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A Study on the supply and demand policy for daily necessities produced in South Korea during the U.S. military occupation period

  • The Review of Korean History
  • 2012, (105), pp.271-320
  • Publisher : The Historical Society Of Korea
  • Research Area : Humanities > History

Jeom Sook Kim 1

1국사편찬위원회

Accredited

ABSTRACT

This study explores the supply and demand policy for daily necessities produced in South Korea during the United States military occupation period. The policy was the most important means for economic stabilization during the period. The authorities of the Military Government aimed to provide urgently needed relief and prevent a rise in disease and unrest. That was why the authorities did not initiate any long-range socio-economic reforms or economic stabilization policy until the Joint Commission adjourned on May 8, 1946. The Military Government announced a “free” market in Korea early in October 1945 except for commodities which were normally subject to Government monopoly control - salt, ginsong, tobacco, opium, sugar, and medicines and pharmaceuticals. The American Forces Military Government revivified the former Japanese economic agencies. These were, respectively, the New Korea Company(NKC),the Korean Commodity Company(KCC), the Materials Control Corporation(MCC), and the Petroleum Distributing Agency(PDA). Among them, the MCC was designated as an agency for procurement, receiving handling, storing, safeguarding, accounting and distribution, of all civilian relief and rehabilitation supplies, surplus war materials, and surrendered or abandoned Japanese property. The authorities of the Military Government believed that the commodities,which was owned by MCC and costed about 1 billion won, would meet the demand of residences of the South Korea. However, the prices of the commodities became staggeringly high. The authorities of the Military Government repeated attempts to control profiteering but it only brought poor result. The Military Government eventually proclaimed the Ordinance # 90, 28 May 1946, which was entitled “Economic Controls.” The Military Government took steps to import from the U.S. and Japan to bring more goods into the Korean economy, with the Civilian Supply Programs which were financed by the Government Appropriation for Relief in Occupied Area(GARIOA). They also instituted allocation, distribution, and price control programs for certain key commodities, produced in South Korea, and resumed a rice collection program,accompanied by the rationing of rice at a price consistent with the stabilization program. To stabilize the general price level at 90 times the 1937 average, the Military Government controlled the prices of the Korean-produced commodities. The controlled prices were decided upon without any consideration of the actual market price. The controlled prices of the commodities were lower than the production costs so that productions of the controlled commodities were lagging. As the result of that, the controlled daily necessities were to be expelled from the market and the general prices on the free market were to be raised. So, the Military Government collected only very few commodities to distribute to civilians. On top of this, public officials and an association of right-wing youth were given preference in the distribution of those few goods that were available. The absence of a positive production policy, which, combined with an absolute dependence upon aid goods, is the basic characteristic and fundamental limitation of the supply and demand policy during the U.S. military occupation period. The formulation of an independent supply and demand policy was impossible when the supply of fundamental commodities relied mostly on aid goods, and also when the U. S. took charge of the introduction and purchase of aid goods. With the failure of the supply and demand policy between June 1945 and the end of 1949, retail prices had increased by 400 times. On the other hand,wages had raised by only 200 times, making the stability of the livelihood of the people impossible. Consequently, civilians had a hard life, and social stability was hampered.

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