The advance of socialism in Vietnam
The Doi Moi policy renovates socialist construction
In my commentary of June 7, 2022, I reviewed the important book by Alberto Gabrielle and Elias Jabbour, Socialist Economic Development in the 21st Century, which examines the developing theory and practice of socialism in China, Vietnam, and to some extent Laos. They suggest that that the classic understanding of socialism, rooted with varying degrees of accuracy in the socialist project of the Soviet Union, is not useful for understanding socialism in our time. We must base our understanding of socialism in the socialist projects that are being developed today, which are found in China and the Third World.
Firmly rooted in empirical observation, at least with respect to the economy, Gabrielle and Jabbour maintain that socialism today is not characterized by centralized planning of state-owned enterprises, but by socialist-oriented planned market-economies, in which there exist possibilities for private capital, for the autonomy of private and public enterprises, and for local enterprises, all of which function under state direction. They further maintain that the approach of the socialist countries today is superior, in productivity and in providing for human needs, to both neoliberal capitalism and the centralized planning of Soviet socialism. It is an approach that involves a mix of capitalist and socialist modes of production in the framework of a socialist-oriented plan and development strategy, which give priority to strengthening productivity in order that the needs of the people can be more effectively met. The key is state planning and state direction of the economy, with the state oriented to increasing productivity and to increasingly providing for the needs of the people and the long-term needs of the national economy. (See “Socialist socioeconomic formations: Lessons from real socialism in the global South,” June 7, 2022). Although not stressed by Gabrielle and Jabbour, I have observed that the sustainability of the project requires the control of the state by the delegates and deputies of the people, elected by the people in structures of people’s democracy.
Gabrielle and Jabbour note that socialism cannot escape the laws of economics. Prices must approach the costs of production, for example. Socialist plans must be consistent with market principles, even though the state is directing the economy toward a goal that the market itself could never imagine. Gabrielle and Jabbour call this “value-based planning,”
For Gabrielle and Jabbour, China is the exemplary model of the mix of socialist and capitalist modes of production in the framework of a socialist-oriented development strategy, as I review in my commentary of June 10, 2022 (see “China models a new type of socialism: The most advanced example of a new socioeconomic formation,” June 10, 2022).
In today’s commentary, I review Gabrielle and Jabbour’s observations on the development of the new socialist model in the Socialist Republic of Vietnam.
Socialist-oriented socioeconomic formation in Vietnam
At the 6th National Congress of the Communist Party of Vietnam (December 15-18, 1986), the various scattered economic reform initiatives of the 1980s were formulated into a coherent and radical reform strategy, which it called Doi Moi (renovation). It established a socialist-oriented market economy, in which state-owned economic enterprises would co-exist with private enterprises, both domestic and foreign, and in which state planning would utilize market forces. The Doi Moi policy was successful in overcoming macroeconomic imbalances, and it led to exceptionally fast economic growth.
Following the unification of North and South Vietnam in 1975, the leaders of the Communist Party of Vietnam initially were oriented to the traditional centrally planned economy that had been applied with success in the North. However, Party leaders soon recognized that the centralized planning approach was not adequate for responding to the serious problems in the economy in the late 1970s, which to a considerable extent were related to challenges presented by the reunification and by the destruction of more than thirty years of war. Party leaders understood that a radical reformulation of economic policy was necessary. It was, however, a reformulation that was fundamentally different from the neoliberal policies of the International Monetary Fund. Moreover, even though Vietnam and China arrived to similar systems of agricultural production and exchange, the Vietnamese reformulation was not a copy of the economic policies of China. It was a reformulation rooted in Vietnamese conditions and goals, independently formulated by the Communist Party of Vietnam, and embraced by the Vietnamese people.
Gabrielle and Jabbour maintain the “market-oriented reforms in Vietnam were initially launched in an ad hoc and experimental fashion, pressed by the urgency to avoid famine and economic collapse.” The reforms are best understood as an effort by the central government to control emerging spontaneous processes by legalizing them and setting formal limits.
