Vietnam’s Third Way poses party
teaser By Long S Le
As
Vietnam’s rapid economic expansion gathers pace,
the country’s communist party leaders are having
an increasingly difficult time maintaining their
so-called "Third Way" model of economic
development, where centrally planned strictures
and market dynamics uncomfortably co-exist.
The question merging over the transitional
economy is whether, more than 20 years after the
launch of market-oriented doi moi reforms,
a new generation of political leaders has the
political will to bury the country’s communist
past and fully embrace market economics.
How the party strikes the balance could in
the coming years make or break Vietnam’s the
reform experiment, claim some
academics. Mancur Olson’s
Power and Prosperity: Outgrowing Communist and
Capitalist Dictatorships makes the theoretical
point that in transitional economies there are
certain reforms that governments may pursue to
better promote economic growth and that certain
styles of government are better able to create and
enforce those reforms more consistently.
Reforms that respect and secure individual
rights, according to Olson, will provide strong
incentives for individuals to produce, invest and
engage in mutually advantageous trade, of which
society will broadly gain more from so-called
rights-intensive production, the theory argues.
And as one might expect, rights-respecting and
strong governments are most able to successfully
implement such reforms.
In today’s
Vietnam, Prime Minister Nguyen Tan Dung and his
economic lieutenants must weigh whether such
reforms are appropriate at this arguably still
early point in the country’s economic development
and, if yes, will his more market-minded
administration allow the country to fully outgrow
communism?
For economic development
scholars who study Vietnam, the general answer is
yes and an eventual yes. Several economists now
argue that in today’s Vietnam, many of the reform
pieces are in place, including evidence that the
slow but steady government grant of more land
rights has led to greater productivity and
investment compared with areas that have not
implemented the same reforms.
On the one
hand, the current group of reform-minded
Vietnamese leaders is committed to market
liberalization because to date it has led to fast
economic growth and helped to shore up the
communist party’s overall popularity. Yet they
continue to do so with an unequivocal determinism
that their reforms do not challenge the party’s
monopoly over state and society.
Indeed,
any activities by groups that are not sanctioned
by the state are subject to criminal prosecution,
as activists who last year called for more
democracy and are now languishing in prison can
attest to. "When leaders here say they want a
socialist market economy, they really mean it … no
one with any influence is arguing that the state
should surrender the economy's commanding
heights," said Jonathan Pincus, a UN economist
based in Vietnam.
Yet at the same time,
the party remains strongly committed to socialism,
or more accurately to Ho Chi Minh thought, still
the underlying basis of its overarching authority
and political legitimacy. That means Dung’s
administration probably won’t anytime soon abandon
communism or implement reforms that would pave the
way for Vietnam’s full-blown conversion to a
rights-based capitalism.
Instead,
capitalism and its externalities will continue to
be co-opted in order to "revolutionize" the
prevailing socialist order, with the country
gradually becoming more modernized, technocratic,
wealthier, powerful, and, perhaps finally,
democratic. Intellectually, the party has started
to map out what this new socialist order may look
like in practice.
According to
party-affiliated scholar Phan Dinh Dieu, the one
party state is not in contradiction with market
reforms:
if we look upon the whole society as
a unified system, then generally speaking the
State does not only ‘dominate’ society, but also
increasingly fulfills many service functions for
society, as if to create a structure and a
favorable environment for the activities of
society’s members … In this sense, antagonistic
relations between State and civil society will
be replaced by relations of collaboration; the
democratic State will be the State 'of the
people, by the people, and for the
people'.
Party leaders are well aware
of the challenges in pursuing its third way
between capitalism and communism. Although this
middle path is not fully bulletproof against
internal and external challenges, party leaders
seem to think that in time it can be. A recent
example of the party’s new thinking was also
presented in a recent op-ed by former prime
minister Vo Van Kiet, who oversaw the
implementation of many important economic reforms
during his tenure.
In responding to a
recent scandal over the widespread distribution of
tainted soy sauce, Kiet reiterated the party’s
belief in the importance of a functioning press to
check and balance their reforms, so long as
reporters remain aware of their constitutional
function and responsibility to the party:
Our socialist-oriented market
economy has not commercialized the press, which
worries many people. But the market itself is
bringing the press and readers closer. Our
nation is led by the Communist Party alone,
which requires the press to be an effective
source of information … Newspaperpersons who
consider themselves above the law are prone to
corruption. Thus, the press’ activities and
penalties for corrupt journalists [either in
state-run or private newspapers] should conform
to the law.
