ECONOMIC HISTORY IN VIETNAM: EARLY ON, DURING THE FRENCH PERIOD AND DURING AND AFTER THE VIETNAM WAR

ECONOMIC HISTORY IN VIETNAM

The Vietnamese trace the origins of their culture and nation to the fertile plains of the Red River Delta in northern Vietnam. After centuries of developing a civilization and economy based on the cultivation of irrigated rice, in the tenth century the Vietnamese began expanding southward in search of new rice lands.

Under the Chinese, Vietnam evolved through the combined influence of two contradictory factors. On the one hand, there was a policy of economic exploitation and cultural assimilation, and on the other, there was a steadfast popular resistance marked by armed insurrection against foreign domination. When the Vietnamese finally began to rule themselves in 10th century one of the main goals was founding a centralized power structure capable of assuming direction of the economy —particularly management of the dyke system. French colonial rule was, for the most part, politically repressive and economically exploitative.

North, South, and Central Vietnam historically were divided by ethnolinguistic differences, but until the midnineteenth century and the beginning of the French colonial period, they were all agrarian, subsistence, and village-oriented societies. The French, who needed raw materials and a market for French manufactured goods, altered these commonalities by undertaking a plan to develop the northern and southern regions separately. The South, better suited for agriculture and relatively poor in industrial resources, was designated to be developed agriculturally; the North, naturally wealthy in mineral resources, was selected as the region in which industrial development was to be concentrated. The separation distorted the basic Vietnamese economy by overly stressing regional economic differences. [Source: Library of Congress]

Despite the return of peace after the Vietnam War ended in 1975, for over a decade the country experienced little economic growth because of conservative leadership policies, the persecution and mass exodus of individuals - many of them successful South Vietnamese merchants - and growing international isolation. However, since the enactment of Vietnam's "doi moi" (renovation) policy in 1986, Vietnamese authorities have committed to increased economic liberalization and enacted structural reforms needed to modernize the economy and to produce more competitive, export-driven industries.

Vietnam Economy Under Chinese Rule (111 B.C. TO A.D. 938)

Economic exploitation by the occupiers hampered the development of productive forces but could not check them. Excavation of tombs dating from the 1st to the 6th centuries has revealed the progressive diffusion of iron tools, production implements and weapons already known in the previous era. Iron cauldrons, nails and tripods appeared while objects in bronze became less common, although the making of bronze drums continued for centuries. [Source: Vietnamtourism. com, Vietnam National Administration of Tourism ~]

In the 1st century, furrowing with iron ploughshares on wingploughs drawn by oxen or water buffaloes gradually replaced cultivation in burned out clearings. In particular, hydraulic works, canals and dykes ensured control over water; the use of fertilizer facilitated intensive farming, the practice of growing two crops a year on well-irrigated fields for example. The growing of tubers such as sweet potato, sugarcane and mulberry was already known, as well as various vegetables and fruit trees. Mulberry growing and silkworm raising took pride of place; there was also betel, areca-nut trees, medicinal plants, bamboo and rattan, which supplied raw materials for basket making. From the earliest centuries, there was thus a diversified agriculture which, gradually improved, would last for a very long time. ~

Handicrafts also reached a relatively high level. Many tools of iron and bronze were forged; ceramics with enamel coating was added to the already flourishing pottery of the previous era. The remains of citadels, pagodas and tombs showed that brick and tile making was thriving, some of which were also coated with a layer of enamel. The most prosperous handicraft occupations were weaving and basket-making. Fabrics in cotton and silk and baskets of bamboo and rattan were sought after items. In the 3rd century, paper began to be made using techniques imported from China. Glass-making techniques also came to Vietnam from China and India. To meet the need for luxury goods for the court and local functionaries, the making of objects in engraved gold and silver underwent new development, the quality of which improved through the use of Chinese techniques. Lacquer was already known. It could be said that Vietnamese handicrafts established themselves during this period. ~

