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Consensus on the socialist-oriented market economy of Vietnam
26/12/2016 10:56' Send Print
Building and developing the socialist-oriented market economy. Image: nhandan.com.vn

Building and developing the socialist-oriented market economy are imperative in both theory and practice

1. Developing the socialist-oriented market economy is an objective imperative

The presence (or recognition) of the market economy in countries in the world shows that this form has strong vitality and is a natural development according to rule in the history of humankind.

Before the reform and openness in China and renovation in Vietnam, the market economy was associated with the development of capitalist economy which, according to some people, is the unique product of capitalism and market economy means capitalist economy. In reality, the market economy is the product of the history of human social development and the achievement of human civilization. Karl Max affirmed that market economy was an essential stage of historical development which any economy has to pass through to reach the stage of higher development and socialism and communism are the stages of development higher than capitalism in the process of human development. Socialism and communism will only arrive when production forces highly develop. To reach this level the market economy must maximally grow and become popular in socio-economic life; only by developing the market economy can premise and conditions for achieving socialism be created.

Noticeably, there are several market economy models in the world, namely ‘the social market economy” in the Federal Republic of Germany, the “allied market economy” in Japan, the “welfare state market economy” in the Northern European countries and “the socialist market economy” in China. Reality shows that the market economy can be built in countries of different socio-economic institutions with specific module relevant to conditions and concrete objectives of each country. Nevertheless, these models have been built and operated according to fundamental rules of modern market economy and international integration with typical characteristics of the market economy (recognition of private ownership, freedom of business and competitiveness, promotion of effectiveness of the market and market mechanism and the State regulates macro-economy).

2. The selection of the market economy model in Vietnam comes under heavy world and domestic pressure

The scientific-technological revolution has been taking place in an unprecedented scale in the world, making extremely great achievements. Under the impacts of the scientific-technological revolution many countries in the world have restructured their economies, opened their economies and developed the market economy under the management of the State. Moreover, the collapse of the socialist economic system in the former Soviet Union and Eastern Europe as well as market-oriented reform in China put an end to the bureaucratic centrally-planned economic model which had almost covered the world economic map and the differentiation of development levels can only be found in the different shades of color. The darkest shade implies the market economy of the Organization of Economic Cooperation and Development (OECD).

In Vietnam, the non-market economy and single-sector economic model proved to be ineffective. The economy of Vietnam before the renovation process (in the North it was since 1958 and in the whole country since 1976) was the socialist economy after the former-Soviet model, characterized by the domination of the socialist State ownership of production material under two forms-people and collective ownership. Corresponding to these two forms of ownership were State economic sector and collective economic sector. All production and business activities of economic units of both State and collective sectors subjected to unified guidance from the Central level. It means that production units should follow a plan developed centrally which assigned what and how to produce, quantity, prices and where to sell products.

By the end of 1970s, the country fell into a grave socio-economic crisis; production decreased; transaction was stagnant; people’s life was extremely difficult. During the period of 1976-1980, annual GDP growth rate stood at 1.4%; industrial and agricultural production stood still; rice output in 1980 reached 11.647 million tons while the objective was 21 million tons, lower than 1976, hence an import of 1.57 million tons of food.

In such a situation, to bring the country out of the socio-economic crisis, Vietnam carried out research, and pilot with interaction among reality-thinking-policy.

The first breakthrough came about with the 6th Plenum of the Party Central Committee, 4th Tenure in August 1979 to “make production burst out.” This can be considered as the “first breakthrough” in changing economic lines and policies to rectify constraints, and errors in economic management, socialist reform, adjust economic lines and policies, remove bottlenecks for the production force to develop, create momentum for production, pay attention to combining interests and essential interests of laborers.

The second breakthrough was marked by the 8th Plenum of the Party Central Committee, 5th Tenure in June 1985 with the line “Resolutely eradicate the State-subsidized, bureaucratic, centrally-planned mechanism, implement one-price system, remove the regime of in-kind and low-price supply, shift production and business to socialist business transaction and banking to business. The significance of this Plenum was the recognition of commodity production and rules of commodity production.

