The economic gains of socialist Vietnam By: Charles McElvey

9/5/2025

The economic gains of socialist Vietnam By: Charles McElvey

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Vietnam is proud of its road of Innovation. Source: Digital newspaper, Communist Party of Vietnam

In Socialist Economic Development in the 21st Century (London: Routledge, 2022), Alberto Gabrielle and Elias Jabbour undertake a reconceptualization of fundamental categories originally formulated by Marx, taking into account developments during the twentieth and twenty-first centuries, including the emergence of real socialist projects in the global South. Gabriele is a Senior Researcher at Sbilanciamoci, Rome, Italy. Jabbour is Assistant Professor at the Faculty of Economic Sciences, Postgraduate Programs in Economic Sciences, and International Relations at the State University of Rio de Janeiro.

For Gabrielle and Jabbour, socialism is characterized by, first, the elimination of capitalist exploitation; secondly, the distribution to each person according to work; and thirdly, the public appropriation of surplus, such that the surplus is allocated to various forms of investment and social consumption. Socialism can have centralized planning, as was the case with the Soviet Union; or it can have “socialist-oriented planned market-economies,” as in the cases of China and Vietnam in recent decades. In their definition, national economies are socialist-oriented if they officially and credibly claim to be engaged in a process aimed at establishing and developing a system characterized by the elimination of capitalist exploitation, fair distribution in accordance with one’s contribution to the society, and the use of the surplus generated by productive labor to develop the national economy and to provide for the needs of the people; and if they have advanced measurably toward these officially proclaimed goals.

Gabrielle and Jabbour use the construct “socioeconomic formation” to refer to a social and economic system with a degree of internal consistency and stability, which historically prevails in a specific place and time, like a particular nation-state. In socioeconomic formations, a mode of production (hunting and gathering, feudal, capitalist, or socialist) is primary, and the primacy of a certain mode of production in a specific historical context can be absolute or relative. In some socioeconomic formations, the primacy of a single mode of production is overwhelming. In other socioeconomic formations, two or more modes of production coexist. This has been common in human history since the agricultural revolution; but generally, one of the modes of production is dominant.

Social movement organizations formed by exceptional leaders can attain systemic change by subverting the social and economic structures of a socioeconomic formation. Lenin and Mao, who conceived socialist-oriented socioeconomic formations, are important examples. However, Gabrielle and Jabbour maintain, visionaries and revolutionary leaders like Lenin and Mao could not fully implement their projects, giving rise to mixed socioeconomic formations. Accordingly, several national economies, including those of China and Vietnam, are characterized by mixed socioeconomic formations, in which capitalist and socialist modes of production coexist, in the framework of a socialist-oriented development strategy, in which the State exerts a high degree of direct and indirect control over the national economy.

Such mixed socioeconomic formations with socialist-oriented development strategies are obligated to construct their projects in a global context in which the capitalist mode of production, with market-based relations of production and exchange, is dominant. Even though no nation’s socioeconomic formation is fully contained, each is constrained by the larger prevailing worldwide and globally dominant socioeconomic formation, Gabrielle and Jabbour maintain. Each socioeconomic formation must adapt to the hegemonic interests of the strongest and most advanced countries of the world-system and the interests of the ruling class in said countries.

The worldwide socioeconomic formation itself has constraints placed on it by various historical, political, economic, and technological factors, which cannot be ignored. Therefore, any quixotic, subjective political action or proposal that ignores such constraints is futile and counterproductive.

However, Gabrielle and Jabbour maintain, the global socioeconomic formation is not immobile or eternal. Several alternative forms of socioeconomic systems can be developed, and some socialist oriented economies have been developed in the Global South.

Gabrielle and Jabbour maintain that socialism in the real world cannot escape the laws of economics. The law of value, for example, according to which prices of commodities tend toward the costs of production, applies to both capitalism and socialism. As does the classical distinction between productive and non-productive labor, and the necessity of funding non-productive labor (e.g., public health and public education) through the surplus generated by productive income-generating labor. To be sure, there is a major difference between capitalism and socialism, in that socialist economies are directed by the State, and a greater share of the surplus is channeled to social or development-oriented investment. Nevertheless, socialism cannot attain its goals if it ignores the laws of the science of economics.

