Vietnam: Anatomy of a Peace

Gabriel Kolko

• Publisher: Routledge
• Year: 2008
• Topic: Economics
• eBook ISBN:
  9781134721948
• Subtopic: Development Economics
• Index: Economics

Vietnam has experienced huge political and economic development since the war. In Anatomy of a Peace, Gabriel Kolko looks at the main economic phases the Communist Party has embarked upon since 1986 and outlines the transition to nascent capitalism. He also explores Vietnam's relations to its neighbours and the US in the light of social and psychological national features.
Based on extensive research and over 30 years first hand experience, Anatomy of a Peace is a timely examination of recent history and developing economies in Asia. Gabriel Kolko argues that neither an intentional socialist or market strategy have determined recent Vietnamese history and, in fact, the Communist Party has little control over development during peace time.

Chapter 1

The Postwar Economy and the Origins of “Market Socialism”

When the war ended in 1975, Vietnam’s leaders had no coherent plan for dealing with the southern economy, much less the skills and organization that the immense challenge demanded. But even had they prepared one, the problems of unifying the two regions would still have remained awesome, not the least because the southern economy after 1972 was already in a deep crisis. The thirty-year conflict had imposed monumental economic, social, and human costs on the people and the party Whatever the advantages of one or another economic strategy, there was no conceivable way that recovery could be easy or painless.

Worse yet, the party’s leaders failed to grasp that any general reconstruction program had to be effective not only in terms of economic growth rates but also in its ability to resolve the war’s more intangible but crucial social and human challenges. Many no longer believed that those who gave and suffered the most during the protracted conflict had imposed binding obligations on them. Ironically, had the Communists conducted themselves during the war in the same unimaginative, empiricist manner they have displayed since 1986, reducing their grand strategy to gauging success in narrow accountancy measurements, they certainly would have lost it.

Leaders who had shown extraordinary creativity and sensitivity before 1975 began increasingly to absorb the mind-set of those they had defeated. Their elitist mode of operating frequently isolated them from the information and criticism essential to avoiding serious errors. Long used to commanding and being obeyed, they failed to comprehend that the masses – above all the poorer peasants – had willingly sacrificed to a significant extent because they had confidence that the nationalist and social causes were identical, and the latter was in their objective interests. This combination, and the promise that their immense devotion would be rewarded when peace came, gave the Communists the legitimacy that had created a remarkably high degree of national consensus during wartime – one they could not afford to lose. Without it, their problems would be even greater. Under no circumstance whatsoever could they allow the so-called winners to become the eventual losers. Ho Chi Minh had always warned that the party must never lose touch with the masses.

The triumphant party in war was unprepared for peace, both in the narrower organizational sense and – as it turned out – in its moral relationship to the people.

The Inheritance of War

Until 1975, the exigencies of the protracted war shaped Vietnam’s economic and political structure decisively, and while the Leninist influence on it cannot be minimized, neither can its strong resemblance to capitalist war economies under comparable circumstances. The decision to fight a war is based on overriding political priorities that later have inevitable and enduring economic and social legacies. During wartime, victory is the only criterion for economic efficiency, and the Communists were supremely successful. But many of the leaders could not imagine that the economic and political methods appropriate to war might become counterproductive in peacetime, and there was no way anyone within the party could discuss this risk seriously

To divorce Vietnam’s economic development from war-induced causes, as International Monetary Fund (IMF), World Bank, and Establishment economists have persistently done, reflects capitalist economists’ endemic ideological inability to view politics and economics as intrinsically related dimensions of one unified social reality Most nations locked in wars will go to extraordinary lengths to win them, and subsidy-based economies and consciously induced distortions are the rule rather than the exception. Germany, Britain, and the United States, to mention but a few after 1914, repeatedly gave huge subsidies to expand industries, transport systems, and much else that was subsequently largely useless in peacetime economies. Few, if any, of Communist Vietnam’s economic policies from 1955 to 1975 differed in principle from what states normally do during wars.

