|Other Articles in this Series on Korean Coins|
|Circulation Coins of the Republic of Korea|
|South Korea's First Gold and Silver Commemorative Coins (1970)|
|The 30th Anniversary of Liberation 100 Won Commemorative coin (1975)|
|The 42nd World Shooting Championships Commemorative Coins (1978)|
|The Fifth Republic Commemorative Coins (1981)|
|South Korean Pattern Coins (1965-1966)|
|Bank of Korea Mint Sets|
South Korean Coin Database
The Hwan Coins of South Korea in the Era of National Transformation(A price guide for these coins is located at the bottom of this webpage)
대한민국 "환" ( 圜 ) 표시 주화
South Korea’s first circulation coins were introduced eleven years after the foundation of its government. Since the date of its establishment in 1948, the Republic of Korea had been plagued by internal armed conflict, an "internationalized" civil war, a faltering economy, and skyrocketing inflation. Only after the end of the Korean War in 1953, along with the first tentative signs of economic recovery in 1958, were conditions met for a price stabilization within the Republic that would allow for the reasonable introduction of small-denomination coins. These three coins were the only ones to be denominated in the Hwan (환) currency (1953-1962), and they would last as such for a brief two-and-a-half years after their introduction in late 1959. The 50 Hwan and 10 Hwan coins would remain in circulation after the country’s second currency reform of 1962, being re-monetized as 5 Won and 1 Won coins. Only the 100 Hwan coin was completely removed from circulation in this currency reform, most certainly a victim of the political change that made unpopular the image of President Syngman Rhee that graced the coin’s obverse.
Despite his extreme unpopularity at the end of his presidency, many observers consider Rhee to be one of the two most important national leaders in South Korea’s history; the other being Park Chung-hee. The Hwan coins circulated in Korea at the disgraceful end of Rhee’s First Republic, and remained in circulation through the somewhat inauspicious beginnings of Park’s tenure as military junta leader, and later during his presidency. Thus, these coins’ time in circulation straddled the two prominent foundational periods in the history of the Republic of Korea that these two leaders represent: The era of post-war survival, and the era of economic transformation.
The Final Years of the First Republic
The end of Syngman Rhee’s regime was the result of a mostly stagnant national economy by the late 1950s, and from a culmination of political events for which the president himself was largely responsible. After leading the Republic of Korea for over ten years, the country’s cranky and willful octogenarian president had also started to give many people the impression that he had overstayed his time in office. Many believed that Rhee had relied far too long on his past record as a Korean-independence campaigner and wartime president, while his acumen in dispensing political patronage and the profits from foreign-aid imports was no longer enough to stem a rising tide of dissent. What the citizenry of South Korea wanted was a minimum of economic security, which Rhee’s policies proved incapable of providing. Instead of promoting economic growth, Rhee persisted in promoting an unrealistic policy of unification with North Korea by force of arms which would, in theory, solve the Republic’s economic woes. However, the main chance for his dream had already come and gone with the Korean War. In the postwar period, Rhee’s signature unification policy was increasingly viewed by a skeptical public as a fiction that the president used to divert popular attention away from concerns about living standards and the economy.
Despite his poor record on the economy —and other aspects of his tenure— Rhee did have important accomplishments. The institution of land reform was arguably the most important, as the resulting reductions in tenancy among farmers went a long way in resolving one of the main political issues of the Korean War, helping to calm much of the unrest in the countryside. This reform had the added benefit of redirecting the energies of the landlord class into commerce and industry and away from landed wealth. Indeed, it was under Rhee that the South Korean economy grew by 8.7% in 1957 due to new industrial development that was supported by competent bureaucrats and foreign aid. However, economic policies were not in place to build upon and expand this growth. Instead, Syngman Rhee busied himself with maximizing the foreign-aid component of the economy and manipulating the exchange rate between the Korean Hwan and the U.S. Dollar, at an overvalued rate of 650 to 1. A realistic exchange rate might have been at least double that. In any case, it was well-known that black market exchange rates were more telling of the actual value of the limited good and services available in the South Korea in the late 1950s.
If economic conditions were not enough for Koreans to want to see the backside of Rhee, his desperate political maneuverings by the end of his tenure were enough indeed. The manipulation of the 1960 vice-presidential election in favor of Rhee’s friend turned out to be his undoing. A growing uprising against this rigged election took its final form in an outright revolt by students in Seoul, in what became known as the April 19 Student Revolution. Within days, hundreds of university students took over many of the functions of government in the popular uprising, and the police and army no longer took directions from Rhee. The president of the First Republic soon went into exile, leaving the leadership of the country to followers and opposition members who had developed their careers during his fifteen-year rule. However, none of them would prove able to fill the vacuum left in the absence of the force of personality and ambition that was Syngman Rhee.
The Bank of Korea and the Korean Mint: The difficult early years
The twelve years of Syngman Rhee’s "First Republic" were both eventful and difficult times for the South Korean monetary and financial system. After the 1945 liberation, the Japanese financial remnant, the Bank of Chosun, stayed on as southern Korea’s central bank during the U.S. Occupation of southern Korea (1945-1948). These were times of high inflation and fiscal deficits, all the while the Bank of Chosun continued to circulate Japanese-patterned Yen banknotes until 1949. In an effort to create a modern central bank independent from political pressure —in this case, from President Rhee— the Korean government drafted a new central bank law with advisement from Arthur Bloomfield and John Jensen of the Federal Reserve Bank of New York. The resulting Bank of Korea ( 한국은행 ) was established on June 12, 1950 —just thirteen days before the North Korean army commenced its attack on the South. Soon, the new central bank was thrown headlong into the daunting task of financing the war and the subsequent postwar reconstruction. The war also necessitated drastic currency changes for the Bank, including a full-out currency reform in early 1953. If not facing enough difficulties, the Bank of Korea also had to deal with challenges to its independence when President Rhee would dismiss the Bank’s governors after their refusals to cover up his administration’s financial scandals.
