Contextualizing Vietnam

In 1986, Vietnam began its ambitious process of reforming and liberalizing its economy in order to develop its industry and boost production. The objective was to be able to have its people provide for themselves and each other, while also developing a surplus in production for a more centrally planned economic model to safely work. Post-French colonialism and American invasion, Vietnam was devastated. 12 million acres of forests were destroyed completely, and those that weren’t were rendered unusable from Agent Orange, a biological weapon used on approximately 12% of the country. Because of this, Vietnam’s socialist economy did not yet have the resources it needed to succeed. In order to build those resources up, a change had to happen. Additionally, Vietnam continued to be affected by serious economic embargoes and refusals to trade from the US and other Western nations. Institutions like the International Monetary Fund (IMF), the World Bank, and World Trade Organization (WTO) backed these embargoes and denied Vietnam entry, making it impossible for it to grow its economy. In order to be able to trade with international organizations and develop its productive forces, Vietnam needed to meet these liberal requirements and “open up” its economy to Western trade, influence, and investment.

Previously, Vietnam was considered a planned Soviet-style economy. It prioritized collectivizing land to avoid private ownership, planning the economy, and distributing goods produced by all people for all people. Those who brought value to society would own their work materials and the fruits of their labor. Initially, the strategy worked well enough to survive the war. By the end of the Vietnam war, socialist North Vietnam had surpassed capitalist South Vietnam in terms of GDP because of the South’s continued recessions and reliance on US aid (although the North’s production had steadily declined from the war). However, when Vietnam was reunified, the economic model was applied nationwide, with a dynamically different outcome. Food shortages were common, and the country relied on UN food aid to feed its people—productivity was low in all fields. The reason for this was the lack of industry and productive forces, which were destroyed during the war. Implementing a successful socialist development model based on worker ownership is nearly impossible without developed factories and agricultural machinery, and the collectivization of land and distribution of resources cannot happen with a sufficient amount of each. Essentially, it's impossible to create value and goods without the necessary productive machinery to do so.

Photo from the Associated Press showing the destruction of Vietnam

In addition to this, Vietnam’s position as a socialist country made it an enemy of the US and international trade organizations. It was burdened by sanctions, so liberalizing its economy gave it the ability to buy and sell resources, pushing it closer to a stronger economy. To develop industry and boost production, and lift the sanctions, Vietnam implemented the Doi Moi reforms, as they were called, which flipped this strategy on its head. The government defined it as “the transition from a subsidized centralized planned economy into a multi-element commodity economy.” Importantly, the reforms are not a black and white switch from socialism to capitalism. What was changed was determined by a recognition in the previous mistakes of central planning that needed to be updated. Socialist factors of the economy now coexisted with capitalist ones as a transitional period to a more fruitful industry. 

What were the Doi Moi reforms and their effects?

The main components of the Doi Moi reforms were A) developing a socialist oriented market economy to stimulate economic development, B) diversifying economic sectors from a cooperative state-owned market, C) removing state-subsidized distribution to to distribution according to labor and capital investment to motivate innovation, and D) tapping into global markets and integration. This meant largely expanding the amount of foreign direct investment (FDI) into the economy, and letting trans-national corporations invest in Vietnam. While this has positive effects, such as lowering the price of goods that can be made cheaper abroad and giving consumers more choices, this caused a shock to some sectors that were not acclimated to a global economy, such as the automobile industry. Since cars became much more cheap, people bought way more cars, even though Vietnam's cities were not designed to fit as many. Previously high import taxes were meant to keep car ownership at a low enough level for sustainable infrastructure development. This is a prime example of the negative effects liberalization can have on developing countries. 

Infrastructure development in Vietnam

However, the socialist-oriented reforms had overwhelmingly positive results. Globally integrated commodity markets, at least in the short term, cause a lot of very fast growth. Because of this, more people had jobs, production went up, and thus prices went down. The GDP rose from 31 billion USD in 2000 to 266 billion USD in 2019, causing poverty to shoot down from 60% in 1990 to 2% in 2023. Food production increased to 43.6 million tons in 2016, turning Vietnam from a country once reliant on aid to the second biggest global exporter of rice. Vietnam has also skyrocketed health insurance coverage to 90% in 2020, leading child deaths to more than half from 58 per 1,000 deaths to 24.5 per 1,000 deaths. This is due to both financial incentives from foreign companies but also government efforts like vaccination campaigns. These reforms created the conditions to significantly improve people’s lives, which was solidified by the country’s central planning. Macroplanning of the economy allocates resources to the necessary sectors and people, such as poverty alleviation.

Ultimately, Vietnam’s use of global markets to stimulate production can be attributed to its people-oriented goal of making the country self-sufficient. In order to be able to achieve its planned mode of production and allocation of resources, Vietnam had to develop the industry necessary to do so. The Doi Moi reforms, in diversifying investment and economic sectors, coupled with government planning to give workers what they need to succeed, yielded powerfully successful change that has turned Vietnam into one of the most promising developing economies. The legacy of the Doi Moi reforms is one of socialist-oriented market integrations, proving putting people over profit has a place on the world stage. Presently, Vietnam is continuing its innovative economic policies, and maintaining their stance as a bastion of socialist production, as the Doi Moi reforms are an ongoing process and Vietnam’s way of adapting to a diversifying, volatile world.