Gabrielle and Jabbour stress that, although the dominance of the capitalist mode of production continues worldwide, it is weaker than it once was. The current weakness of the capitalist mode of production provides socialist-oriented economies with possibilities for economic integration with each other, which they are seizing.
In today’s commentary, I propose that we look at Gabrielle and Jabbour’s observations on the development of the new socialist model in the Socialist Republic of Vietnam.

This is the fourth in a series of commentaries commemorating the eightieth anniversary of the Vietnamese declaration of independence. The first three commentaries are open for visits:

Export and import values in 2019 were 172 times greater than in 1986. Source: Government News, Socialist Republic of Vietnam

Socialist-oriented socioeconomic formation in Vietnam

Following the reunification of Vietnam in 1975, the leaders of the Communist Party of Vietnam initially had been oriented to the conventional socialist centrally planned economy that had been implemented with success in the Democratic Republic of Vietnam (North Vietnam). However, Party leaders soon recognized that the centralized planning approach was not adequate for responding to the serious problems in the economy in the late 1970s, which to a considerable extent were related to challenges presented by the reunification and by the destruction of more than thirty years of war.

At the Sixth National Congress of the Communist Party of Vietnam (formerly the Indochinese Communist Party and the Vietnamese Workers’ Party), held on December 15-18, 1986, the various scattered economic reform initiatives of the 1980s were formulated into a coherent and radical reform strategy, which it called Đổi Mới (Innovation). The Congress called for a socialist-oriented market economy, in which state-owned economic enterprises would co-exist with private enterprises, both domestic and foreign, and in which state planning would utilize market forces. Đổi Mới would become the policy of the government, and it was successful not only in overcoming macroeconomic imbalances but also in creating exceptionally fast economic growth.

Đổi Mới was a radical reformulation of economic policy, a necessary response to concrete problems. It was, however, a reformulation that was fundamentally different from the neoliberal policies of the International Monetary Fund. Moreover, even though Vietnam and China arrived to similar systems of agricultural production and exchange, the Vietnamese reformulation was not a copy of the economic policies of China. It was a reformulation rooted in Vietnamese conditions and goals, independently formulated by the Communist Party of Vietnam, and embraced by the Vietnamese people.

Gabrielle and Jabbour emphasize that the market-oriented reforms in Vietnam, launched in the 1980s, were initially undertaken in “an ad hoc and experimental fashion, pressed by the urgency to avoid famine and economic collapse.” The reforms are best understood as an effort by the central government to control spontaneously emerging processes by legalizing them and setting formal limits.

The initials steps in the reform were taken in the countryside. Collectivized agriculture had been developed in North Vietnam in the 1950s, moving progressively from work-exchange teams to low-level cooperatives and ultimately high-level cooperatives. The development of cooperatives led to the adoption of upgraded rice varieties and modern technology. However, it ultimately led to insufficient incentive to work, provoking a decline in labor and productivity.

In the South during the 1950s (under American control), there was greater productivity than in the North, due to a more favorable farmer/land ratio and to a higher technological level, but land and income was unequally distributed among farmers. Following the reunification of 1975, collectivization was pushed in the South, but it was resisted by Mekong Delta farmers, and it made only partial inroads in other provinces. Resistance to the collectivization campaign led to a drop in rice production in the late 1970s.

In response to the decline in agricultural production in the North and the South, which occurred as noted for different reasons, the Party in April 1981 changed course. It launched the Contract System, in which farming households agreed by contract to deliver a fixed quota to the cooperative, which would be traded at a planned price. The contracts freed farmers to organize production on their plots and to use surplus production for sale or for self-consumption, thus incentivizing creativity and work at the level of the farming household.

The Contract System initially led to a significant increase in food production, but its gains slowed, as a result of the continuation of many aspects of centralized planning. Land use and crop decisions continued to be carried out by the State Planning Commission, which even failed sometimes to carry out the state’s side of the contract. In addition, the security of land tenure was insufficient to induce peasants to invest in the land.

Therefore, in 1988, ideologically and politically supported by the Party’s 1986 proclamation of the Đổi Mới, further reforms were introduced that increased the length of leasing tenure to farming households to up to 20 years; and that further liberalized and decentralized markets. Moreover, responding to conflicts that had emerged from the 1970s collectivization, the 1988 reform established that most farmers (but not landlords) would maintain rights on land they had owned before 1975.

