Research Findings and Policy Suggestions

Prior to 1950, the economy of South Korea was dominated by agriculture and its social structure was based on land. So the distribution of income and social cleavages in Korea were based on agricultural assets. The land reforms in 1950, therefore, played a central role in flattening the distribution of wealth and social cleavages. Moreover, the Korean War (1950–53) destroyed over 40 per cent of manufacturing facilities, over 20 per cent of the net capital stock and about 18 per cent of the housing stock. Therefore, the war also flattened the distribution of non-agricultural assets — in every sense — leaving the majority of Koreans in destitution. After the Korean War, some people were able to accumulate large amounts of wealth through wartime business, tax evasion and so on; but just after the military coup, the military junta launched strong measures to confiscate unjustifiably accumulated wealth. The total amount of confiscated wealth was significant. Furthermore, the military government launched a currency reform, and forced people to save incomes over certain amounts of exchanged money. Then, through government control — nationalisation of commercial banks, the Economic Development Plan and so on — the principle of private ownership was crucially restricted and the government came to play a greater part in the control of economic decisions.