Before we start the great journey into the history of Korea’s financial industry we need to first go over some theoretical topics such as the invasion of modernity into Korea. Of course it is important to acknowledge a series of facts regarding what happened during the 20th century however, I believe without understanding the background source that acted as a guiding force for Korea’s future financial industry, it would be meaningless to know all the historical facts. Thus, we are going to first touch on the source, modernity that determined the fate of Korea’s financial industry.
Near the end of Chosun dynasty (1392~1910), Korea was swung by a great chaos, which intensively derived from modernity. You might be familiar with the term modernity as you have heard a lot of terms starting with the word ‘modern,’ such as modern economy, modern music…etc. Then, what is modernity and how did it influence the whole peninsula? Modernity refers to a post-traditional movement that occurred in the western world usually after the medieval period and largely embraced capitalism, industrialization, secularization and rationalization. Modernity is often considered a savior that shed a light on human civilization; however, the way it spread throughout the world was often destructively invasive, violent, and coercive.
The time modernity invaded Korea coincided with the first establishment of modern financial industry during the end of the Chosun dynasty, and I would like to talk about its impact when it first arrived and started to influence the Korean financial industry mainly during 1878~1900.
The first modern financial industry in Korea began with the establishment of the first modern bank in 1878 founded by Japan, called Japanese Je-il bank. Stimulated by the launching of the Japanese financial institution, lots of Japanese equity started to accumulate in the Korean financial market. During the 1880s, there was no particularly significant action taken by Japan against Korea; however, the Japanese financial power incessantly tried to covet and dominate Korea’s financial market.
Against the invasively increasing equity of Japan in Korea, some of enlightened Korean merchants gathered together and made a decision to establish Korea’s own bank in 1899. Recognizing the importance of forming a great amount of Korea’s own equity through a modern financial institution, those merchants acquired a royal permission from the King Go-jong who also privately supported the foundation with his own money, and finally succeeded in establishing Korea’s own racial bank. The bank was named Daehan Cheonil Bank. The founders of the bank including the king originally planned to have it serve as the central bank of Korea. Despite its great purpose the bank failed to serve its original purpose due to the Japanese financial force. The bank is said to have been unique in the context that it used Korea’s own traditional double-entry accounting skill called Sagesongdo Book-keeping System. The building of Daehan Cheonil Bank still remains in Jong-ro.
Overall, Korea’s 1878~1900 period reflects that Korea’s financial status was very unstable largely influenced by the slowly intruding force of modernity, which usually came from Japan. The Japanese financial power left countless Korean merchants with frustration as they were incessantly faced with inequality under the extremely unstable financial state of Korea. In the mean time, the Japanese financial power became visualized with the emergence of the Japanese bank founded in Korea. Sensing intangible pressure from the intruding modernity, some progressive merchants took an audacious action of founding a Korea’s own bank in response to the Japanese intrusion in order to protect Korea’s financial industry. Korean merchants’ efforts to fending off the power of modernity, however, failed to come into effect. Instead, Japan’s financial power became larger and larger until it could take over the whole financial system in Korea. In short, Korea’s near future at that time was doomed.
We will take a closer look at the specifics of how Japan took control of Korea in terms of finance in the later chapter.