The 1988 measures led to a new surge in productivity. Vietnam became a major rice exporter. The reform was intensified in 1993, with a new Land Law that further strengthened farmers’ tenure, security, and flexibility, granting rights to exchange, transfer, inherit, lease, and mortgage leased land.

Although the reform was developed initially as an ad hoc response to insufficient food production, without a clear plan, it evolved “to establish a consistent and sustainable market-based household-centered agricultural sector, which constituted a solid foundation underpinning the rapid (albeit uneven) industrialization and modernization process that followed,” as expressed by Gabrielle and Jabbour.

Beyond reforms in agriculture, the Đổi Mới policy also included reforms in other sectors of the economy. These included price liberalization, currency devaluation, the opening of foreign investment, the increased autonomy of state-owned enterprises, and the limitation of the scope and authority of the state command chain.
In its efforts to reform the industrial sector, the government of Vietnam focused on restructuring, revitalizing, and strengthening major industrial state-owned enterprises. This process included more autonomy for state-owned companies to use surplus production beyond the contractual quota and, with some restrictions, to relocate assets to produce and sell new products.

The reform of the industrial sector also included consolidation and corporatization. In the 1990s, most state-owned enterprises were too small and weak to withstand international competition. The process of consolidation, seeking to strengthen the industrial sector through combination, cut the number of state-owned enterprises in half during the period 1994 to 1996. Consolidation was pushed further by the creation of General Corporations or state enterprise groups, which were given a very high degree of autonomy. “The ultimate goal was to nurture a small elite of strong national champions endowed with abundant assets and ample financial resources, that would be capable to achieve economies of scale and rapid technological upgrading, thereby achieving a high degree of international competitiveness,” in the words of Gabrielle and Jabbour.

Although initiated in the early 1990s, consolidation and corporatization have been evolving cautiously. There has been resistance from both management and workers, concerned that the consolidation might result in the loss of their positions. Accordingly, Gabrielle and Jabbour write that the process “did not bring about a thorough transformation of most state-owned enterprises into mixed enterprises with significant private participation.” However, “it was instrumental as a tool to consolidate the public industry into a reduced number of large enterprises and groups and to transform them into more modern and market-oriented organizations.”
The fundamental goal of the Đổi Mới policy is to increase productivity with respect to food, consumer goods, and export products. It seeks to support the development of a mixed economy, with effective state regulation of the activities of capitalists and traders.

The positive results of the Đổi Mới policy

Gabrielle and Jabbour maintain that the reforms enabled Vietnam to overcome serious economic difficulties and to resume growth. Moreover, the government has taken an egalitarian approach and has attempted to control the consequences of the market-driven concentration of wealth. Great strides have been made in combatting poverty and malnutrition and expanding public health and education. And the great majority of the people have been fully involved in the overall development project. In 2003, the World Bank described the dynamic in Vietnam as “pro-poor growth.”

Moreover, economic growth in Vietnam compares favorably with neighboring countries. “Since the 1990s, Vietnam has outperformed the most advanced semi-industrialized capitalist countries in Southeast Asia along many dynamic dimensions, including growth in GDP, GDP per capita, labor productivity, and wages – even if its overall level of development has remained lower.”

Gabrielle and Jabbour conclude that “the broad picture is that of a glass that is more full than empty. Key indicators such as growth in GDP, GDP per capita, labor productivity and wages has been faster in Vietnam than in other countries in Southeast Asia, which remains one of the best performing regions in the Global South.” Vietnam’s exceptional performance is even more evident when expressed in terms of the human development index and expansion of universal access to basic services. In addition, economic growth, led by state-owned enterprises in heavy industry and infrastructure, has enhanced the country’s human capital, creating a huge potential for future growth. “Vietnam’s human development achievements have been exceptional by international standards.”

§
The state continues to direct
Gabrielle and Jabbour maintain that even though the number of state-owned enterprises has been shrinking over time, the level of state dominance over the core component of the Vietnamese economy has changed little during the four-decades-long process of liberalization, market opening, and legalization of private enterprises. “The ultimate control is still exercised indirectly by the state.”
Nor has the entrance of Vietnam into the World Trade Organization undermined the commanding role of the state. With respect to the banking and finance sector, Gabrielle and Jabbour write that “in the specific context of Vietnam’s socialist-oriented development strategy, the partial and selective financial liberalization taking place after the World Trade Organization accession has not undermined the commanding role of the state.” It is a partial and selective liberalization, guided by the economic plan and the development strategy of the State.