The initials steps in the reform were taken in the countryside in the 1980s. In the 1950s, North Vietnam had moved progressively toward collectivized agriculture, from work-exchange teams to low-level cooperatives and ultimately high-level cooperatives. The development of cooperatives led to the adoption of upgraded rice varieties and modern technology. However, it ultimately led to insufficient incentive to work, and to a decline in labor and productivity.
In the South during the same period (under American control), there was greater productivity than in the North due to a more favorable farmer/land ratio and to a higher technological level, but land and income was unequally distributed among farmers. After 1975, collectivization was pushed in the South as well, but it was resisted by Mekong Delta farmers, and it made only partial inroads in other provinces. Resistance to the collectivization campaign led to a drop in rice production in the late 1970s.
In response to the decline in agricultural production in the North and the South, which occurred as noted for different reasons, the Party in April 1981 changed course. It launched the Contract System, in which farmer households agreed by contract to deliver a fixed quota to the cooperative, which would be traded at a planned price. The contract freed farmers to organize production on their plots and to use surplus production for sale or for self-consumption, thus incentivizing creativity and work at the level of the farming household.
The Contract System initially led to a significant increase in food production, but its gains slowed, as a result of the continuation of many aspects of centralized planning. Land use and crop decisions continued to be carried out by the State Planning Commission, which even failed sometimes to carry out the state’s side of the contract. In addition, the security of land tenure was insufficient to induce peasants to invest in the land.
Therefore, in 1988, ideologically and politically supported by the Party’s 1986 proclamation of the Doi Moi, further reforms were introduced that increased the length of leasing tenure to farmer households to up to 20 years; and that further liberalized and decentralized markets. Moreover, responding to conflicts that had emerged from the 1970s collectivization, the 1988 reform established that most farmers, but not landlords, would maintain rights on land they had owned before 1975.
The 1988 measures led to a new surge in productivity. Vietnam became a major rice exporter. The reform was intensified in 1993, with a new Land Law that further strengthened farmers’ tenure, security, and flexibility, granting rights “to exchange, transfer, inherit, lease, and mortgage their leased land.”
Although the reform was developed initially as an ad hoc response to insufficient food production, without a clear plan, it evolved “to establish a consistent and sustainable market-based household-centered agricultural sector, which constituted a solid foundation underpinning the rapid (albeit uneven) industrialization and modernization process that followed.”
Beyond reforms in agriculture, the Doi Moi policy also included reforms with respect to price liberalization, currency devaluation, the opening of foreign investment, the increased autonomy of state-owned enterprises, and the limitation of the scope and authority of the state command chain. The goal of the Doi Moi is to increase productivity with respect to food, consumer goods, and export products. It is oriented to supporting the development of a mixed economy, while effectively regulating the activities of capitalists and traders.
In its efforts to reform the industrial sector, the government of Vietnam focused on restructuring, revitalizing, and strengthening major industrial state-owned enterprises. This process included more autonomy for companies to use surplus production beyond the contractual quota and, with some restrictions, to relocate assets to produce and sell new products.
The reform of the industrial sector also included consolidation and corporatization. In the 1990s, most state-owned enterprises were too small and weak to withstand international competition. The process of consolidation, seeking to strengthen the industrial sector through combination, cut the number of state-owned enterprises in half from 1994 to 1996. Consolidation was pushed further by the creation of General Corporations or state enterprise groups, which were given a very high degree of autonomy. “The ultimate goal was to nurture a small elite of strong national champions endowed with abundant assets and ample financial resources, that would be capable to achieve economies of scale and rapid technological upgrading, thereby achieving a high degree of international competitiveness.”
Although initiated in the early 1990s, consolidation and corporatization has been unfolding cautiously. There has been resistance from both management and workers, concerned that the consolidation might result in the loss of their positions. Accordingly, Gabrielle and Jabbour write that the process “did not bring about a thorough transformation of most state-owned enterprises into mixed enterprises with significant private participation.” However, “it was instrumental as a tool to consolidate the public industry into a reduced number of large enterprises and groups and to transform them into more modern and market-oriented organizations.”
