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After World War II and the partitiomn of Korea into a Soviet and American 'administrative' zones, the Soviets had the partially industrialized north and the Americans the agricultural south. The economy of South Korea was basically agricultural and based on inefficent, traditional methods. The Japanese had made no effort to industrialize the south, primarily because of the lack of natural resources there. As repressive as the Japanese were, one policy they did pursue was to build a public education system. So both Koreas had that institutional strength to build on. This was also the situation in Taiwan. Much of the land in both South and North Korea was owned by the Japanese and Yangban class. Both Koreas initiated a land reform. Much of ghe land was owned by Japanese interests or the Yangban class. The North Korean land reform was draconian with land owners being shot and despite early promises, the land eventually became owned by the Government in a priocess of colectivization. The United States and South Koreans carried out a land reform that continued private ownership (1945-50). They confiscated and redistributed all land held by the Japanese interests (the colonial government, Japanese companies, and Japanese colonists). The South Korean government land reform reform required large landholders to divest most of their holdings. The result was a new class of independent, private holding family farmers was created. This was the situation when North Korea invaded South Korea (1950). Korea's infrastruture was badly damaged as well as 2.5 million civilin killed and wounded, about two-thirds in North Korea. The United States began repairing the infrastructture destroyed as part of the war effiort, including, ports, bridges, rail lines, and roads. By the end of the War, some of the infrastructure was modern and in better shape than before the War. The economy, however was in shables and the country was heavily dependant heavily on foreign aid. The military seized control of the Government (1961). The military would rule Korea for a quarter of a century. It was autocratic, but in truth so was the Rhee suposedly democratic government. At time the military was openly repressive, but was pragmatic and flexible in its commitment to economic development. And unlike military regimes in other areas and the Rhee Government, it decided on capitalist policies that were not popular in most of the developing world. The result was that South Korea became one of the Asian Tigers. At first obscured by the Japanese Economic Mirale, the Miracle on the Han transformed South Korea. For three decades the the South Korean economy grew at an average annual rate of nearly 10 percent annually while the North Korean economy stagnated and then plumeted. Agricultural productivity inncewased in the South, but the big change was that South Korea rapidly was trandformed from a backward agricultural economy to an effecicent industrial powerhouse with a skilled workfirce. Per capita income increased more than a hundredfold. Not only did Korea develop heavy indudtry, but a very advanced elrctronics and high tech sectors. The highly leveraged economy was hurt by the Asian market melt-down leafing to a $57 billion IMF bailout (1997). It was the largest IMF rescue program. The country also iniated a domestic program, reforming the chaebŏl and liberalizing the economy. The economy quickly recovered. The economy could not be more different than what the Japanese left in 1945. Rather than an agricultural country with landless peasants, less than 2 percent of the economic output comes from agriculture. Korea is now a middle-class country with most of the population living in cities and enjoying prosperous lives.
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