The American military government which was in charge of South Korea between 1945 and 1948 tried to introduce a modern market economy system.1) It outlawed the so-called “workers’ self-management” of factories abandoned by Japanese owners and barred workers from interfering with managerial responsibilities (Yong-deok Jeon, 1997a). The military government also began to sell confiscated Japanese-owned property despite calls for nationalization from both right- and left-wing political groups. The realized sales of companies and farmland during the three-year U.S. military rule were not large in size, but this was an important first step toward establishing a market economy based on private property ownership.
Divesture continued under the newly established Korean government, and sales reached a peak in 1951-1953. As a result, most of the Japanese-owned properties were converted into private ownership by 1958. They accounted for a large portion of the total national economy; for example, among the companies with 300 or more employees, the share of privatized ones was roughly 40 percent in the 1950s. This achievement is notable given the predisposition toward socialism even among right-wing politicians at the time.2)
Source : SaKong, Il and Koh, Youngsun, 2010. The Korean Economy Six Decades of Growth and Development. Seoul: Korea Development Institute.
NOTE
1)The North was occupied by Soviet Union until a separate government was established in 1948.
2)In fact, the first Constitution of 1948 mandated companies of major importance to be nationalized or controlled by the government. Following this mandate, the government designated 50 companies as state-owned enterprises in 1951. The Constitution, however, was revised in 1954 as agreed by the Korean and American governments, and divestures gained speed to encompass all industries except a few strategic ones.
References
· Jeon, Yong-deok, “Business Ownership and Industrial Policy,”in Yong-deok Jeon, Yeong-yongKim and Ki-hwa Jeong, Growth of the Korean Economy and Institutional Changes, Korea Economic Research Institute, 1997a, pp.161-177 (in Korean).
