtracts heavily from Germany’s budget and adds greatly to its unemployment figures. ...