By co-opting and
integrating elements of market liberalization and
democratization, socialist institutions may
eventually become, and in many ways already are,
more efficient with greater responsiveness in
which the party-state practices "a soft, diffused
and highly qualified form of domination,"
according to academic Chris Dixon of London
Metropolitan University.
Reform blind
spots To be sure, Vietnam’s current
economic growth has yet to be accompanied by an
appreciable increase in economic freedom (ie
government intervention in the economy, property
rights, and rampant black market activities),
political freedom (ie freedom of expression,
freedom of association, and the right to organize
political parties), or good governance (ie
frequency of corruption in public and political
sectors).
So far, the poor and
disadvantaged have been willing to live with the
economic, political and administrative
deficiencies of the one-party state so long as the
government delivers the basic economic conditions
which allow for the creation of higher paying
jobs, better public services, and a gradually
improved standard of living.
The average
Vietnamese household is in absolute terms now
better off than before market liberalization
measures were first introduced in the mid-1980s.
The question going forward is not merely whether
the party can deliver prosperity, but whether
prosperity is equitable and perceived to be based
on merit and not on communist party connectedness
or government corruption. Simply put, the average
Vietnamese citizen still evaluates the communist
party based on its self-proclaimed constitutional
credo that the communist party-state will function
'of the people, by the people, and for the
people'.
On the one hand, the economic
marriage between communism and capitalism can
probably be sustained over the medium term.
Scheduled privatization of former state-owned
enterprises (SOEs) should help to boost economic
efficiency and growth. SOE managers and workers
should have no immediate reason to oppose
privatization, since the process as currently
defined will allow them to continue to receive
some form of government subsidies and a larger
share of their productive surplus.
Party
leaders will still hold on to strategic
industries, such as telecommunications, banking
and financial services, and education and
training, for third-way sociopolitical reasons.
Sustained state-control of crucial industries also
serves as a sort of economic shock absorber. In
case of a significant economic slowdown or
financial crisis, party leaders can further
privatize non-strategic enterprises, such as in
the tourism industry, which are already driven by
firms led by party loyalists.
On the other
hand, the downside of sustained state-vested
interests in the economy is that the country,
while very capable of becoming a low- to
middle-income country, will consistently lag the
region’s more developed economies in terms of
economic efficiency. The preferential treatment of
SOEs by most accounts has led to an inefficient
allocation of capital resources and drags on
Vietnam’s still vastly untapped growth potential.
For example, the World Bank estimates that
the amount of capital needed to create one job in
a SOE is more than eight times higher compared
with domestic private firms; the potential cost
savings in transport and technical services could
easily be more than 30% if the various privileges
bestowed upon SOEs competing in the sector were
eliminated, according to the same World Bank
statistics.
To realize Vietnam’s true
growth potential in job creation and economic
productivity the communist party needs to level
the competitive playing field between the state
and private sectors. Unfortunately there is no
official policy or the financial infrastructure in
place to expand small private firms into larger,
more globally minded companies.
The
importance of this transformation is that, given
the still relatively weak purchasing power of the
average Vietnamese domestic consumer, higher
incomes at this early phase of development will in
the main come from export-oriented activities.
Until these reforms take place, Vietnam will
continue to be marked by inequality, expressed in
recent political protests and labor strikes, which
slowly but surely are from below eating away at
the country’s socialist fabric.
Vietnam’s
communist party leaders will find it increasingly
difficult to reconcile their current marriage
between communism and capitalism. As the
population becomes more economically empowered,
party cadres assertions that the party-state is
equivalent to a democratic state of the people, by
the people, and for the people will ring
increasingly hollow. And any move back towards the
socialist redistribution system to address
emerging issues of inequality will just as likely
be rejected by the very masses they would be
designed to help but who are unwilling to revert
to the party’s inefficient centrally planned old
ways.
For Vietnam’s communist party
leadership, this is the limitation and
contradiction of their hoped for third way which
if not resolved could in the end be its eventual
undoing.
Long S Le is the
director of international initiatives for the
Global Studies Program and also a lecturer of
Vietnamese studies at the University of Houston in
the United States.
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