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Global crisis and challenges to Vietnam analyzed

Impacts of the current global crisis and its challenges to Vietnam, where efforts are being made toward an innovated socialism, have been analyzed by VPDF Vice-President Nguyễn Văn Thanh at a recent international workshop in Hanoi.


The workshop was themed “The Global Crisis and Strategies of the Left”.

Mr. Thanh’s presentation reads in full as follows:

A global crisis was kindled by the US financial crisis in late 2007. In June 2009, recession was officially declared overcome. Yet, the economic landscape in the world’s Number One Superpower and elsewhere remains far from bright. As shown by a recent Rasmussen Report, 82% of Americans believe that “economic challenges are for the US an even bigger threat than military challenges”. The Greek and Eurozone debt crisis is still unpredictable. The “Occupy Wall Street” campaign is spreading to other continents, and turning into “Occupy Everywhere”. On September 20th, the IMF noted that the US and the EU are at the risk of a double crisis. This was confirmed two days afterward, on September 22nd, when George Soros the Billionaire remarked that “the US has fallen into a double dip”.

The powerful US held up to 50% of the world’s output after the Second World War. Now, 65 years later, it accounts for only a little more than 20%. Poverty rates increase annually and rose to 15.1% of the population in 2010[1]. One fifth of New York citizens are listed poor. The economic seisms in the US and Europe show that the longer capitalism exists, the longer and more acute injustices are. Built on injustices, capitalism nevertheless has safety valves –  necessary therapies from demagogy to oppression – to sustain the capitalist society. But for how long?

Capitalism exploits an inherent tendency of humans, namely egoism rather than altruism, or more egoism than altruism. The great American capitalist Andrew Carnegie once said, “He who dies  rich,  dies in disgrace”, by which he implied that one should be charitable and altruistic in order to die in peace. Hence, a capitalist society may have money for education, healthcare and social welfare, and for the training of a generation adaptive to new technologies. But the eventual results remain profits for the big bosses and widening gaps between the rich and the poor.

Crisis and recession are closely attached to the emergence and development of capitalism. According to Wikipedia citing NBER, the US has since 1790 experienced 47 recessions. In 1857-1858, when recession took hold of major capitalist countries, such as Britain, the US, France and Germany – which could be considered the first systemic recession of modern capitalism, another typical example of which was the Great Depression of the 1930s and 1940s – Karl Marx already predicted the unavoidable collapse of capitalism. In the mid-19th century, Karl Marx asserted that capitalism would collapse due to irreconcilable internal contradictions. He particularly emphasized the economic inequalities in society and the ever widening gap between the rich and the poor. And the day will come when the gap is so wide that the proletariat will rise up in an anti-capitalist revolution. In the “Occupy Wall Street” campaigns in the US and elsewhere, references have already been made to a proletarian revolution.

The current global crisis has raised a question about the sustainability of the capitalist system. What will be the future of a system based on individual profit? What system will replace it, as capitalism cannot be the peak of humankind (Francis Fukuyama[2]). How can social injustices be accepted eternally! The current global crisis has rendered the contradictions of capitalism more acute than ever before. These are contradictions between capital and the working people, between imperialist and nationalist countries, between metropolitan and peripheral countries, and between capitalist superpowers on the one hand and former socialist countries and those choosing the non-capitalist path on the other. As shown by the “Another Davos”, “Porto Allegre” and “Occupy Wall Street” campaigns, in the capitalist society injustices were becoming graver, social security networks weaker, and the working people poorer.

According to the Economic Policy Institute (EPI), between 1983 and 2009, the richest 1% of the population owned 40.2% of the wealth of the US while another 4% owned 41%, making the richest 5% owning 81.7% of the country’s wealth. Now, according to Robert Borosage[3], the income of the richest 1% amounts to 60% of the total income, equaling to that of 90% of all lower income earners.

While the crisis is affecting almost the whole world, its impacts have been more strongly felt in countries deeply engaged in international integration than in others less tied to capitalist financial, economic and commercial institutions. In 1997, the crisis started from Thailand and strongly impacted Indonesia and South Korea; 100 billion USD fled from the “countries of smiles”, but Vietnam was not much affected, because at the time we were not as deeply engaged in international integration as at present. We had experienced an industrialization period under the leadership of the State, with centralized planning which was unfortunately attached to bureaucratism and State subsidies. Now, we are in a renewal process, proactively engaged in international integration and striving for a better globalization. Without any other market, we are joining the capitalist market, and trading with partners who treasure profit and base their relationships on money, indifferently, coldly and unaffectionately.