The third breakthrough was marked by the Draft Political Report to the 6th Party Congress in August 1986 and the 11th Plenum of the Party Central Committee, 5th Tenure in November 1986 which formed and affirmed three basic economic viewpoints: first, in economic restructuring, agriculture should be considered the fore front; second, in socialist reform, multisector economic structure was a special characteristic of the transitional period; third, while taking plan as the focus it is necessary to correctly handle relations between commodities and money, resolutely eradicate the State-subsidized and centrally-planned mechanism, the rule of value should be applied in price policy to realize the mechanism of one price.

Consequently, the urgent demand of reality and breakthroughs in thinking helped form new awareness on rule of development in the transitional period to socialism in Vietnam. The search and pilot for new ways of doing things in the 1970s, though went through ups and down, laid the foundation for comprehensive renovation initiated by the 6th Party Congress which marked a turning point the cause of socialist construction, created a great and comprehensive breakthrough, brought the country to a new stage of development, shifted the State-subsidized, bureaucratic, centrally-planned economy to the socialist-oriented market economy.

In a nutshell, awareness and selection of the socialist-oriented market economy in Vietnam were not subjective combination of the market and socialist economy but the grasping and applying objective trend of the market economy. Building on the understanding of development rule of the time and generalization, the Vietnamese Party learnt lessons of developing the market economy of the world, particularly from socialist construction of Vietnam and China to advance policy on developing the socialist-oriented market economy. This line demonstrates the Party thought and perception on conformity of production relations with the level of production force in the transitional period to socialism in Vietnam.

Awareness on unanimity of the market economy and socialist orientation

The 9th Party Congress in 2001 formally identified the overall economic model of the transitional period to socialism of Vietnam “socialist-oriented market economy,” which means a clear confirmation of the shift to the market economy. It is essential to follow the socialist-oriented market economy in Vietnam as there is no other alternative while the market economy has “covered” the world economic map and it is impossible to return to the State-subsidized, bureaucratic, centrally-planned economy.

The confirmation of Vietnam’s economic model as the socialist-market economy has made the identification of relations between “market economy” and socialist-orientation” the key content in awareness renewal in Vietnam for the past 30 years and the years to come. However, there are opinions that the market economy does not go with socialism and basic principles of scientific socialism initiated by K. Max and F. Engels do not “contain” the market economy. This is one of the issues to be clarified.

According the 11th Party Congress, “Vietnam’s socialist-oriented market economy is the multisectoral commodity economy, operating under the leadership of the Communist Party of Vietnam following the rules of the market economy while led and regulated by principles and nature of socialism. (1) That way of explanation makes many people understand that the current socialist-oriented market economy is the “physical combination” between the market economy and socialist orientation, and “socialist orientation” is only “the overcoat” of the market economy. Moreover, an economy which is regulated by two contrary sets of rule can hardly create motive force for socio-economic development, but can hinder development.

It is necessary to understand that the socialist-oriented market economy is not a combination of the two parts. “Socialist orientation is not the “overcoat” of the market economy but lies within objectives and contents of the market economy. This is the new-type market economy model to overcome constraints and negative impacts while succeeding and promoting positive and relevant features of the capitalist market economy. Elements of socialist orientation develop “internally” in the process of the modern market economy development and international integration, manifesting in the following points: 1. Vietnam’s socialist-oriented economy must have progressive production relations which conform to the development level of production force. It has several forms of ownership and economic sectors in which the State economic sector plays the key role; 2. The role of people as masters must be promoted in socio-economic development; 3. Ensure social progress and equality as well as unanimity of economic development and social progress and equity in each development step and policy; 4. Exercise the management of the rule of law State of the socialist Vietnam; 5. The Communist Party of Vietnam leads the market economy to achieve the objectives “rich people, strong country, democracy, equity and civilization,” (2) the leadership of the Communist Party of Vietnam is prerequisite for realizing socialist orientation in the market economy.

Hence, it is possible to say that the most important content in market economy socialist orientation in Vietnam is sustainable development. Obviously, in Vietnam’s development policy, the socialist orientation concept can be realistic only when it “contains” sustainable development for social progress, free and comprehensive development of each individual. Thus, the market economy and socialist orientation do not contradict but are unified.

