Written by Adam Fforde.

Vietnamese domestic politics have long been highly theatrical. This, naturally enough, has had both positive and negative consequences.

Take the idea that Vietnam is one of those countries run by a Communist Party with a Politburo that decides stuff, issues orders and then everybody clicks their heels and toes the line. My own PhD, which looked at communist agricultural cooperatives in the north, concluded that most of the time most of them did not do what the Party said they should do. The so-called ‘5%’ of land reserved by the Party’s Statute on Cooperatives for private cultivation, with the output legally sold on markets, was in fact much more than ‘5%’. When I got to do real fieldwork in the late 1980s (my period covered that before 1975 when there was a war on) one way of getting credibility was to ask ‘what % of your land was the ‘5%’ land, and to watch the grin as they replied, “Oh, 20%”. The emergence of the market economy in the early 1990s was based on the massive commercialisation of State Owned Enterprises, all run of course by good Party members. These officials had ignored Plan instructions from at least the early 1960s in the north and then with added vigour in the late 1970s. This behaviour was then legalised by a decree in 1981. They made substantial amounts of money, which they then used to encourage their supporters as they fought off the so-called conservatives who still wanted goods delivered cheaply to the Plan. These officials won out at the 1986 VIth Party Congress, where it was announced that the Party was in charge, always had been, but had changed its mind and was now far nicer and more liberal. That was labelled ‘doi moi’, and it subsequently spawned a host of accounts that legitimised all sorts of expensive policy advice groups, conferences on strategy and advocacy exercises, all of which bought the line that the Party is in charge, and so things happen if the Party says so. Oh well, aid dollars are good for all sorts of things. I recently reviewed a book, a published PhD no less, that sang this song.

Until about 2007 there was a certain order of things in Vietnam. The Party did what it did, the people did what they did. The macroeconomy was kept rather stable, helped by the fact that economic rents were not really needed to preserve this order, as the steady growth of capitalism was creating a capitalist class made up in part of those with good connections who could ‘acquire’ assets needed for their businesses.  It also included other people who managed to put funds together in some way and then tried their hand. Prices were stable, credit was available at a reasonable rate of interest, bank accounts paid reasonable rates of interest and were liquid. The State Bank, well aware of that one element of the chaos of the late 1980s was rapid inflation, was listened to. A middle class was forming, and things were feeling familiar to foreigners used to developing capitalist countries. NGOs formed to service the needs of INGOs and bilateral donors – an ersatz civil society, familiar from other countries (the Eastern European lament – “They promised us civil society and we got NGOs”).

However, aid donors made little effort to reach out to what was really going on – in the rural areas, farmers were busy forming informal groups, a civil society; labour conflicts were largely led by workers’ own leaders. This was in part because of donors’ strategic and convenient decisions taken in the late 1990s to continue working with official bodies, since (see above), the ‘Party was in charge and policy mattered’.

But in 2007 (or around there) something changed. Arguably, the order created in the early 1990s collapsed as large business groups exerted political power, and won out. Large capital inflows were occurring, the State Bank was buying the $s and selling domestic currency, and needed to get the domestic currency back to prevent inflation. This was stopped, by political interference, and, within months, rent-creation had returned, on credit and foreign exchange markets in particular. Resources were sucked out of the SME sector, rural development and public services, and channeled towards the favoured large business groups. Within the Party, the collapse of this order showed the now impotent nature of formal political structures, and the Premier, traditionally far lower in rank than the General Secretary and the Politburo, was able, through his backers, to buy sufficient support in the Central Committee to avoid censure and keep his job. All this naturally hammered economic growth, the legitimacy of the regime, the quality of public goods production , but increased the value of the security apparatus and the nationalist card, both of which have been deployed.

What is striking is the absence, within the ranks of publicly known political leaders or potential political leaders, of personalities capable of mobilising support ‘outside the box’, as Yeltsin managed to do in Russia. The simple answer probably is not that the security apparatus is too effective, but that progressive opinion is too weak, and those who have tested these waters have found that too many people put the system and their own interests above those of the country.

The outlook is therefore rather boring. One can expect increasing levels of violence, cynicism and corruption, and in parallel an ebb and flow of counter ‘spin’ designed to preserve aid program, margins for those advising foreign investors and so on. Public education, health and infrastructure are increasingly inadequate and it is pretty certain that Vietnam will become another example of countries that, having attained middle income status, then fail to move through it. All of which is a pity, given the quality of the population. But those who are responsible are the great mass of Party members, good members of the establishment, Principals of High Schools, Army Colonels, etc, who did not rethink what was likely to be needed in terms of political change as Vietnam’s market economy and globalisation started to accelerate in the early 1990s. But, to paraphrase Frank Zappa, stupidity not only has a long shelf life, but is very common place amongst our species. At some point reality comes back in, but it does not seem very well placed to do so for Vietnam at present.

Adam Fforde is at the Victoria Institute of Strategic Economic Studies, Victoria University where he is a Professorial Fellow, and the Asia Institute, University of Melbourne where is is Principal Fellow (honorary).