On August 10, 1945, after the US dropped atomic bombs on Hiroshima and Nagasaki, Japan offered surrender in World War II. Soviet troops, part of the Allied forces, immediately began pouring into Korea. The US was appalled, and moved quickly to prevent all of Korea from becoming a Soviet satellite state. Dean Rusk, then a Colonel in the army, selected the 38th Parallel as the line that would divide the American- controlled sector from the Soviet-controlled sector. General Douglas MacArthur announced the division of the Korea into two occupation zones in "General Order Number One", which Stalin accepted. The US took control of South Korea, while the USSR controlled North Korea.
As US and USSR forces moved in, a coalition of Korean nationalists formed the Korean People's Republic (KPR) as an interim government. Over time, the KPR became increasingly communist, and, through a policy of encouraging peasant seizure of Japanese property, extremely popular. The Soviet recognized the KPR, while the US did not. Kim Il-Sung, a Korean guerrilla leader from the 1930s, emerged as the leader of the pro-Soviet KPR in North Korea.
In the south, Lt.-General John Reed Hodge, who had commanded XXIV Corps at Okinawa during World War II, oversaw the occupation of South Korea. Under Hodge, the American Military Government (AMG) became increasingly conservative. The AMG spokesperson was Syngman Rhee, a Korean nationalist just recently returned from a 33-year exile imposed by the Japanese. When, in 1946, Hodge decided to allow a free market in South Korea, speculators hoarded the rice, leading to high prices and famine. During this crisis, Hodge gave Rhee totalitarian powers. By September 1947, realizing that Korea was a political and social morass, Congress and the Joint Chiefs of Staff were suggesting the US should get out of Korea. To save face, the US turned the problem over to the UN, which proposed Korea-wide elections for March 31, 1948. Rhee's gangs and police helped rig the election and coerce people. Despite Communist protests, Rhee's party won in the south, and called itself the Republic of Korea. In Communist elections in the North, Kim Il-Sung won; immediately following his election, the North, rich in hydroelectric power sources, cut off power to the South.
By the late 1940s, the Cold War was heating up. In the summer of 1947, at Harvard commencement, General George C. Marshall announced the Marshall Plan for the economic recovery of West Germany. Germany and Berlin had already been split in two, occupied by American and Soviet forces, and more generally the US and USSR were contesting the political future of Europe, communist versus anti-communist. But after the Berlin Blockade and the formation of NATO, the Soviets began to look outside of Europe for places to expand. By 1949, the confrontation between the US and USSR escalated to another level: the Soviets had achieved the A-Bomb, setting off the arms race. Meanwhile, the United States was gearing up for even more adamant opposition of the Soviets based on the reasoning of NSC- 68, which portrayed communism as a monolithic, evil, and calculating enemy, and called for a huge American military buildup.
On October 1, 1949, Mao Zedong, having defeated Chiang Kai-Shek's nationalist forces, proclaimed the communist People's Republic of China (PRC). The news sent shock waves through the minds of American leaders. In an effort to make the PRC think of the US as a possible ally, the US abandoned Chang Kai-Shek and the Chinese nationalists on Formosa (now Taiwan). In a speech to the National Press Club, Dean Acheson, secretary of state for Truman, gave a speech on Asia, in which he mentioned that South Korea was not all that important to US security. According to his speech, keeping Japan anti-Communist was the most important part of America's Asian defense perimeter.
At the end of World War II, the US was not ready for occupation of Korea. It had no Korean language officers, and no Korea experts. When he arrived in south Korea, Lt.-General Hodge was forced to leave most of the Japanese bureaucracy in place because he had no one to replace them with. Ironically enough, at this early conflict in the escalating cold war, politeness ruled the day: the US asked the Soviets to stop at the 38th Parallel, and they did. Surprised by the Soviet acquiescence, American policymakers failed to realize that the USSR probably didn't want or care for more than the North, which was rich in minerals, hydroelectric power, and warm-water ports. Regardless, in 1945, the 38th Parallel was intended only as a temporary dividing line, not the permanent boundary it later became.
The KPR, initially meant to be an interim government based in Pyongyang, developed into North Korea's government through fair elections. In American- controlled South Korea, the KPR government was not acknowledged. Thus, ironically, the Soviets allowed the Koreans to determine the future of their own state while the Americans did not grant the South Koreans the same freedom to choose a government. Kim Il-sung did create a police state in North Korea, but almost all North Koreans vastly preferred his government to one run by Japanese Koreans.
Also ironically, Syngman Rhee's regime in South Korea, accepted and supported by the US for its anti-communist bent, was no less repressive than Kim Il-sung's government. Far from a simple American puppet, the 77-year old Rhee became a diplomatic liability, for he was incredibly obsessed with conquering North Korea and unifying Korea under his leadership. In the example of Rhee's government can be seen the formulation of American strategic thought through much of the Cold War; the US saw communism as such a menace, that it was willing to overlook the fact that it was supporting non-democratic governments in its attempt to stop communist's spread.
It is also important to note the arbitrary division nature of division at the 38th Parallel. Not only did that line have no historical or cultural significance, it also led to economic difficulties: the North needed rice, available only in the South, and the South needed Northern manufactures. Separating the two economies, which had been linked under Japanese rule, lead to some discomfort.
From the events described above, it is hard to immediately see why the United States would come to the Southern Republic of Korea's rescue when the Communists invaded in 1950. Much of the rationale for the US action, however, can be traced back to memories of "appeasement", the policy by which Britain and the United States allowed Nazi Germany to expand in Europe. Not wanting to make the same mistake twice, the US was now ready to go to war over any aggression by the USSR. It wasn't so much that Korea was strategically significant, it was simply that the US had to fight back as a symbol of American opposition to Communist aggression anywhere.
NSC-68 is a vital document in the history of the Korean War as well as the Cold War. According to NSC-68, primarily authored by Paul Nitze of the Policy Planning Staff, the Soviets were engaged in a rational, calculating, gradual plan to conquer the world. Thus, by the logic of NSC-68, a defeat for anti- communists anywhere was a defeat everywhere, with the very fate of Western Civilization at stake. The thinking inherent in NSC-68 explains the rapidity with which the US went to war after North Korea's invasion of South Korea. However, one also wonders if Stalin would have allowed Kim Il-sung to invade the ROK if he had known about the policies of NSC-68. A similar historical question centers on whether Secretary of State Dean Acheson's Press Club speech partially responsible for North Korea's invasion of South Korea? It is possible that in trying to express goodwill towards the newly Communist PRC, Acheson unwittingly provoked the attack on South Korea by giving the impression that South Korea was not vital to American security interests in the Far East.
In terms of the Cold War and the buildup of the American Military Industrial Complex, the Korean War provided major impetus. Before the war, Dean Acheson was afraid that the Truman Administration's recommendation to triple American military expenditure wouldn't pass Congress. With the Korean War, however, the policies of NSC-68 took precedence and the spending was carried out.