To complement the new Bank of Korea, the South Korean Mint ( 한국조폐공사 ) was founded on October 1, 1951, thus removing the work of printing the country’s currency from the direct control of the Ministry of Finance. The Korean government set up the mint and its printing facilities in the temporary wartime capital, Busan, starting with 275 employees and an initial capital investment of only 1.5 million Won (29,000 USD). The Mint soon transferred its operations to Seoul in August 1953, and from there it established it headquarters at Daejeon in the center of South Korea in July 1958, and there it remains today (after being rechristened in 1971 with the English moniker, “The Korea Minting & Security Printing Corporation,” or Komsco).
Replacing the Bank of Chosun with a purely Korean monetary system and Korean-patterned banknotes had its challenges. Since the banknote and coin designs of the currency circulating in Korea for the previous 40 years were of Japanese origin, the Koreans did not have artists or technicians specifically trained in currency design. Regardless, the Mint recruited a handful of printing-plate technicians from among its ranks to become the designers and engravers for South Korea’s new currency. With a staff of about five individuals, the Korean Mint’s first design team labored throughout the difficult decade of the 1950s under less-than-optimal conditions, composing the country’s banknotes and cheques by utilizing the most basic of drafting tools, such as the compass, triangle, pen, and brush. The team’s main designers in this period were Hwang Dong-hwan ( 황동환 ), Kook In-pyo ( 국인표 ), and Kim Seong-dae ( 김성대 ). Members of this team not only designed currency, but also postage stamps, and Christmas and Easter seals. One designer who did much of the work on seals and postage stamps in the late 1950s was Kang Bak ( 강 박 ), who soon became involved in currency design, taking over as the senior designer for Mint in the 1960s. These men worked well together, putting in place a functioning design department within the Mint in spite of the difficult times.
South Korea’s first circulation coins
It was in the last years of Syngman Rhee’s presidency that the Korean government perceived that the time was right to introduce small-denomination coins to the nation’s currency system. Without a coin-minting facility of their own, the Koreans entered into a contract with the United States Mint to have their new coins manufactured. The Korean government passed legislation on June 2, 1959 for the introduction of three coins in the denominations of 10, 50, and 100 Hwan. Clearly, the Koreans had been in negotiations with the U.S. Mint for this minting contract well before this date, since the first batch of coins that had been made in 1959 were released just four months after the legislation passed —a total of just over 23 million pieces, the vast majority of them being 10 Hwan coins.
The Korean Mint’s surviving design sketches for this series of coins reveals that smaller denominations of 5 Hwan and 1 Hwan had been contemplated in the planning phase. Alternate designs for the coins’ main devices were also taken into consideration; For example, the design of the 10 Hwan coin was initially to feature a rice stalk, and not the Rose of Sharon, the Mugunghwa, that ended up as the chosen design. This appears to be the first time that this “rice stalk” image was considered for inclusion on a South Korean coin, while an almost identical image would recur in later trial sketches for the 1 won coin, as well as on the obverse design of a 5 Won pattern coin (both circa 1965-66). Although it had been passed over a few times, the bending rice-stalk design eventually found its place in the country’s circulation coinage on the 50 Won coin that was first released in 1972.
Bust images of President Rhee are also featured prominently in the design team’s trial sketches, and although a profile image of Rhee was eventually included on the 100 Hwan coin, it was also not the original chosen design. The Mint first wanted to go with an impressive rendering of the 7th Century Silla Dynasty Cheomseongdae observatory with the seven stars of the Big Dipper in the background. The reason why the Mint made this change is not explained in the available literature on this topic. However, in light of President Rhee and his coterie’s frequent impositions on government functions, it is quite likely that the Mint replaced the Cheomseongdae design with the image of the president at the insistence of Rhee’s followers (if not the president himself). In any case, it was not the first time that his face showed up on South Korean currency —out of the twenty-one Bank of Korea notes that circulated during Rhee’s presidency, nine of them featured his face. However, Rhee’s appearance on the 100 Hwan coin was the final time. Six months after the coins were first introduced, Rhee was removed from power via popular uprising by a public that, among other things, was fed up with seeing his face on their currency. Perhaps taking a lesson from this, no other South Korean president has since placed his or her own face on the country’s circulating coins or banknotes.
Manufacturing the coins
In 1959 the United States Mint’s Philadelphia facility was engaged in fulfilling contracts for the manufacture of foreign circulation coins for Costa Rica, the Dominican Republic, Liberia, the Philippines, and Venezuela, in addition to minting the Hwan-denominated coins for South Korea. When it was the Koreans’ turn to submit their work to the U.S. Mint that year, the Americans were reportedly quite impressed with the quality of the designs that they received. It was from these designs that the engravers and technicians at the U.S. Mint produced the dies that they then used to mint the coins. The initial mintage figures show that while the U.S. mint made just under 23 million of the bronze 10 Hwan coins in 1959, only 360,000 each of the 100 Hwan and 50 Hwan coins were made in that calendar year. Interestingly, the U.S. Mint manufactured tens of millions more of all three coins the following year, 1960, but kept striking the coins with the same Korean Era date of 4292 (1959).
