Prof. Kathryn Weathersby
In the last post, we looked at the severe economic difficulties southern Korea was suffering as it moved to create a new government. Exacerbating an already bad situation, the proto-government in the north took an action designed to take advantage of the south’s economic distress to gain political advantage internationally. On May 14 the People’s Committee in Pyongyang stopped the flow of electrical power from generating plants in the north to facilities in the south. General Hodge protested and the Soviet commander in the north revealed the strategy behind this move. He replied that the American commander would have to resolve the issue directly with the governing authorities in the north, which the US did not recognize. The issue went as high as the foreign minister level. The US Secretary of State raised the issue with Foreign Minister Molotov, who duly informed Secretary Marshall that the Koreans in the north were ready to negotiate a settlement of the electricity issue but could not do so as long as the US refused to recognize the People’s Committee.
Kim Kyu-sik and Kim Ku had believed Kim Il Sung’s promise that the north would continue to supply electrical power to the South, which meant that Syngman Rhee gained politically from the crisis caused by its shutoff. On May 29 the newly created legislative assembly overwhelmingly agreed to name Rhee as its chairman. At the opening session held two days later, General Hodge delivered a speech appealing to the North to hold democratic elections and join the South. The American commander also suggested that the legislature leave one hundred seats vacant for northern representatives.
At this time, the new government had only two ways to solve its pressing economic crisis: receiving American aid and selling Japanese property. Following the policy in NSC-8, the US Army transferred to Korea $141 million worth of surplus military property. 40% of this assistance went to the Korean police and army and the rest went to the Korean government. The historian Allan R. Millett concludes that the 60% transferred to the new government contributed significantly to South Korea’s infrastructure for transportation, construction, medical aid, public sanitation, and communications.
Another $301 million in American assistance came from the trust fund of the Government Aid and Relief in Occupied Areas (GARIOA), which was first administered by the Army and then by the State Department before it ended in 1949. This money was used to import food and buy agricultural supplies, lumber, cotton, fuel and petroleum, medical supplies, clothing and textiles. More than half of these funds were distributed in 1948.
As important as American aid was, a far greater sum was available in the form of Japanese property and assets, which totaled more than $2 billion. In 1947 the State-War-Navy Coordinating Committee established the principle that Japanese property in Korea would not be used for Allied reparations. Moreover, former Japanese owners would have no legal right to sue or to sell their confiscated property. The US occupation authorities had already leased Japanese-owned farmland to Korean farmers, but on March 22, 1948, General Hodge announced a plan to sell it to the tenant farmers. Within five months, 85% of the farmland had been sold. 90% of the rest of Japanese property was transferred to the new Korean government, where it would serve as an important source of future patronage relationships as well as economic recovery.
In the next post, we will turn to the second part of US policy specified in NSC-8 – the creation of a constabulary army for southern Korea.
[Sources: This post relies on James I. Matray, The Reluctant Crusade: American Foreign Policy in Korea, 1941-1950 (University of Hawaii Press, 1985); and Allan R. Millett, The War for Korea, 1945-1950, A House Burning (University Press of Kansas, 2005).]
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