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Socialist-oriented market economy - continuation of renewal process
22/4/2013 21:49' Send Print

A socialist-oriented market economy is not a subjective product of pure thought but a summary of reality, the inheritance and development of market economy theories and a model fit for Vietnam’s practical conditions.

With its thoughts of comprehensive national renewal, the 11th National Congress of the Communist Party of Vietnam created a turning point and a momentous start for a socialist-oriented market economy in Vietnam. The 11th Congress affirmed that the liberation of production and the intention to rearrange production structure, overhaul investment structure, and build and advance a new production relationship that matches the characteristics and development level of production forces towards a multi-sector economic structure typifies the transitional period. The Congress defined reforms of economic management; eradication of centralization, bureaucracy and subsidies; and the building of a new mechanism suitable to objective law and the economy’s level of development in order to motivate production and spur businesses to enhance productivity, quality and effectiveness in line with planning mechanisms, socialist business methods, and principles of  democratic centralism.

The Congress stressed the need to harmonize the interests of laborers, collectives, and the entire society to create momentum for economic development. It is necessary to ensure distribution based on work results and economic effectiveness, resolve social issues by balancing economic and social policies, exercise social fairness, and correct the trend of egalitarianism in distribution. However, the 6th Congress of the Communist Party of Vietnam didn’t mention that market economy development and the socialist orientation itself in economic development remain limited. The 6th plenum of the 6th Party Central Committee added the following:

- Identify that multi-sector economic policies are of long-term strategic significance, have legal characteristics from small production to socialism, reflecting democracy in economics and ensuring that every citizen is empowered to do business in accordance with the law.

- Identify that economic sectors are inter-related and compete with each other on the basis of equality before the law. It is necessary to eradicate prejudices, discrimination, and monopoly which interfere with such goals.

- The position of economic sectors is redefined: the state economy has enough strength to dominate the market, but unnecessarily holds a large share in all sectors; the private economy remains necessary to the overall economy in the long run and is included in the mechanism of a commodity economy moving towards socialism.

The 7th Congress of the Communist Party of Vietnam took new steps forward in its awareness of the relationship between the market mechanism, the State, and businesses. Although failing to define the term “market economy”, the Congress said: “A mechanism that operates the socialist-oriented multi-sector economy is a market mechanism managed by the State through laws, planning, policies, and other tools”. In this mechanism, “upholding the advantages of economic sectors, which compete, cooperate and supplement each other in a united national economy… economic units have the rights of doing business, equal relationship, legal competition, voluntary cooperation, and joint venture; the market has a direct role in guiding economic units to chose their effective areas of operation and business methods; the State manages the economy in order to direct economic sectors, create a favorable environment for business activities in accordance with market economy, tightly control and deal with law violations in economic activities, ensuring harmony between economic and social development”.

The 7th Congress also pointed out: “In fact, the market economy is not an all-purpose remedy. In addition to stimulating production, the market economy also creates a supportive environment for social evils. To minimize and overcome such negative consequences, keep the renewal process on the right track, and promote the beneficial nature of socialism, the State should energetically pursue its role of economic and social management via law, planning, policies, communications, education and other tools”.

With fresh awareness of a market economy, the 7th Congress urged “maintaining a socialist orientation during the renewal process, combining principle consistency and revolutionary strategy with flexible tactics and keeping abreast of new trends. Renewal does not mean changing the socialist goal but realizing that goal by adopting an accurate perception of socialism along with appropriate forms, steps, and measures… The key condition for the renewal process’s sustained socialist orientation and success is that during the renewal process, the Party should be persistent and creatively apply Marxism-Leninism and the thoughts of Ho Chi Minh, while holding firm to its role of social leadership. The Party should reform, correct itself, and constantly improve its leadership and fighting capacity”.

The 7th Congress defined that social fairness should be implemented in both production materials distribution and production results; encouraged making a fortune legally in parallel with hunger eradication and poverty reduction; clarified the relationship between the rich and the poor; and established policies on repaying debts of gratitude and income regulation… Those orientations, which are now being realized, have positively impacted economic development and socio-economic stability, while boosting social consensus.

At the 9th National Party Congress (April, 2001), the concept of a socialist-oriented market economy was officially included in documents, affirming that the socialist-oriented market economy is an unswerving strategy and a general model throughout the transitional period to socialism in Vietnam. This economic model combines the characteristics of a market economy with the specific features of Vietnam.

Inheriting the theoretical thoughts of the 9th Congress, the 10th Congress of the Communist Party of Vietnam clarified the basic content of completing a socialist-oriented market economy mechanism in its various aspects: comprehending the socialist orientation of the market economy in Vietnam; enhancing the role and validity of State management; developing comprehensively and managing effectively the operation of fundamental markets in line with healthy competition; developing multiple ownership within economic sectors, with the State economy, together with the collective economy, serving as a firm foundation for the national economy; promoting social fairness in every measure and every development policy; achieving economic growth in parallel with the development of culture, health care, and education; solving social problems for human development goals; and basing distribution mainly on work results, economic effectiveness, capital contributions of other resources, and social welfare.

The 6th plenum of the 10th Party Central Committee continued to firmly embrace all these orientations, saying: “A socialist-oriented market economy in Vietnam is an economy that abides by the rules of a market economy and is controlled by socialist economic rules and factors that guarantee socialist orientation”.