The positive results of Doi Moi policy
Gabrielle and Jabbour maintain that the reforms enabled Vietnam to overcome serious economic difficulties and to resume growth. Moreover, the government has taken an egalitarian approach and has attempted to control the consequences of the market-driven concentration of wealth. Great strides have been made in combatting poverty and malnutrition and expanding public health and education. And the great majority of the people have been fully involved in the overall development project. In 2003, the World Bank described the dynamic in Vietnam as “pro-poor growth.” Moreover, it is a growth that compares favorably with neighboring countries. “Since the 1990s, Vietnam has outperformed the most advanced semi-industrialized capitalist countries in Southeast Asia along many dynamic dimensions, including growth in GDP, GDP per capita, labor productivity, and wages – even if its overall level of development has remained lower.”
Gabrielle and Jabbour conclude that “the broad picture is that of a glass that is more full than empty. Key indicators such as growth in GDP, GDP per capita, labor productivity and wages has been faster in Vietnam than in other countries in Southeast Asia, which remains one of the best performing regions in the Global South.” Vietnam’s exceptional performance is even more evident when expressed in terms of the human development index and expansion of universal access to basic services. In addition, economic growth, led by state-owned enterprises in heavy industry and infrastructure, has enhanced the country’s human capital, creating a huge potential for future growth. “Vietnam’s human development achievements have been exceptional by international standards.”
The state continues to direct
Gabrielle and Jabbour maintain that even though the number of state-owned enterprises has been shrinking over time, the level of state dominance over the core component of the Vietnamese economy has changed little during the four-decades long process of liberalization, market opening, and legalization of private enterprises. “The ultimate control is still exercised indirectly by the state.”
Nor has the entrance of Vietnam into the World Trade Organization undermined the commanding role of the state. With respect to the banking and finance sector, Gabrielle and Jabbour write that “in the specific context of Vietnam’s socialist-oriented development strategy, the partial and selective financial liberalization taking place after the World Trade Organization accession has not undermined the commanding role of the state.” Precisely because it is a partial and selective liberalization, guided by the economic plan and the development strategy of the state.
In Socialist Economic Development in the 21st Century, Alberto Gabrielle and Elias Jabbour draw upon the examples of China and Vietnam to empirically describe and scientifically analyze real socialism in our time. Its key component is state direction of the economy, with a focus on increasing productive capacity in industry and agriculture. In the attainment of this goal, guidelines are established for the participation in the economy of private enterprises, small and large, domestic and foreign. But the state remains in control, and it acts decisively to adjust to consequences that contradict the socialist orientation of the nation.
In the experience of attempting to construct socialism, nations with a socialist orientation are learning that there was some truth to the maxim that private ownership provides incentive for work and creativity. But capitalist ideology expressed this maxim as a justification for no state involvement in the economy, permitting the economy to be ruled by profit, regardless of the consequences for human beings, nature, and the long-term health of national economies. But when the nations constructing socialism discovered in their experience the human need for work incentives, they decided to let that need express itself, and at the same time, maintain state direction of the economy. The socialist projects, in other words, have discovered through experience the need to develop structures that incentivize work and creativity, but that also are designed to address the long-term needs of the people, the nation, and humanity as a whole.
The socialist projects of China and Vietnam are on a road of expanding productivity, not for the benefit of a few, but for the common good. Real socialism in our time no longer has a centralized planning that stifles productivity and creativity and that ignores laws of economics. Real socialism today is developing a viable practical alternative to a capitalist world-economy in decadence, which places profit over peoples and nations. Real socialism today is advancing in theory and practice toward the construction of the necessary post-capitalist and post-imperialist sustainable world order.
We intellectuals of the West who decide for socialism ought to base our understandings of socialism on the advancing real socialist projects in Vietnam, China, and the Third World.
A free subscription option is available, with capacity to read, send, and share all posts. A paid subscription ($5 per month or $40 per year) enables you to make comments and to support the costs of the column; paid subscribers also receive a free PDF copy of my book on Cuba and the world-system.
Follow me on Twitter: Charles McKelvey@CharlesMcKelv14