In the integration process, “in Rome we should do as the Romans do”, for the business world knows neither eternal partners nor eternal rivals. We should rely on internal synergy, which is the decisive factor, while attaching importance to external strengths. Without foreign markets, we would have no outlets for catfish, pepper, cashew nut, coffee, rice, rubber, etc. Not to mention coal and crude oil, which we export reluctantly. For a Newly Industrialized State (NIS), such products should not exceed 70% of the total export value. Thus, we should balance exports and imports, finished products and raw materials, internal synergy and external strengths. Advancing toward socialism while bypassing capitalist development, we should nevertheless make use of achievements of capitalism, which also result from humankind’s knowledge and labor. V.I. Lenin once said that we should learn from the bourgeoisie even the way it packs commodities. Production relations should correspond with highly socialized productive forces and ever more modern technologies so as to facilitate development.

Also, harmony should be ensured between the various interests –  common and particular, public and private, of the state and of  citizens, collective and individual. The state economy should definitely play a leading role, with the market economy serving as a vehicle. Socialist orientation implies, first and foremost, care for the people. A country is strong only when its people are wealthy. To that end, the people should be provided with capital and vocational skills from a socialism-oriented education. Hunger eradication and poverty reduction should not stop at income figures. A higher goal is an equitable and democratic society. Is it reasonable to seize citizens’ land to build golf courses and compensate them with just a little money? And for whom to play? Is it rational for our society to attach greater importance to dollar billionaires than to poverty reduction?

Uncle Ho once said: “We are afraid not of privations, but of injustices”. Now, injustices jump to our eyes. Reflecting and counter-argumenting imply active support for the socialist policy stance of the Party, and criticism of neo-liberalism. Socialist orientation should attach importance to a Green GDP, i.e. the balance between Gross Domestic Product and losses in resources and environment. Though not yet the mainstream, fair trade  values humans, hunger eradication and poverty reduction, instead of merely running after profits. Such is a sketch of the socialism we are building.

With regard to politics, Jonathan Pincus, UNDP Senior Country Economist in Vietnam, once commented: “The problem is that the new economy of Vietnam has produced a new form of politics, which depends less on ideology than on the emergence of powerful interest groups. Imposing discipline on such groups, mostly rooted in the State, constitutes the central challenge for the Vietnamese leadership in not only the ongoing but also the incoming years”[4]. Neo-liberalism is making its way into our country, turning the market from a vehicle into a purpose, belittling the key role of the state economy, as shown in the key English-language slogan at an investment event sponsored by a state agency: “Reduce the importance of State-Owned Enterprises”.

The global crisis has exposed the critical weaknesses of capitalism. Before his “going home”, President George Bush told a G-20 conference in November 2008 that capitalism should be protected, and the market economy saved. For revolutionaries, this situation offers a chance for enhancing the role of the State for the sake of a prosperous people and a strong, equitable, democratic and advanced country.

The 25 years of renewal have changed Vietnam’s complexion. Hunger and poverty remain, but extreme poverty has been reduced increasingly. The rich-poor gap has not been narrowed down, and even become ever wider, but income per capita has increased from several dozen to 1,200 USD. This scores a marked progress for Vietnam where – as once described by a Western visitor – “everyone was poor”. Nowadays, jostling on Vietnamese roads are some 1.8 million cars and 35 million motorbikes, a scene quite different from the past when – also in the view of a Western visitor – there were only “quiet cities on two-wheeled vehicles”[5]. Now, there are even private aircraft.

Evaluating the 2006-2010 period, the Government has declared that Vietnam had graduated from underdevelopment and become a lower-middle income country. Annual GDP growth rate was estimated at 7%, higher than the regional average. In terms of purchasing power parity (PPP), the 2010 GDP doubled that of 2000, and amounted to 101.6 billion USD in actual price.

Export turnover increased by 17.3% per year. However, due to increases in imports, mostly of materials for manufacturing exportables, Vietnam still suffers from a trade deficit amounting to 22.4% of total export turnover a year. Exports accounted for 78 billion USD in the first ten months of 2011, 34.6% up year on year, and are estimated to reach 95 billion USD for the whole year.  

Along with such great achievements, Vietnam is facing tremendous difficulties and challenges. The macro-economy remains unstable; inflation is high and somewhat uncontrolable; public debts, especially foreign debts, are increasing fast; foreign exchange reserves have decreased and recovery is slow; exports have increased rapidly, but, as mentioned above, the ratios of imports and natural resources are high; certain social issues are urgent. These problems all arise in a very complicated international context and a high-risk downgraded natural environment.

