This year marks the 60th anniversary of the outbreak of the Korean war and the division of the peninsula into North and South Korea. Over the past six decades, the South has developed into a technologically advanced country and is one of the world's leading exporters. On a day-to-day basis, people living in South Korea don't think much about the possible outbreak of war, even after the recent Cheonan incident. However, the world's mainstream media--television, newspapers, magazines and the business press--continue to frame the Korean situation in terms of national division and the threat of war on the peninsula. Nowhere is this more evident than in the continued widespread application and acceptance of the so-called "Korea Discount."
As reported in the Joongang Daily this morning, the global rating agency Standard and Poors reports that uncertainty surrounding North Korea’s power transfer is weighing on South Korea’s sovereign credit rating because of the possibility of war and the potential for huge unification costs. “Significant uncertainties remain from a possible succession in the near future in North Korea,” Standard & Poor’s (S&P) said. “We continue to view instability as an important constraint on the creditworthiness of South Korea.”
The credit rating agency said the South Korean presidential council estimated earlier this year that sudden unification could cost the country $2.14 trillion by 2040 and raise government debt to 147 percent of gross domestic product (GPD) in that year, compared with the government’s estimate of 36 percent by the end of this year.
It would be interesting to see an estimate of how much the "Korea Discount" has cost South Korea over recent decades in lost foreign direct investment or other costs directly related to its application.
Moreover, the Korea discount is really only information that estimates the probability of future conflict or economic burdens on the Korean peninsula. As such, it illustrates the power of information, created by the mainstream and financial media and disseminated instantly via the internet. From a certain perspective, one might say that the most stable thing on the Korean peninsula for almost sixty years now has been the nation's division. How does one really estimate the possibility of a peaceful or gradual unification of Korea versus a sudden, disruptive one? The nature of the "Korea discount" and its real, empirical meaning and value deserve much more attention in era of information age politics.
Perhaps some of you who occasionally read this blog can shed more light on the topic. Comments are welcome.