These circumstances had thrown South Korea's economy into complete chaos. Even if the occupation forces had arrived with a carefully laid economic plan, the situation would have been difficult because the Japanese had developed Korea's economy as an integral part of their empire, linking Korea to JaÍÍÍpan and Manchuria.

The division of Korea into two zones at an arbitrary line further aggravated the situation. There were many inherent problems in building a self-sufficient economy in the southern half of the peninsula. Most of the heavy industrial facilities were located in northern Korea--the Soviet zone--including the chemical plants that produced necessary agricultural fertilizers. Light industries in southern Korea had been dependent on electricity from the hydraulic generators located on the Yalu River on the Korean-Manchurian border electric generating facilities in the south supplied only 9 percent of the total need. Railroads and industries in the south also had been dependent upon bituminous coal imported from Manchuria, Japan, and the north (although the south had been exporting some excess anthracite to the north).

The problems were compounded by the fact that most of Korea's mines and industries had been owned and operated by Japan. As the United States military government let the 700,000 Japanese depart from South Korea in the months following the start of the American occupation, almost all of the mines and factories--now enemy properties vested in the military government--were without managers, technicians, and capital resources. This situation led to severe problems of unemployment and material shortages.

The months after the arrival of occupation forces also witnessed a vast inflow of population. South Korea's population, estimated at just over 16 million in 1945, grew by 21 percent during the next year. By 1950 more than 1 million workers had returned from Japan, 120,000 from China and Manchuria, and 1.8 million from the north. The annual rate of increase of births over deaths continued at about 3.1 percent. Since rural areas were inhospitable to newcomers, most of the refugees settled in urban areas Seoul received upwards of one-third of the total. The situation was further aggravated by scarcities of food and other commodities and by runaway inflation, caused in part by the fact that the departing Japanese had flooded Korea with newly printed yen.

The social unrest created by these developments can be easily surmised. By 1947 only about half the labor force of 10 million was gainfully employed. Labor strikes and work stoppages were recurrent phenomena, and demonstrations against the United States military government's policies drew large crowds. Temporary stoppages of electricity--supplied from the northern areas--in the early part of 1946 and late 1947 plunged the southern region into darkness on each occasion, deepening the despair of the populace. The disillusioned and disconcerted people paid keen attention to political leaders of various persuasions who offered new ways of solving the Korean problem.

Data as of June 1990

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