Such difficulties and challenges have both objective and subjective causes. These include the global financial crisis and economic recession, which calmed down in 2009, but a resurgence is likely and may lead to a double recession in the US and EU; the Eurozone debt crisis, which has driven the financial, economic and trade centers of the capitalist world into a dilemma, with signs of stagflation similar to those in the early 1970s. Also with objective causes, but bearing human imprints, are natural environment degradation, climate change and sea level rise. These impact the entire world but, according to the World Bank 2007 Report, Vietnam is among the countries most seriously affected. If the sea level rises by 1 meter, 10% of the Vietnamese population and 90% of the area under rice cultivation in the Mekong River delta will be affected, 4.4% of Vietnamese territory with 20% of all communes permanently flooded, and 9,200 kilometers of roads wiped out.

The subjective causes reside in Vietnam’s own weaknesses and shortcomings. There has been in practice not any model of socialism-oriented market economy so far. We have had to deal with the capitalist market, i.e. to apply the laws of value and of profits, shape labor, currency, stock and real estate markets, join financial and trade institutions of international capitalism (IMF, WB, WTO), and be affected by a “laissez-faire” neo-liberalism, liberalization, deregulation, and privatization. Transition to socialism in a capitalist economic and business environment becomes all the more difficult. “Getting rich” becomes a guideline. Money becomes value. It is hard for socialist men to emerge when social values are turned upside down.

Meanwhile, capitalism has launched a new crusade in North Africa and the Middle East in the name of “responsibility to protect” (R2P). Hypocrisy has become a weapon against States not to capitalism’s liking while possessing increasingly scarce “black gold”. Capitalism and non-capitalism (in various forms) again directly confront each other. In G7, G8, G20 then G2 (US&China) lie geopolitical calculations of capitalism at its later stage.

Vietnam is taking the way of market economy, but we know full well that “the market economy has negative aspects contradictory to the nature of socialism” and that it “leads to an excessive gap between the rich and the poor, money worship, and money-driven encroachments upon ethics and human dignity”[6]. In the long and difficult process of transition, a practical instead of voluntarist approach is needed. In the present conditions, in order to develop production, we should promote the capabilities of all economic sectors and recognize the practical existence of exploitation and a certain rich-poor gap. But we should protect the working people’s interests, and never forget that it is the goal as well as basic economic law of socialism to improve constantly the people’s living standards, helping everyone and every family to prosper and reducing the gap between the rich and the poor.

Vietnam can take advantage of its being a latecomer – late industrialization does not necessarily mean disadvantage. Naturally, we should guard against lagging further behind and letting forerunners “kick away the ladder”. A major issue is, of course, application of new technologies. We should not turn Vietnam into a dumping site, and our rural areas a scrap-yard. We should not squander farmland, the fruit of thousands of years of history. To build a factory, it may take 10 years, but to have a hectare of farmland, it often takes a lifetime.

The role of rural areas should be reconfirmed. Agriculture should be given no less importance than industry, for, as a proverb says, “out of rice, about you run”. With the traditions of a country well experienced in agriculture, we should not reduce excessively the proportion of farmers as in capitalist countries, but move instead toward a 50/50 or 70/30 rate. What imports is not to downgrade urban areas but upgrade rural areas. Our motto should be “A modern industry and an advanced agriculture”. There should be policies to supply more talent and “grey matter” to agriculture and rural areas. Let us export agricultural knowhow, as we have done in certain African countries, instead of exporting agricultural materials, for materials are exhaustible while knowhow remains.

We should finish soon the labor-intensive stage and enter that of high technologies, using less materials and more knowledge. A new model should be friendly to the environment and nature. It elevates social issues to the level of economic ones. We persist in the path of socialism, but a socialism compatible with Vietnamese traditions. We should bear in mind President Ho Chi Minh’s saying: “In order to have socialism, we should have socialist men”. For a long time, this motto seems to have been forgotten. In the past, our ideological work drew a clear line between what we were for and what against. At present, things seem not so clear. Yet, there is no hope of success if we talk about models without attaching importance to the human factor and ideology.

Combating trade frauds, tax evasion and avoidance, and illicit business will enjoy not only support from the people but also sympathy from decent capitalists. In short, the future socialist model  will be a bottom-up model ever more widely applied. It attaches importance to equality; but one could enjoy no equality without real strength. (Hence, it should rely on the public sector, and be vigilant against interest groups). It also attaches importance to democracy, but without real strength from the majority, democracy will be just a formality. Let farmers and workers have a voice – that is, there should be more forums for the public. The model of the future will be one with people having actual conditions to master society and nature; it requires that we solve the problem of ownership in rural and urban areas. The development of farm economy should go along with its management. Equitization of State-owned enterprises should go along with solution of the shareholder problem.