If the economy as a whole remained autarkic, certain products supplied markets in administrative centers such as Long Bien (in present-day Hanoi) which had trading quarters. River and sea transport was carried out using sampans or junks, some of which had barges and several score oarsmen. The Red River and the road running along it led to Yunnan and Sichuan, and hence to Central Asia as well as Burma. Communication with China was achieved by both sea and land, the road being dotted with many relays. Chiao Chih served as a port of call for junks from Java, Burma, Iran, India and even the Roman empire on their way to China. In large centers, there were a number of foreign residents such as Khmers and Indians. The vessels carried local products, valuable timbers, ivory and handicrafts, and also took part in the slave trade. This external trade was entirely monopolized by the occupiers. ~

Impact of French Colonialism on the Vietnamese Economy

The French period also produced a new group of Vietnamese absentee landowners who possessed riches far in excess of the wealth anyone in the older society had enjoyed. This new group came into existence as a result of the French development of vast new tracts of land in Cochinchina. A few of these large holdings were retained by French companies or citizens, but most were held by enterprising, Western-oriented, urban Vietnamese from Annam and Tonkin who lived mainly in Hanoi and Hue. By investing in light industry and medium-sized trading concerns, they became Vietnam's first modern industrialists and entrepreneurs. *

In urban centers the demand of both the expanding French government bureaucracy and the private sector for secretaries, clerks, cashiers, interpreters, minor officials, and labor foremen created a new Vietnamese white-collar group. The development of mining and industry between 1890 and 1919 also introduced a new class of workers. Because most of the natural resources as well as a large labor pool were located in the North, industrial development was concentrated there, and Hanoi and Haiphong became the country's leading industrial centers. At the same time, conditions of overcrowding and intensive farming in the North provided little room for agriculture on a commercial scale. In order to expand agriculture, the French turned their attention to the underdeveloped, warmer South, where French cultivation of such crops as rubber, coffee, tea, and, in Cochinchina, rice gave rise to a group of agricultural and plantation wage earners. *

In the North, while irrigated rice remained the principal subsistence crop, the French introduced plantation agriculture with products such as coffee, tea, cotton, and tobacco. The colonial government also developed some extractive industries, such as the mining of coal, iron, and nonferrous metals. A shipbuilding industry was begun in Hanoi; and railroads, roads, power stations, and hydraulics works were constructed. In the South, agricultural development concentrated on rice cultivation, and, nationally, rice and rubber were the main items of export. Domestic and foreign trade were centered around the Saigon-Cholon area. Industry in the South consisted mostly of food-processing plants and factories producing consumer goods. * The development of exports--coal from the North, rice from the South--and the importation of French manufactured goods, however, stimulated internal commerce.

The colonial period also led to a substantial increase in the Hoa population. The country's limited foreign and domestic trade were already in the hands of Chinese when the French arrived. The French chose to promote the Chinese role in commerce and to import Chinese labor to develop road and railroad systems, mining, and industry. French colonial policy that lifted the traditional ban on rice exports at the end of the nineteenth century also attracted new waves of Chinese merchants and shopkeepers seeking to take advantage of the new export market. Vietnam's growing economy attracted even more Chinese thereafter, especially to the South. Already deeply involved in the rice trade, the Chinese expanded their interests to include ricemilling and established a virtual monopoly. *

Vietnamese Economy During the Period of War from 1945 Until 1975

A pattern of trade developed whereby rice from the South was exchanged for coal and manufactured goods from the North. When the North and South were divided politically in 1954, they also adopted different economic ideologies, one communist and one capitalist. In the North, the communist regime's First Five-Year Plan (1961-65) gave priority to heavy industry, but priority subsequently shifted to agriculture and light industry. [Source: Library of Congress *]

During the 1954-75 Second Indochina War (the Vietnam War) , United States air strikes in the North, beginning in early 1965, slowed large-scale construction considerably as laborers were diverted to repairing bomb damage. By the end of 1966, serious strains developed in the North's economy as a result of war conditions. Interruptions in electric power, the destruction of petroleum storage facilities, and labor shortages led to a slowdown in industrial and agricultural activity. The disruption of transportation routes by U.S. bombing further slowed distribution of raw materials and consumer goods. In the North, all 6 industrial cities, 28 out of 30 provincial towns, 96 out of 116 district towns, and 4,000 out of 5,788 communes were either severely damaged or destroyed. All power stations, 1,600 hydraulics works, 6 railway lines, all roads, bridges, and sea and inland ports were seriously damaged or destroyed. In addition, 400,000 cattle were killed, and several hundred thousand hectares of farmland were damaged. *

