Capitalism in the Socialist Republic

95% of Vietnamese tell pollsters they back a capitalist system: more than any other nation in the world. How to square that with the fact that Vietnam is still notionally Communist?

The Saigon skyline now dominated by block of luxury flats and the offices of large companies

That most guidebooks to Saigon recommend going to see a building called ‘the Ho Chi Minh City People’s Committee Head Office’* is perhaps somewhat surprising. Its name makes it sound like it should be a rather ugly piece of concrete brutalism. In fact, it’s a rather stylish piece of colonial architecture built by the French to serve as Saigon’s Town Hall. That’s still basically the job it does today. When the city fell to the Communist’s in 1975, its municipal government was rebranded as the ‘People’s Committee’ and made subordinate to the Party but kept its old base. However, it did not keep the prominence it once had. The People’s Committee building is now dwarfed by the Vincom Centre, an upmarket shopping centre just over the road.

That a commercial building, which is far from the largest in Saigon, now looms over the centre of state power in Vietnam’s largest city is a fitting symbol for the extent to which global capitalism has made itself at home in the country. A private sector that the Communist Party once tried to abolish is stronger than ever. As wages in China have risen, it has become a less attractive place for many of the Western firms looking for a place to outsource jobs. In many cases they have turned to Vietnam as an alternative. While doing teaching training in Hanoi, a traditionally less commercially orientated city than Saigon, I found that most of my classes were learning English to help them get jobs in finance. And a freewheeling informal capitalism of street stalls and small shops is still very much alive.

What is truly remarkable, however, are Vietnamese attitudes towards the market economy. 95% of those Vietnamese surveyed by Pew agreed with the statement “most people are better off in a free market economy even though some people are rich and some are poor”. That’s more than in any country surveyed, double the share in some countries like Spain and Greece and 25% than in the supposedly uber-capitalist US. That a communist country should be home to the most consistently capitalist people clearly requires explanation.

Support for Free Market System

Part of it may be that a market orientated approach is clearly getting results for Vietnam. It has not quite matched the staggering rates of economic growth achieved by China but it is not far behind. At present it is doubling the size of its economy roughly every decade.

Conversely, the Vietnamese have had recent experience of a socialist approach not working. Having gained control of the south of the country in 1975, the Communists would attempt for almost a decade to impose socialist policies upon it. This resulted in precisely the kind of inefficiency one associates with centrally planned economies: shortages, unfilled quotas and resources squandered on unviable projects. The country saw such massive inflation that a sandwich from a street stall now costs 20,000₫ and despite substantial Soviet support was falling deep into debt. The confiscation of private property and new restrictions on trade also proved provoked a substantial amount of hostility towards the party. Facing national ruin, the party changed course. Provincial party chairs in the south were given scope to experiment with more economically liberal policies. When these produced positive outcomes, their architects used them as a springboard for promotion to positions of power in the national Party. This in turn allowed them to disseminate these policies across the country as a whole.

A natural if rather smug conclusion to draw from this is that the Vietnamese have such a high regard for capitalism because they have tried the alternative. This is not wrong but I suspect the note of free market triumphalism is nonetheless misplaced. It doesn’t account for why the Vietnamese population view capitalism more favourably than do the Chinese despite the two countries’ similar trajectories and the fact that China has grown even faster.

I wonder if the difference is down to inequality. Vietnam is a substantially more egalitarian place than China. I’ve blogged before about the huge disparities within China: the average income in Macao is over $90,000, while in Yunnan it’s less than $1000. That’s the equivalent of having Luxembourg and South Sudan within a single country. The Vietnamese government has kept a lid on this in particular by more pro-actively redistributing revenues from richer regions to poorer ones. So while China now has levels of income inequality roughly on a par with the US, Vietnam’s levels are similar to those of European countries like Spain and Italy. The two countries also have similar life expectancies and literacy rates even though GDP per capita in Vietnam is less than half that in China.

One might therefore infer from the Vietnamese experience that the best way to prevent inequality eroding support for the free market is to prevent inequality from emerging in the first place.**

*Notwithstanding the official change of Saigon’s name to Ho Chi Minh City, I am referring to it by its old name as I figure this will be more familiar to my mostly Western readership and because it is still widely used in Vietnam.

**This suggestion should not detract from the fact that inequality has risen sharply in Vietnam since 1986. It has just not risen as fast as in many other countries.

2 thoughts on “Capitalism in the Socialist Republic

  1. Pingback: The last Lib Dem manifesto mentioned Israel more than the entire Asia-Pacific, and that’s a problem | Matter Of Facts
  2. Pingback: Vietnam: optimism nation | Matter Of Facts

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