In commemoration of the recent 60th anniversary of the end of the Korean War, Andrei Lankov published a counterfactual study in the Asian Times under the assumption that the North Koreans had won the conflict.
The short answer in Lankov’s scenario is that life would be considerably harder for people in the former South Korea but a little less so for the people in the former North Korea. In the long run he sees a certain amount of liberalization in a communist led unified Korea, much as what happened in China, but likely not a collapse. Lankov does not delve into the effects that a defeat in Korea would have on the course of the Cold War or on American politics.
Another counterfactual comes to mind, based on the assumption that the American led United Nations powers won and unified Korea under a (more or less) democratic regime.
As those familiar with the history of the Korean War know, after the initial North Korean Assault pushed the South Korean and American forces south to a salient around the southern port of Pusan, General Douglas MacArthur landed forces at Inchon, to the north of South Korea, cutting off the North Korean forces, on Sept 15, 1950. The United Nation forces swept north rapidly with the goal of liberating North Korea. The UN forces took the North Korean capital of Pyongyang on Oct 19. By late November, the North Koreans were driven almost to the Yalu River, which marked the border between North Korea and China.
On Nov 26, a massive Chinese army crossed the Yalu and attacked the scattered and disorganized United Nations forces by surprise and drove them south of Seoul, the South Korean capital. While Seoul was retaken and the front line eventually bogged down around the 38th Parallel, which constituted the border between the Koreas, there was no serious thought of liberating North Korea again. MacArthur, who wanted to launch such an effort, was removed from command. The war stalemated until July 27, 1953.
Let us suppose that instead of arrogantly dismissing the idea of a Chinese intervention, MacArthur was more prudent as his forces advanced north toward the Yalu. Perhaps he received indisputable intelligence such an attack was to take place. So, instead of the pell mell drive to the Yalu, MacArthur moves more methodically. Thus, when the Chinese do attack, he is ready, with strong defense lines backed up by superior artillery and air power. The Chinese attack is decimated and repelled and the United Nations establish a line along the Yalu. Stalemate still ensues, but with Korea still being united under the Seoul government in the end.
Taking the flipside of Lankov’s scenario, life for all Koreans is markedly better than in real history, with the entire country eventually becoming a democratic, industrialized country. To be sure, an American army has to stay in place along the Yalu to guard against another Chinese invasion for much of the Cold War. Possibly, after the Nixon opening of China, that border would become less militarized and China, undergoing economic reform, would find Korea as a better trading partner than an enemy.
As far as the effect on American politics, it is entirely possible that Eisenhower, who in real history had won the presidency based in part on a promise to win the Korean War, would not have become president. On the other hand, Douglas MacArthur, in this scenario the victor of the Korean War, would have become president and all that implies.