The economy in the South between 1954 and 1975 became increasingly dependent on foreign aid. The United States, the foremost donor, financed the development of the military and the construction of roads, bridges, airfields and ports; supported the currency; and met the large deficit in the balance of payments. Destruction attributed to the Second Indochina War was considerable. Hanoi claimed that in the South, 9,000 out of 15,000 hamlets were damaged or destroyed, 10 million hectares of farmland and 5 million hectares of forest lands were devastated, and 1.5 million cattle were killed. *

For Vietnam as a whole, the war resulted in some 1.5 million military and civilian deaths, 362,000 invalids, 1 million widows, and 800,000 orphans. The country sustained a further loss in human capital through the exodus of refugees from Vietnam after the communist victory in the South. According to the United Nations High Commission for Refugees, as of October 1982 approximately 1 million people had fled Vietnam. Among them were tens of thousands of professionals, intellectuals, technicians, and skilled workers. *

Hunger and Queues in Hanoi

During the "hard times" of hunger in Hanoi from 1968 to 1989, people used rocks to keep their place in queues to collect water in communal water taps and buy a few ounces of food with state-issued ration coupons. "During the subsidy years, using a book to buy rice, scrambling to be the first buyer, or to buy a good bag of rice made a deep impression on me," Nguyen Ngoc Tien, a collector of memorabilia from the era, told Reuters. "Those who came late could not get food." [Source: By Grant McCool , Ho Binh Minh, Nguyen Van Vinh, Reuters, May 10, 2006 //\\]

Reuters reported: "Queues started at 3 a.m., more than four hours before shops opened, said Tien. In his hands, he held what is his most valuable and symbolic item -- a large stone scratched with a name and house number that was used to secure a place in line." Other common items form the era included charcoal-heated clothes irons, chipped porcelain rice bowls, Soviet-made radios with incorrect Vietnamese-language labels, scale from Poland. Tien’s prize possession is a BMW motorbike used by a spy who was the director of a rubber plant. The collector explained that he wanted these possessions from people all over the country because "the period when Vietnam had its subsidy system was rare in the world's history." Vietnamese remember it for low costs for staple goods but dire shortages. //\\

"During the decades of subsidized living, Vietnam was at war and isolated from the West. It depended on support -- food, machinery and raw materials -- from the former Soviet Union and other communist or socialist countries in Eastern Europe. The United States backed a South Vietnam regime in a war with the communist North and then imposed a trade embargo after the communists unified Vietnam in 1975. //\\

Problems with the Vietnamese Economy After the Vietnam War in 1975

After reunification in 1975, the economy of Vietnam has been plagued by enormous difficulties in production, imbalances in supply and demand, inefficiencies in distribution and circulation, soaring inflation rates, and rising debt problems. Vietnam was one of the few countries in modern history to experience a sharp economic deterioration in a postwar reconstruction period. Its peacetime economy was one of the poorest in the world and has shown a negative to very slow growth in total national output as well as in agricultural and industrial production.

Vietnam developed little during the war years; industry was nearly non-existent in both North and South and both countries were dependent on foreign donor countries. Worse, the country's critical agricultural infrastructure had been badly damaged. The South had roughly 20,000 bomb craters, 10 million refugees, 362,000 war invalids, 1,000,000 widows, 880,000 orphans, 250,000 drug addicts, 300,000 prostitutes and 3 million unemployed. [Source: Wikipedia]

Vietnam pursued isolationist policies while the United States worked hard to isolate Vietnam economically, all with disastrous results. Vietnam's economic problems were exacerbated by the costly and ultimately unsuccessful invasion of Cambodia in 1979. The 1979 war between China and Vietnam was also costly to Vietnam. It was started by China who was going to teach Vietnam a lesson for ousting the Khmer Rouge.

Post-1975 developments, including the establishment of new economic zones, did not eradicate distinctions between North and South.

Economic Policy After the Vietnam War

In an effort to socialize the economy the Vietnamese government followed the Chinese model. It closed thousands of small businesses and replaced them with a state trading network. Wealth and property were seized. Most landholdings were collectivized. Merchants and landowners were tossed into the streets, their assets were seized, and in some cases they were shipped off to "new economic zones."