This suggests that only a tiny fraction of the total number of 100 Hwan and 50 Hwan coins that were dated “4292” (1959) were actually minted in the year 1959 (see production chart, below). Upon the arrival of the first batch of coins to Korea, the Bank of Korea released the 10 Hwan and 50 Hwan coins on October 20, 1959, and the first 100 Hwan coins ten days later.
The short-lived “Second Republic”
It was almost as soon as the first circulation coins were introduced and began circulating in South Korea that Syngman Rhee was ousted and a new interim government was in place. This new, reform-minded government got to work rewriting the Republic’s constitution in June 1960 in an attempt to correct the abuses of the Rhee regime. The resulting constitution abolished the position of vice-president, reconstituted the president’s role to that of a figurehead (clearly in reaction to Rhee), and put in place a cabinet-style administration with the prime minister as the chief executive. It instituted new political and press freedoms, which opened up those fields to long-suppressed voices. The new leadership purged many in the police, in addition to punishing officials of the former First Republic. The fact that the new leadership had themselves held several posts during the Rhee years was not lost on many people: During his presidency Rhee had personally sponsored both the new Prime Minister, Chang Myon, and the new President, Yun Bo-seon. They were elected in August 1960. Despite the association, the two new national leaders were not cut from the same cloth as the often-dyspeptic and unenlightened Rhee: Both were of mild temperaments and had scholarly interests. Chang and Yun rejected Rhee’s style of leadership, instead favoring a principled, rule-based leadership responsive to a parliamentary government, prompting many observers to label this brief period as South Korea’s “democratic experiment.”
The “experiment” might have turned out to be more than that, if only the leaders of the Second Republic had just an ounce of Syngman Rhee’s fortitude and political skill. Chang and Yun were simply not able to garner support from the public, nor even control their own political party.
Vacillating on the punishment of former Rhee officials, they got caught between those who argued for due process and those who wanted vengeful prosecution. After the new Chang government had opened up the politics of the country to all-comers, national disunity arose with conflicts between nationalist groups and a resurgent radical left-wing that was bent on a conciliatory reunification with the North. The freer environment also allowed for many labor unions to release pent-up grievances in strikes, worsening an already weak economy; and now purged of thousands of officers on charges of corruption, the police struggled to manage a crime rate that had doubled in the capital city. Unemployment rose to 26%, and rice prices rose 60% during the regime’s last four months in power. The government was forced to devalue the Korean Hwan (with support, and some pressure, from the United States) in a feeble effort to make Korean exports enticingly cheap. The Hwan to USD exchange rate rose to 1,300—1. The culmination of political, economic, and social instabilities dovetailed to the effect that it can be said that the Second Republic died the death of a thousand blows. Had they been listening, the Chang government might have paid better attention to the rumblings in the ranks of the officers of the Korean Army, to the ones who were to deliver the final blow.
The Military Junta Regime, 1961-63
In the pre-dawn hours of May 16, 1961, a small force of 3,600 soldiers crossed the bridges of the Han River into central Seoul on a mission to capture the centers of political power, which they did with relative ease.
Thus began the 32-year odyssey of the Korean military’s involvement in the politics of South Korea.
After the obligatory take-over of the central broadcasting station in order to announce the coup d’état, the self-styled “Military Revolutionary Committee” explained to radio listeners that the Committee had lost faith with the government of Chang Myon, and now wished to give direction to a nation they felt had gone dangerously astray. The rebels fashioned themselves as Young Turks, insisting (and continuing to insist for the next two decades) that the Korean media refer to their actions that day as the “May 16 Military Revolution.” In the span of a day, the ‘democratic experiment’ of the Second Republic rapidly disintegrated with no protection from the nation’s military, and thanks to the worsening overall situation in the country, no love lost from the Korean civilian population.
The origins of the May 16, 1961 coup d’état stretched back to the late Rhee period, during which the Korean president used divide-and-conquer methods to keep the increasingly powerful military under his personal domination. Ever the master of manipulation, Rhee encouraged personal rivalries and the formation of cliques among his general officers, exploited regional differences among them, and disciplined them with frequent and sudden replacement of those at the top. The resulting competition within the higher military ranks bred corruption —usually taking the form of illegal ‘diversions’ of military aid and materiel— allowing general officers a relatively opulent lifestyle compared to the downright penurious lives of the junior officers and enlisted men they commanded.
This created a particularly unhealthy cleavage between the senior and junior officers in the Korean Army that was only exacerbated by a backlog of promotions resulting from rapid rank-advancements of officers in the fledgling South Korean military prior to the Korean War. As a result, some of these politically and financially well-connected men tied up the army’s prestigious general-officer positions for years.
Rhee’s ouster in the April 1960 Student Revolution removed the president’s towering control over the military, and in this emancipated environment, the aggrieved junior officers saw an opening to right the wrongs within the ranks…and more. The active core of this group was mostly made up of Colonels, graduates of the Eighth Class (1949) of the Korean Military Academy, and were known as a respected elite that was highly ambitious and nationalistic, but one that maintained an egalitarian mentality. They shared with a small but popular group of civilian thinkers a nationalist intellectual reaction against the rule of the ‘liberation aristocrats’ (ie, Rhee, Chang, and Yun) who had led the country into stagnation while resting on traditional privileges accorded to them by Confucian social hierarchy. Using the free press environment of the Chang Myon government to express their ideas openly, these intellectuals called for national reconstruction, removal of the “ills” of Korean society, and for ‘developmentalist’ patriots to lead the country. Keen on reform —and insurrection— the military men (mis)appropriated the ideas of this school of thought to justify a coup. In fact, their plans for a coup d’état in 1960 were offset by the abrupt Student Revolution and needed to be shelved, as it turned out, until the following year. Meanwhile, they bided their time by organizing calls for a “clean up” of corrupt officers in the military.