Vietnam’s regionalization of the economy and transport was the only rational course possible insofar as some production at low levels of efficiency was superior to a centralized alternative that theoretically was more productive but also offered American bombers better targets. The cooperative and collective agricultural system was a precondition for manpower mobilization, since it provided security to soldiers’ families and allowed for optimal employment of women workers. That both might create major problems after the war was unimportant. There was only one goal: to win the war in the face of vastly superior military and economic power. The Communists triumphed in what was certainly one of the most unequal conflicts in human history, and they initially interpreted this as a vindication of their economic and political policies until then. On the other hand, they failed to perceive fully that their French and American enemies’ uncritical faith in material resources was proof that the complex nature of societies and their problems made a fixation on power in the strict physical and economic sense exceedingly dangerous. Until 1975 the Communists insisted that they had depended on ideological and broader social factors that alone made them succeed over the long run. Ironically, after 1986 they increasingly adapted many of the assumptions and human priorities of those they had defeated, priorities on which a consensus has prevailed throughout the world since market theory attained unchallenged ascendancy in the putative socialist nations.

From a purely political and military viewpoint, Vietnam’s economic structure was eminently rational and efficient, for it was a decisive factor in producing victory Astonishingly few, if any, Vietnamese now assess the war’s burdensome economic and organizational legacies in this essential historical context, or their integral relationship to current economic problems, just as they ignore the social implications of their present economic course to the party’s chances of future survival. And this fact alone is a reflection of the utter inadequacy of their superficial ideological resources for dealing with the immensely complex environment in which they live.

In a word, it was the unavoidable Communist decision up to 1975 to make those sacrifices essential to winning the war that created the overall context for their economic experiences after that date. While choices within that framework unquestionably produced quite distinct short-term results, the Vietnamese leaders’ present misinterpretation and rejection of their past economic efforts perilously misjudge history and have primed them for more errors than the existing system is able to bear.

Whatever the Democratic Republic of Vietnam’s (DRV) historic aid dependency, which unquestionably made its war economy far more viable, it was nonetheless much smaller than the south’s reliance on U.S. support. Southern agriculture was not only structurally different in 1975, historically it had always been much more individualistic than the north’s, and however great the local peasants’ earlier political role, most refused to accept the cooperative systems that had succeeded fairly well in Annam in the center and Tonkin in the north. And while the DRV was in certain ways poorer than the south, it had a far superior social infrastructure in terms of health, education, and the like; the merger of the two zones immediately posed huge difficulties in this domain also. The Communists were totally unprepared for these gigantic challenges.

The dominant southern economic class has always been overwhelmingly Chinese. When Nguyen Van Thieu in 1966 seized power in Saigon, a small coterie of Chinese worked with him to play the leading role in exploiting South Vietnam corruptly Wealthy Chinese began exporting large amounts of capital well before 1975, and when Saigon fell their personal connections in Southeast Asia allowed many to go into exile and prosper elsewhere. Given this elite’s political as well as economic role, and the inherent fragility of the dependent, parasitic southern economy, there was no conceivable way that Vietnam’s leaders could have left its power untouched. Apart from the consequences to morale as well as to their ideology, had the Communists avoided confronting them it is highly likely that the local Chinese would eventually have thwarted the creation of a socialist economy, and grave economic problems would have arisen in yet other forms. It was impossible, from an economic or political viewpoint, to merge the two regions painlessly. The situation after 1975 was ripe for a crisis – and it was one that involved Peking’s traditional protective relationship to Southeast Asia’s overseas Chinese.

It was at this very point that Vietnam’s conflict with Cambodia after December 1978 altered fundamentally the entire context of reconstruction and gravely compounded the war’s already immense burden. However justified the political and security reasons for its invasion of Cambodia in December 1978, economically it was a catastrophe, above all at this critical point, producing a world economic boycott that constrained economic development and consumed vast resources for another decade. Its short, extremely destructive war with China in 1979 imposed an additional huge drain, forcing it also to remain mobilized on its northern border. Vietnam’s economy, to varying degrees, never became fully geared to peace until it evacuated Cambodia and the world boycott was lifted after 1989. In this context, the decisive origins of its economic problems were political, the consequences of having first fought the Americans to the utter limit and then becoming embroiled in the region. No conceivable economic strategy, whether socialist or capitalist, with or without a “market,” could have caused genuine reconstruction. Indeed, it was certain that once real peace came then significant growth would occur also, whatever the policy Politics, not a plan, was the principal constraint on the economy as well as impetus to its economic growth after 1988.