Having won the war and defeated South Vietnam, the modd of Vietnam’s leader Le Duan in April 1975 was optimistic. As one Central Committee member put it, "Now nothing more can happen. The problems we face now are trifles compared to those in the past." Le Duan promised the Vietnamese people in 1976 that each family would own a radio set, refrigerator and TV within ten years; he seemed to believe he could easily integrate the South Vietnamese consumer society with agrarian North Vietnam. In 1976 the 4th National Congress declared Vietnam would complete its socialist transformation within twenty years. This optimism proved unfounded; instead Vietnam staggered from one economic crisis to another. [Source: Wikipedia +]

The main goals of the Second Five-Year Plan (1976–1980), which was initiated at the 4th National Congress, were as follows: 1) "Concentrate the forces of the whole country to achieve a leap forward in agriculture; vigorously develop light industry" 2) “Turn to full account existing heavy industry capacity and build many new industrial installations, especially in the machine industry, so as to support primary agriculture and light industry." 3) "Virtually complete socialist transformation in the South" +

The Vietnamese leadership expected to reach these targets with economic aid from the Council for Mutual Economic Assistance (COMECON) and loans from international agencies of the capitalist world. The 4th National Congress made it clear that agriculture would be socialised; however, during the Second Five-Year Plan the socialisation measures went so badly that Võ Chí Công, a Politburo member and Chairman of the Committee for the Socialist Transformation of Agriculture, claimed it would be impossible to meet the targets set by the plan by 1980. An estimated 10,000 out of 13,246 socialist cooperatives, established during the plan, had collapsed in the South by 1980. Politburo member Lê Thanh Nghi. attacked lower-level cadres for the failure of the socialist agriculture transformation. The collectivisation process led to an abrupt drop in food production in 1977 and 1978, leading the 6th Plenum of the Central Committee to completely overhaul the Party's agricultural policies. +

With regard to heavy industry, the leadership's position was muddled. In his Fourth Political Report Le Duan stated that during the transition to socialism, priority would be given to heavy industry "on the basis of developing agriculture and light industry". In another section of the report, Le Duan stated that light industry would be prioritised ahead of heavy industry. The position of Pha.m Van Dong, the Chairman of the Council of Ministers (the head of government), was just as confused as Le Duan's. In practice Le Duan prioritised heavy industry: 21.4 percent of state investment was in heavy industry in the Second Five-Year Plan and 29.7 percent in the Third Five-Year Plan (1981–1985). Light industry only received 10.5 and 11.5, respectively. From 1976 to 1978 industry grew, but from 1979 to 1980 industrial production fell substantially. During the Second Five-Year Plan industry grew just 0.1 percent. The 6th Plenum of the Central Committee criticised the policy that the state had to own everything. +

Before the 5th Central Committee Plenum, Le Duan believed that Vietnam was in a perilous position, although no talk of reforms followed. Beginning in 1979, Le Duan acknowledged that economic policy mistakes had been made by the national Party and State leadership. Until the 6th plenum, the planners prevailed. That plenum condemned the old ways and promised that from then on the economy would be governed by "objective laws". The roles of the plan and the market were openly discussed for the first time and the roles of the family and the private economy were enhanced and certain market prices were officially supported by the Party. Le Duan endorsed the reforms at the 1982 5th National Congress. Le Duan talked about the need to strengthen both the central planned economy and the local economy at once. In his report Le Duan admitted that the Second Five-Year Plan had been a failure economically. +

Results of the Economic Policy After the Vietnam War

Le Duan promise of a television and refrigerator in every home in 10 years instead turned out to be "the 10 bad years." A craftsman told Stanley Karnow the Communist government "provided us with social welfare but they didn't understand the need for incentive. they saddled us with corrupt, incompetent managers.”

After the war, per capita income stood at $101; it decreased to $91 in 1980 and then increased to $99 by 1982, according to United Nations figures. Vietnamese Premier Pham Van Dong admitted that per capita income "had not increased compared to what it was ten years ago". Physical health declined and malnutrition increased under Le Duan, according to the Ministry of Health. According to the The International Herald Tribune, an estimated 6,000,000 Vietnamese were suffering from malnutrition, leading the government to request aid from the United Nations Food and Agriculture Organization. Le Duan's policies led to an abrupt decline in the standard of living; monthly per capita income in the North declined from $82 in 1976 to $58 in 1980.