The model of the 21st century or beyond should be driven by equity and democracy; social security should go along with political security. This should be called socialism of a new type. Its overall objective for 2012, as determined by our Party, is: Give priority to controlling inflation, stabilizing the macro-economy, maintaining a rational growth rate in association with growth model innovation and economic restructuring, raising quality, efficiency and competitiveness; ensuring social welfare and security, and improving the people’s living standards; maintaining political stability, consolidating national defense, ensuring national security and social order and safety; raising the efficiency of external relations and international integration.[7]

Over the past few decades, the world has witnessed models of import substitution industrialization (ISI), then export-led industrialization (ELI). Asian economies like South Korea, Hongkong, Taiwan and Singapore have shifted from the ISI to the ELI model, taking exports as a development motive, and have become “dragons”. Their achievements have significant geopolitical causes linked to the Cold War (but sometimes Hot) and the struggle between two world systems. After the collapse of Soviet model of socialism, US capitalism has furthered the globalization process with three institutions (WB, IMF and WTO), a military alliance (NATO), 1,000 military bases worldwide, and over 70,000 supranational economic corporations. Capitalism seems to have reached the zenith of human history. But, after the “trente glorieuses” (glorious thirty), capitalism has fallen again into recession, from the American financial crisis to the Greek and Eurozone debt crisis. No capitalist development model has been sustainable, while no socialist model has been able to replace it.

Vietnam keeps transiting to socialism, making use of a market mechanism but with socialist orientation, engaged in international integration but holding fast to national identities and characteristics, “grasping and promoting potentials and advantages of a latecoming country possessing, while in the process of industrialization, an agriculture with high potentials for producing and exporting agricultural commodities.”[8]  

At the 4th theoretical roundtable with representatives of the Japanese Communist Party, Mr. Đinh Thế Huynh, CPV Politburo member and Head of the CPV Information and Education Commission, emphasized: “The socialism toward which we Vietnamese are heading is an innovated socialism.”[9] Indeed, theoretical thinking about socialism should be innovated in the face of new realities. In the view of Mr. Huynh, we should first of all focus on developing productive forces, securing a highly socialized production with a modern technical-technological basis, while enhancing new, socialist production relations corresponding to such productive forces. He also stressed that in the multi-sector economy with different forms of ownership, distribution and business, the state economy is to play the leading role and, together with the collective economy, to become increasingly a sound foundation of the national economy.

We continue to promote exports, meaning in fact to follow the export-led industrialization model. In 2010, in terms of export turnover, Vietnam ranked 40th in the world, while Malaysia ranked 23rd, Thailand 26th, Indonesia 30th, and the Philippines 54th. By October 2011, export turnover exceeded the 2011 figure with 78 billion USD, three times the target set by the National Assembly. The ELI model continues to prove its usefulness. However, more and more difficulties have appeared, for purchasing power has decreased seriously in our key export markets, such as the EU, as a result of flooding public debts and harsh austerity policies.

So, doesn’t it mean that socialism of a new type requires more attention to the domestic market, a balance between import and export, and harmony between internal and external strengths, between public and private ownerships with the former playing the key role? And doesn’t it mean that the transition period is one of mixed economies where the state economy plays the leading role? In conditions of our Party’s being one in power, “it is necessary to further promote the decisive role of the State in shaping and regulating the development of a socialism-oriented market economy.”[10] This implies an ideological and theoretical struggle against neo-liberalism which deliberately belittles the role of the State (dubbing it a Tea Party) while magnifying that of the market, economic liberalization and privatization, and “group interests”, and prioritizing individual profits over social benefits.

Persistently following the path of socialism, “using the invariable to cope with the variable”, we will overcome difficulties and challenges of all kinds and achieve the goal of “a prosperous people and a strong, equitable, democratic and advanced country”. Such is the essence of socialism of a new type, the socialism of the 21st century./.

  ------------------------------------------    
[1] . In 2010, the US poverty line was 22,134 USD for a family of four (New York Times, September 13, 2011). Ranked utterly poor were 20.5 million persons, or 6.7% of the population, whose income was 11,000.

[2] . Author of The End of History and the Last Man (1992)

[3] . Robert L. Borosage is a leading member of the Institute for Policy Studies, President of the Institute for America’s Future, and Secretary of the Campaign for America’s Future.

[4] . Jonathan Pincus & Vu Thanh Tu Anh, FEER, May 2008, “Vietnam Feels the Heat”

[5] . After liberation in 1975, there were 150,000 motorbykes in HoChiMinh City; now there are 4.5 million.

[6] . Documents of Party Congresses during the renewal process. National Political Publishing House, Hanoi 2005, p.459.

[7] . Speech by Party General Secretary Nguyen Phu Trong, Nhan Dan October 11, 2011.

[8]. Ibid.

[9] . Nhan Dan October 30, 2011

[10] . Speech by Party General Secretary Nguyen Phu Trong, Nhan Dan, October 11, 2011

 

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