KEI Spotlight

In a Hudson Institute publication titled "Pathways to Peace: Achieving the Stable Transformation on the Korean Peninsula," KEI Senior Director Troy Stangarone contributed a chapter entitled "Economic Engagement with North Korea Post-denuclearization."

In this chapter, Stangarone takes on a hypothetical scenario in which Pyongyang commits to denuclearization. He asks what needs to be done in this scenario to begin reversing the country's moribund economy. 

He observes that manufacturing-led exports are unlikely to drive development after a decade of low-demand growth since the 2008 financial crisis. Moreover, U.S. pressure on trading partners to reduce their trade surpluses raises questions about whether the export-led growth model followed by much of Asia in the twentieth century remains viable for North Korea.

Given these limitations, Stangarone highlights the primacy of North Korea developing institutions that would be capable of executing the vital task of freeing prices from government control. Responsible for generating data, these institutions would also help North Korea join international financial institutions like the the International Monetary Fund. Institution-building, alongside legal reforms safeguarding property rights, will further open channels for the international community to contribute to North Korea's reconstruction. 

The path forward is not without its risks, as Stangarone highlights, nonetheless, the lifting of sanctions and the reduction in defense spending would likely provide much-needed boost to North Korea's fragile domestic economy. 

Find the full chapter here