These junior officers were also fans of another officer, a similar-minded Major General who, on May 2, 1960, daringly asked for the resignation the Korean Army Chief of Staff for his failure to prevent corruption in the army during the presidential election two months earlier. This audacious two-star general had a reputation for personal integrity (he and his family lived by very limited means) and was known for his leadership skills, particularly among those in the secretive military-reform movement. This general would join the group of disgruntled officers, play a central role in the coup of May 16, 1961, and soon rise to command the military junta government. His name was Park Chung-hee.
Like many of the reformist colonels in the junta, Major-General Park Chung-hee came to military life from a rural background in the southwest Gyeongsang provinces. And like a few other of his fellow junta members of general-officer rank, he hailed from both the Japanese Manchurian Military Academy, and the American-sponsored Korean Constabulary Officer Training School (later renamed the Korean Military Academy), graduating from its abbreviated Second Class in 1946. It was with his respected reputation as an officer that Park secured key personal connections within the army, connections vitally important in the Korean social context, and central to understanding his rise to the presidency. These associations had saved both his life and career in the past, and propelled him up the ranks to become the first of his 1946 graduating-class to become a Major General, in 1958. In fact, it was probably only with the help of Park’s connections that the May 16th insurrectionists secured the military chief of staff’s passive acquiescence to their coup, and after its initial success, the chief’s agreement to become the nominal Junta leader. This also likely explains why the Korean Army’s central commissariat responsible for regime loyalty, the Defense Security Command, refused to act against the coup. It did not take long for Park to consolidate his own position at the top soon after the coup by removing the junta’s “leader,” the Chief of staff, arresting him on charges of treason. On July 3, 1961, Park was named Chairman of the Junta, now calling itself the Supreme Council for National Reconstruction (SCNR).
That was the easy part.
Now, Park and the SCNR needed to attend to the real problem of securing legitimacy for their rule from the Korean public. As the new executive of the country, Park was in trouble with his countrymen: According to Korean social norms, he had no legitimate claim to authority. He had no birthright as an aristocrat, and he was no war hero, having had desk jobs during the Korean War; in any case, a centuries-old Confucian prejudice against the military still lingered in Korea. Obviously, he had no status in the Korean independence movement since he had fought on the side of Japan. Unable to rely on an acceptable pedigree, Park instead took full advantage of the popular consensus for total reform in the country. He began to build legitimacy with an achievement and growth-oriented leadership with military-style discipline and efficiency; and unlike the Chang Myon administration, Park had no aversion to total martial law-style controls. His initial steps took the form of popularly-supported purges of corrupt officers, government officials, in addition to demonizing certain wealthy members of the business community as “illicit profiteers,” subjugating them to his authority. However, Park’s real claim to legitimate leadership was through an intense devotion to economic progress via “Guided Capitalism.”
Equally as vital as public support was international acceptance, of which the United States’ acquiescence was paramount. Here, the junta ran into a great deal of luck. Although at first the Americans insisted on a return to civilian rule and that the junta ease off on the purges and arrests of individuals, the U.S. Ambassador, Samuel D. Berger recommended giving Park’s junta some time to make good on the assurances that Park had made to this effect soon after the coup. Within weeks, the Kennedy administration started to give positive assurances of support to the new military leadership.
Seemingly overlooked was the fact that Park’s junta removed a civilian parliamentary government that was not just openly friendly to the United States, but whose policies (unlike Rhee’s) actually aligned with American policy on Korea. Fortunately for Park’s junta, Kennedy’s Cold War calculations made allowances for a regime like theirs, so long as they helped maintain the Cold War model envisioned by the United States. The junta’s need to gain legitimacy from the Kennedy administration was a matter of life and death, as it was linked to international financial support for South Korea, which in 1961 could not be understated. The United States alone was financing over 50% of South Korea’s national budget and over 70% of its defense budget, making any delay in aid from Washington a potential disaster for the Republic of Korea.
After the leadership had thus established itself, the junta got to work attending to its “revolutionary tasks,” and making moves towards its “Six Pledges” of anti-communism, anti-corruption, bettering international relations, economic reconstruction, unification, and returning to civilian rule. On the last pledge Park grudgingly took off his uniform for the suit-and-tie of a civilian candidate for president and ran against former president, Yun Bo-seon in 1963, thereby acquiescing to an American ultimatum on this point. With a campaign touting an “Economy first, Korea first” program, Park narrowly won this contest against Yun’s principled opposition, but the limited plurality of Park’s “Third Republic” started to gain popularity with the people, and he won against Yun again in 1967. Along the way, Park made notable mistakes early on, particularly in regard to his choice of fellow junta members to lead some of the regime’s “reform projects,” which sometimes led to amateurish implementation, and sometimes led to serious trouble. In the years since, a few of these incidents have been included in theatrical treatments on the subject of the man and his regime. Evidently, Park’s seventeen-year presidency had produced enough dramatic action to keep the Korean movie and television industry supplied with plot lines until the present day and presumably beyond. Many of these storied incidents and controversies are mix of verifiable fact and urban legend. One of these stories, which has yet to be dramatized on screen, has to do with South Korea’s last currency reform.
