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Relationship between economic growth and social development based on the principle of progress and equality in Vietnam’s renovation process
21/11/2013 21:35' Send Print

World development models from the perspective of balancing economic growth and social development

Generally, over the past few decades there have been several development models in the world:

Development model of classical liberalism. The experience of the centuries-old capitalist market economy proves that in a freely competitive environment the stronger wins and the weaker loses. National wealth has increased but fallen into the pockets of the rich upper class, while the underprivileged lower class is driven into poverty. The harmony of social spontaneity in a free market economy has been absent.k

Development model of neo-liberalism. To realize this model, the state’s role has been diminished and market self-regulation has been heightened. National budget spending for public interests is reduced. Income distribution is tilted away from workers toward capitalist employers in order to encourage them to “save and invest”. As a result, economic growth leads to negative social effects, including rising unemployment and deepening wealth disparity.

Development model of democratic social perspective. This model combines the use of a capitalist market economy and the implementation of a system of social welfare policies to create consensus for development. With big social welfare policies, it’s easy for the majority of people to abuse social allowances, while capitalist employers seek to transfer their investment capital overseas to avoid heavy taxes imposed on their income. This has resulted in the recession of the domestic market economy and clear signs of exhaustion in the social welfare state.

Development model of centrally-planned, non-market economy. This model was effective for socio-economic development in the former Soviet Union and other socialist countries for a certain period of time. However, time after time it revealed its defects, mostly in the way that social needs exceeded the capacity to meet those needs by a non-dynamic economy which was slow in applying scientific and technological advances to production. Other reasons included a highly-centralized planning mechanism, which gradually became a centralized bureaucracy and followed a distribution regime mostly based on egalitarianism. This is the very factor that hindered or eliminated development momentum. Those countries that applied this model fell into stagnation followed by severe socio-economic crisis and the collapse of the social regime.

The real situation of resolving the relationship between economic growth and social development based on the principle of progress and equality in Vietnam’s renovation process

Before the renovation period, Vietnam’s centrally-planned economy with its bureaucracy and state subsidies plunged into stagnation, recession, and severe crisis. Many targets of social progress failed to be realized, while social equality meant “dividing poverty equally”.

Since the 6th National Congress of the Communist Party of Vietnam in December, 1986, the Party and State of Viet Nam have imitated and constantly improved their renovation policies. The breakthrough in point of view and guidelines was to renounce the old economic model and shift to a socialist-oriented market economy.

Following this model, Vietnam has used the market mechanism - a major achievement of human civilization - as a tool to motivate and speed up economic growth and improve people’s lives.

Thanks to a consistent adherence to this point of view and these guidelines, Vietnam has gained encouraging achievements in social development based on the principle of progress and equality while pursuing economic growth, although numerous shortcomings and weaknesses still need to be overcome.

Achievements

Economic growth: Vietnam’s economy achieved a relatively high growth rate for many consecutive years. The average annual GDP growth rate between 1986 and 1990 was 4.4%; between 1991 and 2000 it was 7.5%; between 2001 and 2005 it was more than 7.5%; between 2006 and 2010 it was 7%. Although the growth rate has fallen off a bit from previous periods, Vietnam remains among the highest-growth countries regionally and globally.

Vietnam’s real Gross Domestic Product (GDP) in 2010 was 101.6 billion USD, 3.26 times higher than in 2005. The per capita GDP was more than 100 USD in 1986, increased to 1,168 USD in 2010, and to 1,540 USD in 2012. The living conditions of the majority of people have improved markedly.

As a sign of social progress and equality in labor and employment, from 1991 to 2000, Vietnam generated 1 million - 1.2 million jobs per year; from 2001 to 2005, the number of new jobs was 1.4 million - 1.5 million jobs per year; and from 2006 to 2010, it was 1.6 million jobs per year. Vocational training developed steadily, increasing the percentage of trained workers from less than 10% in 1990 to around 40% in 2010.

Hunger eradication and poverty reduction efforts have achieved impressive results. According to the national standards, which have been upgraded many times, the number of hungry and poor households dropped from 58% in 1993 to 29% in 2002 and to 14.2% in 2010. The 2012 poverty rate in Vietnam was between 11.3% and 11.5%, 1.1% - 1.3% lower than in 2011. So Vietnam was “ahead of the global plan of halving the number of poor households by 2015”, set by the UN Millennium Development Goals (MDGs).

The education sector has made progress with larger-scale and diversified educational institutions from primary to college and tertiary level. In 2000, Vietnam completed the elimination of illiteracy and universalization of primary education under the national standards. By the end of 2010 all provinces and cities had completed the universalization of lower secondary education.

Scientific and technological activities have made encouraging steps forward. Scientists and technicians in the social sciences, natural sciences, and technological sciences have provided scientific grounds for Party and State decisions related to national renovation. They have acquired, mastered, and effectively applied imported technologies, particularly in information and communications. Some varieties of high-productivity plants and animals have been cross-bred. Achievements have been recorded in oil and gas exploration and development, bridge construction, shipbuilding, the production of vaccines, and innovation in information technology.

Public health care has made progress. Health insurance has been expanded to more than 60% of the population. Community health indexes have improved. The mortality rate of children under 5 was reduced from 81% in 1990 to 28% in 2010; the rate of malnourished children under 5 dropped from 50% to 20%. An expanded immunization program has been carried out, eliminating or containing fatal diseases. The average life expectancy was 62 in 1990 and is now 73.

