The Vietnamese Economy Under doi moi

The Vietnamese economy before doi moi appears on the surface to be a mirror image of Stalinist policies from the 1950s Soviet Union and Eastern Europe

However, the system of compulsion found under Stalin and necessary for such a system was present in only limited form

In many ways, Vietnam was and is a much more liberal society than might be expected, especially given the ruthlessness of communist behavior during the war

The economic failure of these semi-Stalinist policies cannot be in doubt, even by Vietnamese authorities

This is perhaps best depicted by the periodic extreme shortages of food after 1975 (in spite of the enormous productive capacity of the Mekong area) and the ravenous inflation of 1985 (775%)

The reforms of doi moi did not happen all at once; instead they were worked out in a process of political struggle, economic crisis, and international crisis between 1986 and 1999

An example: the decisions to liberalize agriculture were made repeatedly after 1981 but were met with resistance from local cadres (employees of the state who managed the cooperatives and gained local power and status from collective control of agriculture

The food crisis of 1987-88 prompted the government to dismantle the cooperatives even in the north - many thousands of cadre jobs were eliminated; only after this did agricultural production begin to grow; this also prompted a spontaneous capitalism in cities among very small shopkeepers and even in state owned enterprises, the state-appointed managers of which began to follow the market

This growth of market activity not only led to rapid growth of production; it also moved the state to recognize and act on new opportunities; the trade laws were considerably liberalized giving rice farmers and middlemen the global market as a reference point for production and sales

Perhaps the key decisions regarding doi moi were taken in the 1987-1989 period. These included:

1) the real liberalization of agriculture (this meant establishing the household as the unit of production and eliminating the collective)
2) the opening of Vietnam to international trade (including tourism and the inevitable security problems this created for the insular and suspicious old guard leaders)
3) drastic devaluation of the dong to bring it close to market rates
4) establishing real interest rates and a commercial banking sector, and
5) ending almost all centrally managed prices
6) Eliminating most subsidies to state enterprises

In the years following, Vietnam has continued to add to reform but at a slower pace.

1) the legal system, defining the terms on which commerce could take place, was considerably expanded
2) major efforts to reduce corruption and place contracts on a legal footing
3) creation of a new National Assembly where actual policy debates over laws and representation of local interests occurs
4) reduction of the budget deficit and the use of government debt instead of printing money to cover any deficits

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