The Five Year Plan and currency reform
The currency reform was just one of a series of “reform projects” that the junta enacted to support the high investment levels needed for their ambitious economic development policies under South Korea’s first Five Year Plan (1962-66). This was the seminal economic policy of the Park era, and was formally announced in January 1962 as the “May 1961 Plan,” a self-servingly laudatory reference to the military junta, even though it was largely a carryover plan from the previous civilian government which never got the chance to implement it. Park’s Five Year Plan (FYP) was an unadulterated scheme for a growth-oriented, planned economy that was to be based on labor-intensive manufactured exports; an area in which the Koreans felt they could develop a competitive advantage with their surplus of low-paid labor. The plan also fit nicely into a regional economic scheme, picking up much of this work from nearby Japan, which wanted to move out of such labor-intensive, pollution-intense manufacturing and to off-shore these less-desired industries elsewhere.
As leaders of one of the poorest countries in the world in 1961, the junta was certainly audacious in moving forward with a plan that necessitated huge government spending, particularly when the taxpayers of another country funded half of their national budget. Therein lied the rub for Park: Although he appreciated that without the United States he could not maintain his international legitimacy nor maintain his hold on power, he resented what he called the Americans’ “52% majority vote with regard to Korea,” a reference to the share of the South Korean budget that lent the Americans political leverage in Korea. Additionally, he complained about the substance of American aid, and not without reason. USAID program aid, for example, often took the forms of commodities that the Koreans did not necessarily desire, and were a way for politicians in the United States to pork-barrel for their local agricultural constituencies in wheat, barley, or cotton. Park wanted to resist the leverage that any American aid carried with it, and therefore economic independence became a major theme of the FYP. To pursue this end, the FYP carried with it a formula to raise immediate economic capacity based on Korea’s own domestic capital by imposing “administrative controls” on certain ‘target mechanisms’ needed for a planned economy.
Korean business and finance were the targets.
One of the many dragnets conducted by the junta in the weeks after the coup was the sudden arrest of around sixty of the most prominent businessmen in South Korea on the charge of “illicit profiteering.” The junta released them a month later with the sole proviso that they sign a legal agreement stating: “I will donate all my property when the government requires it for national construction.” With the government making them an offer they couldn’t refuse, these businessmen understood that their freedom was dependent on their cooperation with the regime and on their business performance; but they were also put on notice that they (the supposed “illicit profiteers”) were the government’s choice to become the owner-developers of industries under the FYP. As junta leader, Park could easily target Korean businesses with strong-arm tactics, simply because the business community lacked any political power of its own at the time, and especially since the military men owed them no political debts. What soon developed was a Confucian military-style master-student relationship between the government and Korean businesses. This was how the Park government ‘administered’ the business community under “Guided Capitalism.”
As for the South Korean financial system, the military men of the junta had a deep-seated mistrust of what they perceived as the finance sector’s greediness and unwillingness to take risks, both qualities clearly unbecoming of a patriotic, high-speed development plan. Seemingly typical of the hijinks of many other post-colonial third-world states, the junta nationalized the country’s five major independent banks almost immediately after the coup, along with instituting a “stock market maintenance plan” the following January. But unlike in certain other countries the main purpose was control, not embezzlement. Another one of the key agents for accommodating the FYP was the central bank. The junta completely amended the Bank of Korea Act in 1962, paving the way for the staffing of its decision-making body, the Monetary Administration Committee, with junta appointees and giving Park’s finance minister veto right over its decisions on monetary policy. The new law restricted the Bank from formulating monetary, credit, and foreign exchange policy to simply implementing monetary and credit policies. Essentially, the Bank of Korea’s new role was the rubber-stamping of government policies (particularly in regards to loans) to facilitate an economic jump-start, and not to let conservative ideas such as ‘price stability’ get in the way. The currency reform was another method to get that jump-start going, by creating ‘economic capacity’ out of thin air.
The “Emergency Currency Measure” of June 9, 1962
In a scene to be repeated often during the Park years, the 1962 currency reform was announced as a sudden “emergency decree” in the form of Central Bank Law Number 1088. This law caught the public off-guard and sent them scrambling. At the rather inopportune hour of 10 o’clock p.m. on Saturday, June 9th, the junta government announced that the currency, the Hwan was to be immediately replaced with a new Won currency, at the rate of 10 Hwan to 1 Won. All financial transactions were to now take place in the new Won currency, and all bank withdrawals were frozen. The government did allow for the sake of convenience the use of the “old” banknotes and coins denominated at 50 Hwan or less as currency, only now revalued downward at the 10 to 1 rate. At the time of the announcement, the 50 Hwan coin and the 10 Hwan coin became 5 Won and 1 Won respectively. These “small” notes and coins were to remain in circulation until July 11th (for 30 days), after which all cash transactions were to be done only with the newly-introduced Won banknotes, which were secretly imported from Britain and distributed to banks in the days before the announcement.
This meant that the 100 Hwan coin featuring Syngman Rhee, along with all the other banknotes in larger denominations of 1,000 Hwan, 500 Hwan, and 100 Hwan could no longer circulate; they could only be deposited into accounts at one-tenth of their stated value. These higher-value coins and banknotes, along with bank cheques and personal cheques predating June 10th, needed to be deposited by Saturday, June 17th. After that date, these currencies would no longer be accepted for deposit, and would become worthless to the people still holding them. The junta further stipulated that a ceiling of 500 Won per person be placed on the amount a person could receive in exchange for the old currency, as they reasoned this would be enough money(?) for each citizen to survive on for the next 30 days.
The intention behind freezing all withdrawals and limiting exchanges to 500 Won would become apparent two weeks later, when the intended substance of the reform would be revealed.