The command economy strangled the commercial instincts of Vietnamese rice farmers. Even though Vietnam is one the world’s leading rice exporter today, by the early 1980s Vietnam was a rice importer. Stanley Karnow wrote in Smithsonian magazine: "Encouraged by the Soviet Union, the Vietnamese government squandered vast sums on industrial projects like steel mills, rather than concentrating on agriculture and small factories. They suppressed private entrepreneurs and, by shunting peasants into collectives, sapped initiative and crippled farm production. They also interned as many as 300,000 vanquished South Vietnamese officials and army officers in brutal 'reeducation' camps."

From 1981–1984 agricultural production grew substantially, but the government did not use this opportunity to increase production of such crucial farm inputs as fertilizer, pesticides and fuel, nor of consumer goods. By the end of Le Duan's rule, in 1985–1986, inflation had reached over 100 percent annually, complicating economic policy-making.

Harsh Economic Life in the late 1970s and Early 1980s

Describing Hanoi in 1980, Seth Mydans wrote in the New York Times, it was "crushed between the petulant economic embargo of the losers and the ruinous attempt by the winners to impose the Communist economy the had fought for...By day the city seemed half asleep. Private commerce was banned and shops were shuttered. the grandest hotel was a dank, poorly lighted chamber of creekin floors, spiders and dust. The old French Hanoi General Department Store...offered little more than matches and soap on it nearly empty shelves...At night...electric power was cut to save costs."

"When I saw Hanoi in 1981," Karnow wrote, "not a needle or a bar of soap could be found in its empty shops. people spent hours foraging for a scrap of food or a stick of firewood. ragged families straggled into town from areas that suffered from actual famine. They begged in front of hotels, and huddled together for warmth on cold drizzly nights...Rats scurried around the lobby, where outmoded European leftists exchanged fatuous revolutionary jargon with Asian, African and Latin American insurgents then often trained in Vietnam."

College students can remember standing with their families in long lines, waiting to receive their ration of rice. Even when food was plentiful people were reluctant to buy it out of fear that they would draw attention to themselves for having money. One Saigon tailor told the Los Angeles Times, "In the bad years after the war when times were very, very tough we sold everything just to survive: the refrigerator, the radio, our clothing...Finally we had nothing left.

Economic Crisis in the Mid 1980s

The harsh postwar crackdown on remnants of capitalism in the South led to the collapse of the economy during the 1980s. Vietnam's gross domestic product (GDP) in 1984 was valued at US$18.1 billion with a per capita income estimated to be between US$200 and US$300 per year. Reasons for this mediocre economic performance have included severe climatic conditions that afflicted agricultural crops, bureaucratic mismanagement, elimination of private ownership, extinction of entrepreneurial classes in the South, and military occupation of Cambodia (which resulted in a cutoff of much-needed international aid for reconstruction). [Source: Library of Congress *]

By the mid 1980s, the Vietnamese economy was on the verge of collapse. Inflation neared 700 percent a year; civil salaries were $5 a month plus food rations,: people were hungry and queued for rice and meat; Russians were dismissed as "Americans without dollars." One diplomat told National Geographic, "Hanoi was so impoverished in ‘84 you could invite only one person from the Ministry of Foreign Affairs to a diplomatic function because there was only one suit at the ministry and people had to share it. Sometimes an official would show up wearing a funny-looking coat with sleeves that reached his elbows. He’d be one of the big guys the suit didn’t fit.” Only the party elite lived reasonably well.

As the "hard times” of the 1980s wore on Soviet bloc support evaporated. The Vietnamese got some some economic help from the people they regarded ast he enemy during the war — the United States, Japan, South Korea, Australia and Thailand—but not much. With the economy in shambles, Vietnam’s government altered its course and adopted consensus policies that bridged the divergent views of pragmatists and communist traditionalists.

Image Sources:

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, Vietnamtourism. com, Vietnam National Administration of Tourism, CIA World Factbook, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Global Viewpoint (Christian Science Monitor), Foreign Policy, Wikipedia, BBC, CNN, Fox News and various websites, books and other publications identified in the text.

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© 2008 Jeffrey Hays

Last updated May 2014

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