Friday, March 6, 2009

The Economic Impact of National Division

The Korea Times carried an interesting article  today suggesting that fear of the "Three Ds" was weighing on the Korean economy.  The Three Ds are
  • asset Deflation
  • won Depreciation, and
  • Daepodong missile
I'd like to focus on the last of these, because it illustrates a continuing problem.  According to the Korea Times article, Pyongyang's test-launching of ballistic missiles has wreaked havoc on the Korean won, as demonstrated several times, particularly in 1998 and 2006.  During the following four weeks after the Stalinist country fired ballistic missiles, the won depreciated 3.4 percent in 1998 and 2 percent in 2006.
``In hindsight, the North's missile launches have negatively affected the South's financial markets,'' IBK Securities economist Park Ok-hee said.
Beyond the impact of actual or threatened missile launches, the reality is that national division entails a military confrontation with the North that exerts a continual drag on the South Korean economy.  This is largely because the media around the world frame so much of their coverage of Korea in terms of the North Korean nuclear problem, its missiles and the six-party talks.  The fact that South Korea has achieved its current level of economic growth is even more remarkable in light of the continuing effect of press coverage about North Korea.

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