Preparing for the reform
The currency reform was the invention of Colonel Yu Won-sik, chairman of the junta’s commerce and industry committee, a key figure behind many of the junta’s other economic reforms, and initially, the number-two man behind Park Chung-hee. At its core, Yu’s currency reform was a plan to recall all the nation’s cash, particularly those ‘copious funds’ that people had surreptitiously squirreled away, and to utilize this money immediately to fund economic development. The junta evidently considered this a preferred alternative to traditional bank loans, as the complicated lending procedures involving securities were not to their liking. The reform plan was concocted in 1961-62 in an airtight bubble of five people, including the Governor of the Bank of Korea, with all members sworn to secrecy ‘on the pain of death’ (an oath typical of the junta era). To ensure secrecy, the job of running the currency reform was given to the junta’s intelligence organ, the Korean Central Intelligence Agency (KCIA) —a choice of name that certainly did not endear it to the American CIA. The KCIA was formed two months after the coup under the direction of Colonel Kim Jong-pil, a trusted aide of Park Chung-hee, and rival to Yu Won-sik. The Agency was established to oppose ‘indirect’ communist actions and “to remove obstacles to the execution of the revolutionary tasks.” The wide-scope of their charge apparently allowed them to function on a decidedly loose interpretation of this ‘mission statement,’ since the KCIA would be tasked to do things like punish businessmen (the “illicit profiteers” episode; their very first mission), control the country’s single labor union formed to keep a lid on expressions of worker discontent, arrest anybody on any charge for any reason …and oversee a nation-wide currency reform.
With the basic plan, people, and muscle in place, it was also felt that a brain might possibly be needed. Just a month before the reform action was announced, a finance expert named Kim Chong-ryom was brought in from the Bank of Korea to work on the currency reform since he had previous experience participating in the 1953 currency reform as a technocrat at the Bank. At the time, in 1962, Kim was working in the finance bureau, and had just recently been asked to prepare a comprehensive report of the 1953 currency reform for the sake of “exploratory purposes,” not knowing that the government had already prepared for a new currency reform, including the printing of new currency overseas. Since he was brought on board at the very end of the planning phase, Kim was employed to simply amend the basic plan. He got to work, reshaping the reform based on West Germany’s 1948 currency reform, which created economic capacity without excessive inflation. In their case, the Germans introduced a new Deutsche Mark to replace the old Reichsmark at a rate of 1 new per 10 old. This action wiped out 90% of all debts in the country, but also private savings. Consumer prices initially rose, but the reform eventually kept them under control, while earnings from exports soared and were reinvested in the German economy. This was the kind of result that Kim Chong-ryom attempted to interject into Yu’s plan. In an interview conducted decades later, Kim (by then safely out of the KCIA’s reach) said that he was trying to “limit the damage of the KCIA-led currency conversion by drawing up a workable reform plan.”
While Mr. Kim was busy overhauling the currency reform, the new British-made Won banknotes had arrived in Korea, causing a bit of a kerfuffle. The British ship carrying the notes had docked in Busan weeks earlier than planned, catching the Koreans unprepared. Fearing a disclosure of the ship’s secret cargo, the junta government rushed military and police forces to the ship to stand armed guard. After the Koreans stormed aboard, the British crew were prevented against their will from leaving the ship while the guards awaited further orders. The crew began to protest the boarding of the ship, and demanded their immediate release from their confinement. Eventually, it was arranged for the crates holding the banknotes to be offloaded onto Korean Navy vessels for shipment to a secure facility at the port. Once on land, the cargo was the responsibility of the Bank of Korea, which needed to maintain the secrecy of the operation while transporting the notes to bank branches across the country. Improvising on the fly, the Bank officials rounded up some employees from the Busan branch and pressed them into service to guard the banknotes, forced them to engage in a little cosplay by having them put on fake Korean Army uniforms complete with field-grade officer rank, and predictably, had them sworn to mortal secrecy (this time the method was specified: Death by firing squad). To complete the subterfuge, the crates containing the banknotes were labeled “explosives.”
The effects of the currency reform
If their efforts in preparing for the reform gave the junta government the ambiance of the Keystone Cops, the immediate effect of the currency reform was no laughing matter for the citizenry. Its sudden announcement of June 9th caused frantic scenes in the streets that night, and the following day, as it was clear that many did not understand the rules of the reform. Taxi drivers started to refuse to take the “old” currency, making it increasingly more difficult for late-evening commuters to get home before the nationwide midnight curfew. Housewives rushed to the local rice sellers with skirts full of cash in an attempt to purchase as much as they could before inflation hit, and the following day, shoppers were greeted with three-fold price increases at stores. While calm was eventually achieved, large crowds queued in front of banks for days, just to ensure that they could make the deadline for deposits and to secure some of the new currency.
A week later, the other shoe dropped.
With most of the nation’s currency recalled and withdrawals from accounts frozen, the government issued another decree on Saturday, June 16th, ordering that all accounts held either by individuals or corporations be bifurcated: Each account was to be converted into a restricted account, and an unrestricted account. Calculations based on a prescribed rate diverted a percentage of an account-holders’ money, if above a set limit, into the restricted account. This restricted account was converted into shares issued by the government-owned “Industrial Development Corporation,” with a yearly dividend rate of 15% guaranteed by the government. The remainder would be shunted to the unrestricted account, for the account holder to use as they wished. The government left untouched as ‘unrestricted’ all other accounts with a maturity of over one year. This was the part of the currency reform that Colonel Yu had devised as a way to convert so-called ‘idle money’ sitting in people’s bank accounts, or hidden, into valuable capital for important national business ventures —the owners of the money be damned. The public may have been concerned about this development in the short term, but the response over time was muted, as very few people found that their money was placed in ‘restricted’ status.