The party’s leaders have refused to this day to acknowledge in any way this fundamental reality because it only would confirm the immense economic costs of their Cambodia strategy, one whose justification became weaker as the war lingered indefinitely and the government it installed in Phnom Penh became increasingly venal and even nationalist. Worse yet, many blamed their economic failure until then on their refusal to accept the putative “laws of the market.” But attributing the price of their political error to an economic policy only compounded the party’s serious analytic failures. From the very inception, its economic assumptions after 1978 largely ignored the vast political, social, and human charges inherent in both its wars with the U.S. and especially Cambodia, and it never comprehended that its economic policies had not only to produce growth but at the very same time weigh them against its more intangible but imperative social obligations to the people. This fundamental myopia distorted its priorities gravely, and it is likely to stand as the greatest single mistake that the Communists made after 1941.

Opting for Renovation: DOI MOI

In certain ways, the data we have show that the economy in the decade after 1975 might have been much worse, and later official accounts of it exaggerated its failures to justify the new economic strategy In 1977 the party began to take over the property of the mainly Chinese southern bourgeoisie, disrupting the nonagricultural as well as the rural economy and antagonizing China in the process. Apart from the Cambodian war’s great impact on every aspect of production, and the doubling of the army to 1.5 million men, 1980 was a catastrophic year for agriculture; a series of typhoons destroyed at least 40 percent of the north’s rice crop, and the war absorbed all resources that might have been used for essential imports of fertilizers and food. The disastrous conjunction of the war and weather forced the party to introduce or simply tolerate major revisions in the entire agricultural marketing system, with its pragmatic emphasis on increasing output in any way that succeeded. Ideology remained, but practice changed, and this was also true for large sections of industry “The stomach is our principal concern,” officials admitted.¹

Between 1976 and 1980 Vietnam’s agricultural policy had fortunately emphasized food other than rice, and by 1980 overall production had increased to 61 percent above that of 1976. Rice is by far the major staple, and the introduction of an extensive contract system after 1980 caused yields to increase steadily. Agricultural output grew a fifth from 1979 to 1982. Given the low base from which it began, this impressive record was far from brilliant. Much more significant, from 1981 to 1984 grain output increased 4 percent and paddy 6 percent annually, or 21 percent for all staples in 1981–5 – not very different than subsequent growth.

Industrial production, assuming that the official data are reasonably accurate, also grew 54 percent from 1981 through 1985. Considering the low quality of much of the output, these numbers are less impressive, but that is equally true of much of the growth since then. The economy had serious problems, but it was never as calamitous as Vietnam’s promarket leaders subsequently described it, nor as bad as it might have been given the external circumstances. Most important, to repeat a crucial point, the party has kept silent regarding what was, in fact, the principal cause of the post-1977 economic crisis: Vietnam’s protracted war with the Pol Pot regime and then the brief but terribly costly conflict with China in 1979.²

Whatever the rhetoric, there was far more pragmatism than ideology guiding the economy, and many sections of the nation pursued their own, often quite different, economic strategies. In 1981, largely autonomous regional import and export companies were authorized, and there was, and always has been, far less central control over state enterprises than in China or the Soviet Union. Indeed, when the Politburo was unable to articulate solutions for problems during the early 198Os, it explicitly decided to “delegate powers to the regional and grassroots echelons,” in reality reducing its own.³ Some provinces even taxed goods coming from the others. A province-centered economy was the inevitable legacy of the war and the nation’s vast length, and this is even more the case today.

Such independence made it possible for the party in Ho Chi Minh City, led by Nguyen Van Linh and Vo Van Kiet, to permit the local Chinese merchants after 1981 to reimpose their control over the regional economy, leading to its rapid growth. Linh was a key Politburo member and Kiet was also chairman of the crucial State Planning Commission; his assistant was Nguyen Xuan Oanh, whose unusual background and even more remarkable role warrants more detail here.

