U.S. Role in Development of South Korean

U.S. Role in Development of South Korean Economy

The end of the Second World War saw the division of the Korean Peninsula into two separate countries: North Korea, under the control of the Communists, and South Korea, under the control of the United States and it's allies. (Carter 2010) In June of 1950, the North Koreans, with Soviet support, invaded the South in an effort to re-unite the two countries in a "People's Republic of Korea." (Hickey 2000) With the intervention of the United States and it's U.N allies, the North Koreans were pushed back and, when on the verge of collapse, the Communist Chinese enter the war on the side of the North Koreans. The Americans were then pushed back to the area around the original dividing line between the two countries; and the war then see-sawed back and forth for two more years. In the end, the two nations were still divided, very near the 38th parallel of latitude, the original border. However, after the North's initial invasion, which pushed deep into the South and almost enveloped the entire country, the South was completely devastated. Any economic development which had occurred in the years prior to the war was gone. At the end of the war in 1953, South Korea was a devastated nation with no industrial infrastructure and an agricultural system which was unable to fed the South Korean people.

In the wake of the devastating war, which all but destroyed the South Korean economy, the United States recognized that the South Koreans were going to need help to recover. President Eisenhower had stated that South Korea was an important part of the Free World an it played an important role on the front lines of the war against the spread of Communism. (Medhurst 2000) Originally the economic development of South Korea was the responsibility of the U.N., but as time went by the U.S. felt that the United Nations was not living up to it's responsibilities to the people of South Korea. As one historian put it "From 1953 on, the United States recognized a responsibility for economic and military assistance." (Mason 1980, 181)

Even while the war was still being fought, the United States sent an economic recovery team to evaluate the economic situation in South Korea. Made up of the employees of the Washington firm of Robert Nathan, these Americans went under the banner of the United Nations Korean Reconstruction Agency (UNKRA). This mission undertook an evaluation of the economic conditions and came up with a 5-year plan for the economic recovery of South Korea. Their plan relied heavily on the export of raw material to pay for the importation of finished products. However, their plan was exceedingly optimistic and never was fully implemented. (Mason 1980, 178)

The next American initiative to rebuild the South Korean economy came later in 1953 when the President sent Henry J. Tasco to South Korea in order to evaluate and report on the economic conditions. The Tasco mission eventually led to Eisenhower's Korean Aid Program which took direct responsibility for the economic development of South Korea away from the U.N. And placed in the lap of the United States. The Korean Aid Program led to the establishment of the "Office of the Economic Coordinator" (OEC) which replace the American Aid Mission already there, and undertook the difficult task of creating a prosperous and stable economy for the people of South Korea.

The Korean Aid Program was a mix of aid for economic development as well as for the development of the military. Between 1953 and 1962, the U.S. gave South Korea over $2 billion dollars in economic aid and over $1 billion in military aid. However, even the military spending spurred economic development in the civilian areas. For instance, after the war many of South Korea's roads and bridges had been destroyed and needed to be rebuilt. The U.S. military aid was used in order to repair and rebuilt a large number of roads and bridges, but the companies which built them for the military were private firms, employing civilian workers. In effect, the military spurred the development of the construction industry through the building of military projects.

Much of the economic aid was delivered in the form of financial grants to banking institutions, and private companies which in many cases provided the start up capital for the development of the automobile industry, shipping and trade, banking, and a large number of other industries. The fact that the United States was able to provide such a large amount of economic and military resources also allowed for the native South Korean resources to be spent on their own economic development.