The reason for this, as the junta quickly found out, was that no Korean, rich or poor, had much money at all: It was discovered that 90.5% of all account holders had total balances of no more than a million Hwan ($770.00 in 1962 USD). Among the rich, there were only 7 cases of individuals found to have 100 million Hwan ($77,000 USD) or higher, with the highest amount just below 1.2 billion Hwan ($923,000 USD). Consequently, only a small minority of bank accounts held balances in amounts high enough to qualify for siphoning-off by the government, and woefully insufficient funds were converted into government shares.
Colonel Yu’s plan turned out to be a major flop.
While this realization started to slowly sink in, the currency recall also alerted the junta to the fact that over four percent (7.1 billion Hwan) was not collected out of the total 165.3 billion Hwan that was then in circulation.
The junta government suspected that this missing currency was not recovered since most of it circulated in the black economy” of gambling and other illegal activities (certainly not an unreasonable guess, since even at the time of this article’s writing, a good percentage of South Korea’s current 50,000 Won banknotes that had been placed in circulation since 2009 are currently “missing,” and most likely being used for illegal purposes). Much of the Junta’s suspicion also fell on the ethnic Chinese community in Korea, who the junta believed had hoarded cash in their homes, eschewed banks, and maintained an underground economy amongst themselves.
Meanwhile, the recall of the lower-value Hwan banknotes and coins proved to be a significant irritant to the public. All of the 50 Hwan and 10 Hwan coins, now circulating as 5 Won and 1 Won, were recalled along with all of the other small-denomination banknotes on July 11th. The recall resulted in an immediate shortage of small-denomination currency, since small-value notes of the new U.K.-printed Won currency were of insufficient quantity to fully take the place of the recalled notes and coins. Businesses, banks, and consumers were hampered in their daily operations involving small monetary transactions because of the absence of these notes and coins. Without a re-release of at least some of the locally-available small-denomination Hwan currency, it seemed that the Bank of Korea would be forced to import even more British-made banknotes, raising the costs of an already badly-bungled currency reform.
Even in the face of these setbacks, the junta continued to plow through with this and other reform projects (that met with similar outcomes), confident that they could manage the reactions of a citizenry that, so far, had a high tolerance for their boondoggles. What is equally noteworthy was how Park’s government seemed quite heedless of any possible reaction from the United States to the currency reform, especially in light of the significant American financial effort for South Korea, as this funding would also have been affected by the currency conversion and any resulting inflation. Added to this was the fact that, like many Koreans, the U.S. Embassy staff first learned of the reform after reading about it in the newspapers the morning after it was announced. Reaction was not long in coming from the Americans, who put on an immediate diplomatic full court press in lodging their complaints.
Among the civilian officials on the U.S. ‘country team’ in Korea in the early 1960s, the position of Director of USAID could wield an appreciable amount of influence on Korean government actions. When USAID director James Killen learned of the currency reform, he promptly demanded a meeting with Yu Won-sik. At the meeting Killen reprimanded Yu and the junta for violating the terms of economic aid agreements and threatened to withhold further assistance. Killen’s threat was echoed in Washington when the State Department summoned the Korean ambassador and complained about the risks posed by the currency reform, warning him that “[i]f U.S. efforts are to be nullified, we must reassess assistance policy.” The Americans also questioned the junta’s allegiance to the basic rules of banking in a market economy, lecturing to them that the use of surprise martial decrees to appropriate the legitimate earnings of others was most decidedly outside of the generally-accepted principles of a free economy. Some Americans in the embassy also began suspecting Colonel Yu of communist leanings. While the members of the junta bridled with self-righteous indignation at such chiding, James Killen was true to his word and withheld portions of U.S. aid for close to a year afterwards. Killen’s actions, while prompted by the junta’s currency reform, were actually part of a larger, protracted American effort in forcing the Korean government to adopt an economic stabilization plan. The currency reform episode highlights a recurring theme in the U.S.-Korea relationship in the 1960s: The Korean leadership was anxious to develop the mechanisms for economic growth, while the Americans constantly cautioned stability for the Korean economy, fearing inflation.
The combination of the U.S. threat to reduce aid and the currency reform’s failure to produce results forced the junta to alter the reform. They converted two-thirds of the “restricted accounts” into time deposits of less than one year, while turning the rest into unrestricted accounts. The junta’s passage of this legislation on July 13th made the basic reform measures meaningless, essentially cancelling the currency reform. Concretely, it had failed: Lasting only five weeks, the currency reform accomplished little more than the reduction of South Korea’s basic monetary unit by one-tenth. Despite this defeat, Park’s junta government continued its open defiance of American economic advice over the next two years until the combined effects of the loss of aid, bad harvests in 1962-63, and the failure of the currency reform had exacerbated economic difficulties, including inflation (rice prices increased 46% from June 1962 to June 1963) —much as the Americans had warned. It did not take long for the junta to resort to the printing of more money, this time at the Korean Mint. Park Chung-hee consequently recognized the need to accommodate U.S. demands so as not to lose their support, while the failure of the junta’s early economic reforms made him more willing to insert provisions for stability into the FYP, which was radically revised in mid-1964.
It was in the aftermath of these failures that Park got up and dusted himself off, announcing a re-commitment to economic growth with a new policy that was later known as “export-oriented industry construction” (EOIC), which laid out a comprehensive set of export sector specific incentives for Korean businesses. As for the United States, it was willing to go along with almost anything the Koreans wanted to do at that point, pending appropriate policies towards stability, since by 1964 very little economic growth had resulted from over a decade of American aid provisions. It was around this time that American officials were known to have complained about “pouring money down the Korean rat hole,” so the Park government’s earnest attempts at growth were cautiously viewed in a positive light, and some officials privately cheered on the Korean efforts.