§
The gains continue
A recent article by Tien Phong in VietNamNet Global, entitled “Vietnam’s 80-year economic evolution: From hardship to high growth,” confirms the continued economic growth of socialist Vietnam. The article quotes economist Ngo Tri Long, who reiterates that in the period 1945 to 1975, North Vietnam stressed the formation of agricultural cooperatives, state-owned enterprises, and centralized distribution systems, and this approach was effective in building an economy devastated by war and social dislocations. However, following the reunification of Vietnam in 1975, the government’s application of the centralized planning economic model, intended to stimulate rapid industrialization, provoked hyperinflation, stagnation in production, and widespread shortage. So the Đổi Mới reform was introduced, which stressed market-oriented reforms under socialist orientation, with very positive results. From 1990 to 2000, GDP grew an average of 7.6% per year, as exports grew from USD 789 million in 1985 to USD 14.4 billion by 2000. During this period, Vietnam joined ASEAN and normalized relations with the USA. The growth continued in the twenty-first century, as per capita income reached USD 2,750 in 2020, as against USD 130 in 1990. Vietnam emerged as Asia’s new manufacturing powerhouse, and poverty fell from over 58% in 1993 to under 3% by 2020.
The article also cites Assoc. Prof. Dr. Ngo Tri Long, who stressed the importance of macroeconomic stability. He noted that from 2014 to 2024, the average inflation rate was only 2.9% annually, as a result of effective monetary policy and prudent macroeconomic management. Ngo notes that by 2024, the structure of the national economy had shifted toward industry and construction (37.64%) and services (50.5%) as key drivers of the economy, with agriculture-forestry-fisheries reduced to 11.86%. Exports soared to USD 405.5 billion in 2024, compared to USD 789 million in 1986, a 500-fold increase. The gains are evident in social indicators, as life expectancy reached 74.5 years in 2023, and health insurance now covers 93% of the population.
Ngo Tri Long observed that Vietnam intends to continue its leap forward through investment in science and technology, especially artificial intelligence, semi-conductors, and green technologies.

Conclusion

Socialist projects in the real world since 1945 have been developing socialism that has characteristics different from the socialism of the Soviet Union of the 1930s and is fundamentally different from the caricature of socialism and the ignorance with respect to socialism that pervade the public discourse of Western nations. The key component of the post-1945 socialism of the Global South is state direction of the economy, with a focus on increasing productive capacity in industry and agriculture. In the attainment of this goal, guidelines are established for the participation in the economy of private enterprises, small and large, domestic and foreign. But the state remains in control, and it acts decisively to adjust to consequences that contradict the socialist orientation of the nation.

In the experience of attempting to construct socialism, nations with a socialist orientation learned that there was truth to the maxim that individuals must have incentives to work, and that private ownership in general provides incentives for work and creativity. But capitalist ideology expressed this maxim as a justification for no state involvement in the economy, thus permitting the economy to be ruled by profit and by large corporations, regardless of the consequences for human beings, nature, and the long-term development of national economies. But when the nations constructing socialism discovered in their experience the human need for work incentives, they decided to let that need express itself, but at the same time, to maintain state direction of the economy.

We thus can see the significance of socialist projects in the real world for humanity. Nations constructing socialism have discovered through experience the need to develop structures that incentivize work and creativity, but that also are designed to address the long-term needs of the people, the nation, and humanity as a whole. At the same time, although not addressed in today’s commentary, nations constructing socialism have developed structures of people’s democracy, characterized by direct and indirect elections of people’s councils and people’s assemblies, with function to keep the interests of the wealthy at bay. Socialist projects in the real world are constructing the most advanced political-economic systems of our times.

Originally published on charlesmckelvey.substack.com

Author

Charles McKelvey is influenced by black nationalism, the Catholic philosopher Lonergan, Marx, Wallerstein, anti-imperialism, and the Cuban Revolution. Since his retirement from college teaching in 2011, he has devoted himself to reading and writing on world affairs.

The economic gains of socialist Vietnam By: Charles McElvey

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