Nguyen Xuan Oanh probably has had the most varied and remarkable career of any single person in Vietnam since 1944, but in the last analysis the real source of his power was the party’s inability to employ its socialist ideology to respond to the vast challenges facing it. During World War Two he collaborated with the Japanese and received his BA in economics in Japan in 1944, and an MA in 1947. He then worked for the U.S. Army in Japan and went on to earn a PhD at Harvard in 1954. After an undistinguished career as an academic in the U.S. and a minor IMF functionary, he returned to Saigon in 1963, becoming vice premier in charge of the economy in 1964. As acting prime minister in February 1965 he gave the Saigon regime’s endorsement of the American escalation of the brutal air war against the DRV. A coup soon removed him from office, and he spent the next years in Saigon preparing a plan for Vietnam’s postwar economy which, as a U.S. Defense Department intelligence expert later described it, “was very similar” to that which he was later to convince Linh and Kiet to adapt.⁴

Linh and Kiet authorized Oanh to use local Chinese to create and supervise mixed trading companies, and these firms quickly became extremely profitable and allowed the city to prosper for two years in what the same Pentagon analyst described as “unfettered market capitalism.”⁵ The favored Chinese had close connections with the local party leaders, and in mid-1982 the Politburo in Hanoi learned about what was then considered scandalous, possibly corrupt, behavior. Linh was dismissed in disgrace from the Politburo because of his zeal, but his success in the south soon became decisive for the party’s future. Kiet himself is both avaricious for power and result-oriented; doctrine for him is merely ideological baggage to which he gives obeisance but which scarcely influences his actions. He can cite Marxist rhetoric to justify his goals but he is no more a socialist than were Yeltsin and his cohorts. Linh, as subsequent events showed, is unquestionably very sincere but he has scant understanding of economics. He proved himself to be as impressionable to Kiet as Kiet was to Oanh. Oanh was certainly not wholly in charge, but his influence was crucial at a time when the party, paralyzed by its dogmatism, lacked constructive alternatives. Meanwhile, the IMF in its annual consultations, which Vietnam’s membership in it required, was urging the same policies. Oanh was also a natural link with the IMF, for which he once worked. I will continue this astonishing story in the next chapter, after Linh and Kiet took charge of the national economy in 1985 and the IMF’s role became decisive.⁶

Vietnam’s leaders throughout the early 1980s were profoundly confused and disunited over how to cope with an increasingly diverse economy that they guided far less than many of them desired. It is a simplification to call it a centrally planned socialist economy, because while that was the ideal and a major part of the reality, it was also much more complex. In fact, central control has been far less of a goal than producing results, because over the long run, as in China, real power in the economy has been moving toward the provinces, and the Politburo became aware of the risks of this shift only well after it had embarked on them – or too late. In an effort to resolve its economic impasse, in June 1985 Linh and his allies were readmitted to the Politburo and central committee, and they initiated major steps to reduce subsidies to state enterprises and begin market-style reforms, called “socialist accounting.” Tran Phuong, whose abysmal ignorance of economic affairs had so impressed me when I met him in 1973, was made vice premier in charge of the entire economy He was always, and still remains, a devotee of the market. It was under his supervision that Vietnam’s most critical problem ceased to be growth and became inflation.

Retail prices between 1979 and 1985 rose consistently, nearly doubling in 1982 alone, destabilizing the economy seriously In September 1985, Phuong and the reformers sought to reverse this pattern and organized a currency reform which produced a disastrous hyperinflation and far graver difficulties than at any time since 1979. Prices over the next year increased at least 700 percent and created a monumental crisis, and there was a disastrous decline in output of every sort. Phuong was fired in total disgrace but the damage had been done.

What had been a ...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright
• Dedication
• Contents
• Acknowledgements
• Map of Vietnam
• Introduction: The legacy of war
• 1. The postwar economy and the origins of “market socialism”
• 2. Economic reform in theory and practice: The crisis of success
• 3. The Communist party’s political crisis
• 4. Land and the crisis of rural society
• 5. The social and human costs of reform
• 6. Who rules, and why? The Communist party on the threshold
• Conclusion: Winning the war and losing the peace
• Epilogue: The necessity and risks of resisting injustice
• Notes
• Bibliography
• Index