The “Miracle on the Han”
With the country on the verge of national bankruptcy by 1964, Park’s second attempt at an ambitious economic agenda was yet another risky venture —but this time was different. In the wake of the failure of the currency reform, the junta asked Yu Won-sik to resign from the Supreme Council; and on Ambassador Berger’s urging, Park asked his KCIA Director, Kim Jong-pil to resign, ostensibly for his mishandling of the reform (but there were other reasons). Park wisely ditched these army buddies and staffed his cabinet with civilian economic ministers and foreign-trained technocrats with experience and know-how. One of these hand picked ‘whiz kids’ was none other than Kim Chong-ryom, the financial technocrat from the Bank of Korea who had attempted to fix the 1962 currency reform. Kim was appointed as the vice minister of commerce and industry in 1964, and later rose to become a key figure in the government as Park’s presidential chief of staff (1969-1978). Kim was President Park’s choice to became one of his two personally-selected economic czars; The other was Oh Won-chol, an engineer with a record of accomplishment who Park chose to run his new economic development program. In the next phase of South Korea’s industrial revolution, Park rewrote the constitution (the result being the draconian Yushin Constitution of 1972) in order to concentrate the control of the nation’s economic sector in their hands —and for Park to declare himself president for life. It was these three men who called the shots during South Korea’s “heavy and chemical industrialization” period (1972-1979), with unhindered power to create the methods of fund-raising, factory construction, and choice of products to be made; all with little interference from politicians, the business community, and least of all, from the citizens of the Republic. This is the “Miracle on the Han,” in a nut, for those who may think that a "miracle" actually took place there. For the reader who may not have heard of this pet name for South Korea’s successful economic surge, the Han is the major river that runs through Seoul (the name itself was coined from the alias for the West German economic rise after 1945, the “Miracle on the Rhine”).
So, while its "miraculous" origins are in question, the outcomes for the South Korean economy, in nominal per capita GDP (in 2012 USD), were nonetheless remarkable:
In 1961, it was $92 USD.
By 1970, it was $284 USD.
By the time of President Park’s death in 1979, it was $1,795 USD.
In 2012, the figure was $23,052 USD.
The Hwan coins return to circulation
The cancellation of the currency reform on July 19, 1962 did not immediately bring the Hwan coins back into circulation from their complete recall. What did bring them back was the exigent lack of smaller denomination currency in the monetary system. Unless the Korean government wanted to put up the expense of ordering more banknotes from De La Rue, they needed an alternative plan. Therefore, the junta government was forced to reverse yet another one of their reforms by bringing the 10 Hwan and 50 Hwan coins back into use again as revalued Won coins —as well as printing quantities of new, domestically-made banknotes. The junta allowed the return of the coins on August 28th that year, by passing Law Number 1132, the “Temporary Measures Law on the Circulation of Coins.” This law was not as ‘temporary’ as planned since the coins remained in circulation for the next thirteen years, after which the Bank of Korea withdrew both coins for the last time. Although the Bank of Korea may have had quantities of both coins in its vaults, the Bank stopped issuing the 50-Hwan coin (circulating as Five-Won) on February 3, 1967, along with the 10-Hwan (circulating as One-Won) the following year, on April 16, 1968. These two coins were no longer legal tender in South Korea after the Bank finally demonetized them on March 22, 1975. South Korea's problem in the 1960s of maintaining smaller denomination currency in circulation was only alleviated by the construction of a coin mint for the domestic production of new circulation coins near the city of Busan in 1966. The huge expansion in the mintages of these Won-denominated coins after 1968 —helped along by a switch to less expensive coining metals— allowed for the eventual withdrawal of the old hwan coins.
Cost was another consideration. Returning the two Hwan coins back into circulation after their short 48-day absence in 1962 was also motivated by the government’s desire not to waste the approximately $1.1 million (in 1962 USD) that they had spent over the previous four years to manufacture and import the 50 Hwan and 10 Hwan coins from the United States. As the 100 Hwan coins had their own $700,000 USD price tag, these coins were likewise slated for reuse, only not in their original form. Reserved for storage and melting down, the 100 Hwan coins’ copper-nickel material was later used in the production of the 100 Won coins that the Bank of Korea first released in 1970. The Korean government contracted with Poongsan Metals to refabricate 315 metric tons of the old 100 Hwan coin-material into copper-nickel plates. Another company, Ilsung Industries, used these plates to punch the 24mm-diameter coin blanks which they then sent to the Korean Mint for use in striking the very first 100 Won coins.
The Hwan coins today
Quantities of surviving examples of South Korea’s first circulation coins now reside in coin collections, and are quite common in high-circulated and low-Mint State grades In recent years these Korean coins have seen increases in value among interested collectors, albeit with sometimes wildly varying realized prices. Collectors especially prize the bronze 4292-dated 10 Hwan in higher, “problem-free,” grades. Numismatic value aside, a knowledge of contemporary Korean history can perhaps provide the collector with an appreciation of these coins as a metaphor for the fortunes of the South Korean economy and the changes in leadership of the country during the formative years 1959—1964. The Hwan coins’ time in circulation mirrored the hopeful, but short rise of economic conditions in the late Rhee era as the coins were first introduced, survived Syngman Rhee’s ouster, only to be withdrawn during a time of economic slump and poor policy planning and implementation. Later, two of the coins were to restored to circulation as re-valued currency during President Park’s successful recommitment to the nation’s economy, resulting in its storied and meteoric rise. Considering the short, yet crucial era in the history of the Republic of Korea during which they the functioned as currency, the Hwan coins certainly do qualify as examples of “history in your hands.”
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Article by Mark Lovmo (2014)HOME