The Human Development Index (HDI) has risen regularly over the past decades: from 0.561 in 1985 to 0.599 in 1990, 0.647 in 1995, 0.690 in 2000, 0.715 in 2005 and 0.728 in 2010.

Shortcomings, weaknesses

Economically, Vietnam remains a developing country with a lower-middle income level. Economic growth still relies on horizontal development factors but is slowly shifting to a vertical growth model. From 2003 to 2008, the ratio of capital contributions to GDP was 52.7%, labor contribution to GDP was 19.1%, the Total Factor Productivity (TFP) was 29.2%, while the TFP of other countries in the region was 35% - 40%. Vietnam’s electricity use per GDP unit is 1.7 times higher than that of Thailand, 2.5 times higher than the Philippines, and 3.3 times higher than Indonesia. Vietnam’s national competitiveness ranked 68th out of 131 reviewed countries in 2007, and 70th out of 134 reviewed countries in 2008.

Socially, the poverty reduction rate has slowed recently and cases of people becoming poor again after escaping poverty briefly are increasing, particularly in remote, mountainous regions, regions inhabited by ethnic minority people, and regions prone to natural disasters. By the end of 2010, the national poverty rate was 14.2% - 12.3 million people out of a population of 86 million. The wealth disparity between the richest 20% and the poorest 20% increased from 4.4 times in 1992 to 9.2 times in 2010. So hunger eradication and poverty reduction remains a challenge to the social development prospects based on the principle of progress and equality in Vietnam.

Although the unemployment rate in urban areas was reduced from 9% in the 1980s to 4.64% in 2007, the unemployment rate has been on the rise since 2008, particularly among low-skilled and unskilled workers, because of business shut-downs, downscaled production, and soaring domestic inflation in the wake of the global financial crisis and economic recession. Hundreds of thousands of farm households whose land was confiscated for industrialization and urbanization have not received support for retraining and have added to an already serious unemployment situation.

In education, curricula and teaching methods are obsolete. Training is inappropriate and there is a shortage of highly-skilled workers and qualified experts and managers. In general, the quality of education and training remains low and human resources fail to meet the needs of accelerated industrialization and modernization.

Although the public healthcare network has been expanded, facilities and equipment are inadequate and poorly distributed. Policies on health insurance, hospital fees, health check-ups, and medical treatment for the poor need to be improved.

Dealing with the relationship between the economy and society, sectors and localities are likely to pursue economic growth and neglect social progress and equality.

Measures

1- Perception of the relationship between economic growth and social equality

First, in the socialist-oriented market economy, economic growth and social development based on the principle of progress and equality interact closely. Economic growth creates the material conditions for social progress and equality. In return, social progress and equality provide a spiritual momentum for economic growth.

Second, the combination of economic growth and social development based on the principle of progress and equality should continue to be included in every step of every development policy.

Social progress and equality should not be delayed until the economy reaches a high development level, nor should social progress and equality be sacrificed to economic growth. Every economic policy should seek to ensure social progress and equality. Every policy to guarantee social progress and equality should contribute to economic growth, directly or indirectly, immediately or in the long term.

2- Major solutions

First, step up the economic restructure, implement an in-depth growth model based on higher quality human resources.

Vietnam can no longer sustain the horizontal economic growth model introduced over the past few decades, because this development model uses a lot of capital, backward technologies, and low-skilled workers and is mostly engaged in outsourcing, assembling, and exploiting, partly processing, and selling cheaply natural resources. Consequently, the quality and effectiveness of the economy is not high, incomes for the majority of workers are low, and their lives are difficult. Vietnam should adopt appropriate mechanisms, policies and roadmaps to restructure the economy and shift to an in-depth growth model with the majority of workers acquiring high qualifications and skills, which will enable them to adapt to modern technological assembly methods and eventually get involved in designing and manufacturing high-value-added products. Thus, the economy will experience higher growth with higher quality and the workers will be rewarded with sufficient incomes to improve their lives.

Second, have concrete plans so that State investment allocations will be reasonable for different regions and sectors.

The allocation of higher investment capital to boost key economic regions is needed to create growth “locomotives” to drive the “train” of the Vietnamese economy. But it’s needed in other regions, particularly remote ethnic regions, to narrow the development gap between regions. The state of “natural injustice” and “injustice left by history” should be eliminated. Socio-political stability should be maintained. Social development should guarantee the principle of progress and equality for all regions nationwide. At the same time, the current salary system should be reformed, creating the right “convergent point” to restore equality (not egalitarianism) to incomes of employees in the various economic and social sectors.

Third, harmoniously combine redistribution of incomes for different population strata with building a multi-layer social security system.

In Vietnam beneficiaries of social policies are numerous and diverse, so Vietnam continues to refine its multi-layer social security policy system. This system includes: 1. Policies on social preferences aimed at ensuring above average living conditions for individuals who rendered great service to Vietnam’s past revolutions and struggles, 2. Policies on social insurance aimed at helping workers save a portion of their income for a rainy day (unemployment, illness, old age…), 3. Policies on social subsidies aimed at helping disadvantaged and vulnerable people, including the disabled, the lonely elderly, orphans, street children…, 4. Policies on social relief aimed at helping victims of natural disasters, wars, or accidents.

The successful implementation of a multi-layer social security policy system is a clear indicator of an advanced, fair, civilized society, and an important factor in inspiring entrepreneurship to eliminate poverty and create prosperity both for individuals and for the country.

Fourth, fight without mercy to prevent or repulse illegal profit-making practices./.

Pham Xuan NamProf., PhD., Viet Nam Academy of Social Sciences