In addition to other achievements, the 11th plenum of the Communist Party of Vietnam pointed out: “The current economic development is unsustainable. Growth quality, productivity, effectiveness, and the competitiveness of the economy are low, macro-economic balance is not solid…” and emphasized: “The market economy mechanism, the quality of human resources, and infrastructure are current obstacles to development”. Consequently, the study, refinement, and completion of theories regarding the socialist-oriented market economy, as well as objectivity about the current situation are now more urgent.

First, theoretically and practically, a market economy and the goal of socialism building in Vietnam are not contrary to each other. Disputes may arise during the development process, but this process is completely in accordance with objective rules and solutions are in place. A market economy can be a tool to achieve the goal if it is developed with a correct orientation and constantly refined in order to maximize its advantages and minimize its shortcomings. Therefore, the completion of the socialist-oriented market economy was defined by the 11th National Party Congress as one of three strategic breakthroughs and is the legal framework for the development of the economy.

Second, typical characteristics and criteria of market economies in general have been identified in many economic theories and official statements around the world. The following recommendations of the WTO, the EU, and the US can be referred to during the development process:

WTO criteria: non-discrimination, trade liberalization, and market integration; healthy competition; anti-monopoly; anti-price distortion; anti-dumping; economic development and reforms, creating conditions for the government to overcome forms of market “failure” through preferential tariffs and allowed subsidies.

EU criteria: (low) influence of the government on the distribution of resources and business decisions, either direct or indirect, the state should not interfere and distort business operations regarding the privatization process; should not use the non-market trade system (exchange of commodity for commodity) and should not apply the subsidy system; issue and enforce enterprise law, ensuring transparency, non-discrimination and appropriate facilitation for corporate management; issue and enforce a uniform, effective and transparent legal system; respect property ownership rights and ensure the operation of corporate bankruptcy mechanisms; maintain a real financial sector which is independent of the state and subject to the adjustment of full bailout regulations and satisfactory supervision; market liberalization for expanded competition.

US criteria: convertibility of foreign currencies against local currencies; level of salary negotiations between workers and managers; level of liberalization in foreign-invested companies’ operations; level of government ownership and control over major production materials; level of government control over the distribution of resources and decisions on pricing and outputs of businesses; other related factors such as liberalization of market and trade, law-governed state, and anti-corruption…

Third, it is necessary to define what constitutes a socialist-oriented market economy. The Platform on national construction during the transitional period towards socialism (2011 supplements and amendments) emphasized “developing a socialist-oriented market economy with multiple forms of ownership, economic sectors, business organizations and distributions”. Some issues need to be clarified and developed through further research:

- Mixed and inter-twined forms of ownership are developed that establish diverse economic groups.

- Economic sectors are developed that operate legally, are equal before the law, co-develop in the long run, and cooperate and compete healthily. The role of the state economy in these sectors needs proper study.

- Market factors are established comprehensively and types of markets are gradually built and developed abiding by the rules of a market economy while maintaining a socialist orientation.

- The rights of owners and users of production materials and the rights of state management in the economy are clarified, making sure that all production materials have specific users and that all business units are self-controlled and responsible for their business results.

- The distribution relationship ensures fairness and creates momentum for development; resources are distributed in line with strategy, planning, socio-economic plans, and market principles; the distribution system is based on work results, economic effectiveness, and capital contributions, plus other resources and distribution through the social security and welfare system. 

- The State manages the economy, regulates and boosts socio-economic development via laws, strategy, planning, plans, policies, and material forces.

Fourth, it is necessary to continue in-depth studies and promote a more comprehensive awareness of pursuing a socialist orientation during the market economy development process in Vietnam. The market economy should be fully tapped to utilize all resources available for rapid and sustainable economic development, raise people’s living standards, encourage people to make a fortune legally in parallel with hunger eradication and poverty reduction, enhance social consensus to achieve the goal of a wealthy people, strong country, and democratic, fair and civilized society. It is necessary to protect every citizen’s freedom to do business in accordance with law to become wealthy while contributing to society, and ensure that all economic sectors and players in the market are respected and permitted to co-develop, cooperate and compete with each other in a fair, healthy, and civilized manner. Meanwhile, the state economy should be given special attention and proactively integrated into the international community while the independence and self-reliance of the economy are maintained. Economic development should go hand in hand with cultural and social development, emphasizing progress and social fairness. There should be fairness in distributing production resources, in access to business opportunities, and in results distribution. It is necessary to maximize the effectiveness and validity of state economic management, upholding what is positive and minimizing what is negative in the market economy and promoting the people’s right to economic mastery.

Human history has witnessed a number of economic models, among which the market economy has proved its vitality and adaptability to upheavals in history. However, potential risks of the market economy are high. Threats of crisis and recession do not smolder as in the planned economy model, but flare up and have a domino effect, particularly in an era of economic globalization. High growth along with grave risks of crisis and recession are inherent features of the market economy. Only if a development orientation is correctly defined and is accompanied by an ability to predict and cope with threats and adverse effects can a country achieve its set goals within a market economy./.

PhD. Nguyen Tien DungRector of University of Economics and Law - Vietnam National University of Ho Chi Minh city