Establishment of the Korean Government and the Rhee Syngman Administration[1]
The Rhee Syngman administration witnessed some of the most tumultuous years in contemporary Korean history, including the chaos that erupted in the aftermath of liberation from Japanese colonial rule, the establishment of the Korean government, the Korean War that lasted from 1950 to 1953, and the project of postwar reconstruction. The Rhee administration relied heavily on aid and grants from the United States for its operation, as the then war-torn Korea still lacked what could be suitably called a private sector. Thus most of the functions and services required by the newly born republic came from the government-led public sector.
A defining characteristic of governance in Korea during this period was the emergence of rents created by regulatory policies dependent on U.S. aid and grants.[2] Large amounts of wheat began to come into Korea free of charge under U.S. public law (Title 48 of the U.S. Code). Companies that were authorized by the Korean government to process the wheat reaped far greater profits than companies not so authorized. Another key source of regulation rents was the exchange rate of the U.S. dollar. Given the absolute shortage of foreign reserves in Korea at that time, the fixed exchange rate diverged dramatically from the market exchange rate. It was this difference in the two exchange rates that enabled individuals or companies with access to the foreign reserves in dollars to enjoy much greater profits than those lacking such access. Nevertheless, the state of affairs in Korea remained too chaotic and vulnerable for the Rhee administration to attempt to translate these rents effectively into its economic development strategy, let alone establish systemic regulatory policies in the first place.
Source: Korea Institute of Public Administration. 2008. Korean Public Administration, 1948-2008, Edited by Korea Institute of Public Administration. Pajubookcity: Bobmunsa.
