The Postwar Rise of Vietnam: Economic and Political Feats

After WWII, the European colonial powers were spent. They tried to regroup and retake their former colonies in the postwar developing world. Only the Americans in the West were not in favor of the revival of colonization and envisioned an international community (the United Nations or UN) that would have a Security Council to resolve international disputes. This was sometimes known as the “Rooseveltian vision”.

The former colonies of European powers were also keen to agitate and fight for self-determination. In the postwar period, a global wave of decolonization began. The rise of nationalism in East Asia coincided with the period of decolonization. The Vietnamese under their leader Ho Chi Minh was no exception to the regional rise of nationalism and fought the French for independence. The Battle of Dien Bien Phu was decisive and the French in Vietnam were defeated in 1954.

The Cold War intensified between the US and the Soviet Union as the world gradually became a bipolar world divided between two ideologies. The “Domino theory” during the Cold War reinforced American political conviction and belief that South Vietnam should be prevented from becoming communist to contain the spread of global communism. The Tet Offensive proved to be a turning point and 1975 saw the downfall of Saigon, the bastion of the South Vietnamese regime and its US allies.

In 1976, the Democratic Republic of Vietnam and its US allies lost the war and the Socialist Republic of Vietnam was triumphant. Over half a million people (mostly South Vietnamese) escaped in boats. Ideological priorities were paramount during this period and the communist government began to round up capitalists and sent them for re-education. Some of them were made to do labor in camps.

In the postwar period, starting from North Vietnam in 1955 to the contemporary period in the late 1980s, Vietnam began its economic development using a central planning system. Policies were planned centrally by the government and implemented by State Owned Enterprises (SOEs). The whole central planning period ended in excess capacity and labor. Wage control resulted in a lack of incentives and, consequently, Vietnam became dependent on foreign aid. Soviet aid was crucial during this period.

Some entrepreneurial individuals networked with the South Vietnamese diaspora in the US or reached into the Soviet Bloc to bring daily products into Vietnam. These were probably the first prototypical capitalists in Socialist Vietnam. The lack of supplies and shoddy Vietnamese-made products, as well as the clamor for foreign-made products, resulted in economic self-reflection. The 1982 Fifth National Party Congress admitted that the revolution did not produce the economic results that were desired.

In 1986, Nguyen Van Linh rose to become Secretary General of the Vietnamese Communist Party. He instituted economic reforms known as Doi Moi. Cooperatives in the agricultural sector were discontinued. Peasants were now able to grow crops on privately-owned plots of land. Doi Moi was considered Vietnam’s own version of the Soviet Perestoika and Glasnost under the former (and last) Soviet President Mikhail Gorbachev. There was also a feeling that the Soviet Union’s days were numbered.

After 1989, Vietnam moved towards a market economy. Consumption was not centrally determined. Consumption and production were now guided by market forces. The state sector declined. With the collapse of the Soviet Union in 1989, Vietnam could no longer depend on external help. 1989 marked the end of the Cold War with the fall of the Berlin Wall and in 1992, the Soviet Union dissolved. Meanwhile, China’s economy seemed to be booming after its opening up in 1979 and the early 1980s.

In 2005, Vietnam shifted to a collective leadership structure. It consisted of the general secretary, president, and prime minister.

By the 1990s, Vietnam made peace with China, Japan, and the West. For all of Vietnam’s important efforts in reforming their economy, there was still a barrier that needed to be overcome. Vietnam’s economy was still being constrained by the US’ Cold War-era policies against its former enemies. The US was by far the world’s largest market, most dynamic economy, and the new hyperpower in the post-Cold War unipolar world. US support would be crucial for Vietnam’s economy to be successful. In 1994, the US lifted its embargo on Vietnam.

In 1995, former US President Bill Clinton normalized relations with Vietnam. With US support, Vietnam joined the World Trade Organization. It had become a full-fledged member of the global trading regime. Vietnam, like the other East Asian economic “miracles,” benefitted from exporting to the US market and accumulated reserves, technological know-how, skills, foreign exchange, and management knowledge for its own economy.

Foreign Direct Investment went into Vietnam from the US and other Western investors as well as Japan and the Tiger economies. The rest of the economic development narrative was a Vietnamese success story. Literacy increased, lifespans lengthened, national poverty went down, and infrastructure improved. After decades of hard work, Vietnam entered the middle-income country category. Foreign investments poured in and Vietnam began to be known as the “Little Dragon” economy after China which was the region’s (indeed the world’s) largest-scale success story in poverty alleviation. These investments made Vietnam into a major manufacturing sector in Southeast Asia.

In 2005, Vietnam shifted to a collective leadership structure. It consisted of the general secretary, president, and prime minister. This paralleled China’s own collective leadership shared amongst 9 Politburo members (now 7 members). Vietnam and China have similar socialist one-party systems that are hybridized with a market economy that has private sector initiatives as well as SOEs.

There are some complementary features between the two countries’ political systems. Their common socialist backgrounds and economic reforms connote a special relationship that has been as close as a fraternal socialist brotherhood during the Vietnam War era, and also as regional rivals over the fate of Cambodia in 1979, Paracel Islands ownership, joining different camps during the Sino-Soviet split, and historical memories (e.g. Qing invasions).

Economically, the relationship is cyclical with economic closeness punctuated by challenges. Vietnam opened up border trade with China and became part of the ASEAN-China Free Trade Agreement deal. Economic relations boomed in the first decade of the 21st century between China and the ASEAN economy. Since its rise, China has become the individual ASEAN countries’ top three ranking economic partner and a top-ranking economic partner of ASEAN overall. However, maritime disputes have spilled over into economic relations, with local Vietnamese protests against Chinese and Taiwanese investments in the country.

Future economic and political relationships may be dependent on the wisdom of the two countries’ leaderships in resolving maritime disputes and working with each other in a transparent, mutualistic, and beneficial manner (“win-win” situation) while maintaining bilateral cooperation in harmony with the multilateral needs of other great powers with interests in the region, and keeping the sea lanes of communication open perhaps within the framework of a Code of Conduct.

Domestically, despite great economic success and poverty alleviation, there is still work to be done: for example, uplifting of minority living conditions and minority rights. With better living standards and economic growth, the Vietnamese people now clamor for a better environment, sustainable development, egalitarian development, equal opportunities for social mobility, etc.