Continue to reach consensus on the socialist-market economy in the new context

New awareness on the socialist-oriented market economy is identified in the documents of the 12th Party Congress. It is “the economy operates fully and synchronously following the law of the market economy while ensuring socialist orientation appropriate to each stage of national development. It is the modern market economy in international integration under the management of the rule of law socialist State led by the Communist Party of Vietnam to achieve the objectives of “rich people, strong country, democracy, equity and civilization.” (3) Thus, the market economy must adjust to the context and development level of the Vietnamese economy and approach fundamental standards of the modern market economy and international integration. Prompted by practices of countries with developed market economy, some basic and typical characteristics of the modern market economy and international integration can be identified:

First, it has mixed forms of ownership of which the stock ownership prevails. Medium and small-sized stock companies have higher advantages than other kinds of businesses and companies as their interests and legal status regulated by law account for high proportion in the total of other forms of businesses and companies.

Second, the modern market economy is the highly “marketized” economy. This does not only mean that the market mechanism is more effective than other economic mechanisms which have existed but a really complete market economy to enable a healthy, equal, favorable competitive environment for all types of businesses, facilitate advantages, and reduce priorities and incentives for an equal investment and business environment. In addition, to uphold the market economy’s effectiveness, the State intervention in the market economy must abide by market principles and respect market law.

Third, the modern market economy develops based on modern sciences and technologies, knowledge economy and high quality human resource. Accordingly:

- In the modern market economy, high technology in products accounts for large proportion. For example, in Germany, Japan, Great Britain and French, the high-tech branches contribute 30% of their GDP. In the US market economy, it is 50% of GDP in which information technology accounts for 30%.

- Knowledge economy is formed in developed economy which takes knowledge as the primary important basis for production, distribution, exchange and consumption. The major characteristics of knowledge economy is computer science and related leading services. Currently, in OECD economies, more than 50% of the total value originated from knowledge-based branches.

- European and American modern market economies have high qualified, well trained and capable human resources, typically “intellectual workers.” The US is one of the countries with highly developed market economy and 70% of the workers are intellectual workers.

- Fourth, modern economic structure: agricultural and industrial proportions decrease and that of services goes up. In OECD countries, the service sector contributes 70% of GDP, the US 89% and Japan 74%.

Financial-banking (including insurance) and business services have become two important branches, generating the bulk of added value of service sector and the driving force of economic sector’s growth.

Fifth, function of the State in the modern market economy.

History shows that the rule of law State in the market economy exists to address market failures and improve equity. Thus, the State in modern market economy also boasts key function of addressing market failures and improving social equity.

The State’s intervention must abide by principles relevant to the market mechanism; the State regulates market while respecting the role and functions of market. Market is an objective entity. It operates and develops following its own rules depending on no one or social organization’s will, even the Government’s will. In developed market economies, the States intervenes to a certain extent and under different forms depending on application of economic theories, e.g. “the State maximum, the market minimum” according to J.M. Keynes’ economic theory, “the State less, the market more” of new liberalism, or the close combination of “the invisible hand” (market mechanism) and the “visible hand” (the State) to regulate the economy. Adopting whatever viewpoint, the State must still apply and observe market economy law.

Sixth, the modern market economy is an “open” economy with market economy institution developing towards globalization, regionalization, bilateral and multilateral free trade agreements to heighten the State’s regulation toward the economy both within and outside the boundary of a country.

The approach to the modern market economy and international integration of Vietnam’s modern market economy model should embrace standards and contents of the modern market economy and ensure distinctive and unique socialist-oriented elements of Vietnam.

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(1) Documents of the 11th National Party Congress, the National Political Publishing House-Truth, Hanoi, 2011, p.34

(2) (3) Documents of the 12th National Party Congress, the Office of the Party Central Committee, Hanoi, 2016, p.102

Prof. Chu Van Cap, PhD,Former Director of the Political Economic Institute, Ho Chi Minh National Political Academy