Hwam for Won

For months the Korean government of Syngman Rhee and its benevolent ally, the U.S., had been in a polite wrangle over currency payments. On top of the brutal ravages of war, South Korea was suffering, as it had since war's beginning, from galloping inflation. As prices kept on rising, the Rhee government demanded some $90 million in repayment for Korean won withdrawn by U.S. military and other agencies for their day-to-day uses. The U.S. recognized the debt, but before it 'paid the money it wanted some assurance that a new flood of dollars would not be used to create still more inflation.

Syngman Rhee and his able finance minister, Paik To Chin, put their heads together and devised a plan. All the won in circulation would be called in and exchanged for a new unit, the hwan, at the rate of one hwan for 100 won. Not more than 50,000 won (about $10) could be handed in by any individual at the first exchange; the rest would be exchanged later on terms not yet specified. Last week government teams quietly went out by boat and train from Pusan to stock the banks with the new money. Then a nine-day exchange period was proclaimed.

The move set off a minor panic in the cities, especially among black-marketeers, speculators, and even legitimate merchants with large won holdings. Hundreds of them flocked from the cities to the country, aiming to buy food and other consumer goods from peasants--with the old won--before the country people caught on. Some of the city people traveled on foot, some in rickety cars, some pedaling on bicycles. But the peasants got wise quickly, and many a city man returned wanly, his won still in his hands.

In long queues before the banks, plain folk waited for hours. For those caught without new currency, the government doled out emergency rice rations. Communist bandits in South Korea, who need money for their own purposes, were hard hit--they did not dare to appear at exchange windows. At Kobu in the southwest, 15 of them attacked a government finance office, killing a guard and a bystander, and made off with $6,000 worth of the new hwan. Some of Rhee's political enemies noted bitterly that the new system will make it difficult for opposition parties to convert their funds.

Nevertheless, by week's end it was clear that the changeover would be completed without crippling convulsions. The U.S. agreed to pay its dollar debt, on the inflation-curbing condition that only 60% would be spent for consumer goods, the balance to go for industrial rehabilitation. U.S. officials on the scene thought the exchange would help greatly, hoped it might prove a long-term check to inflation. "We think we've got it licked," one said, "but we'd better keep our fingers crossed."

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