In 1955, a conflict began between two states of the Republic of Vietnam, backed by the United States of America, and the Democratic Republic of Vietnam, supported by the People’s Republic of China and the Soviet Union. This conflict was known as the Vietnam War and ended in 1975 when the communist government in the north achieved its goal of unifying the country. The unification of Vietnam, unlike the way the communist bloc marketed it, did not bring significant progress in economic and social development for the people who fought in the war. On the contrary, poverty worsened with a GDP per capita in 1985 of only USD 235.7 (current prices), according to a report by the World Bank. In turn, the poverty rate for the year 1993 was 79.7 percent, exposing the failure of the planned economy, which characterizes countries with governments far removed from freedom.
However, in 1986, Vietnam began a process of institutional restructuring known as “Doi Moi”, which translated as restoration. Before implementing “Doi Moi“, Vietnam relied on the actions and aid it could receive from the Soviet Union. When this began to falter, the Vietnamese government understood that steps had to be taken in favor of economic openness and globalization.
The first step was to focus on eliminating self-imposed trade barriers and freeing the domestic market, making the country attractive for foreign investment: In the diplomatic sphere, they decided to leave behind the Soviet ideological burden and be more pragmatic, reestablishing relations with various states. Finally, they improved security and protection of private property, both for Vietnamese and foreign direct investment.
The results of the trade opening were positive. Thus, in 2020, Vietnam reduced its poverty-stricken population to just 5 percent. This country, which once depended on the food bank and suffered famine, achieved a historic milestone by exporting 1.4 million tons of rice in 1989. Its success continued: by 2008, Vietnam had shipped 4.7 million tons of rice, competing directly with Thailand in this market. In addition, it played a crucial role in providing food during the 2008 crisis. This achievement showcases Vietnam’s incredible economic transformation.
Vietnam did not stop its process of trade openness. In 2008, it joined the Association of Southeast Asian Nations, where it generated important trade alliances with the People’s Republic of China, the United States of America, and the Republic of Japan. The process that began in 1986 now allows Vietnam to be ranked 72nd in the economic freedom index carried out by the Heritage Foundation, showing good indicators in fiscal health, government spending, labor freedom, judicial security, government integrity, monetary freedom and trade freedom.
Therefore, it is unsurprising that 91 percent of Vietnam’s population sees globalization as a positive force. Unfortunately, protectionist and nationalist ideas wish to take a step back in favor of freedom. Nationalism sees globalization as an attempt to invade their traditions which they believe was the reason for the development of their nations, denies the value brought by immigration, the evolution of institutions in favor of trade, and denies the simple way in which one can now communicate with any country in the world. Globalization is the most remarkable example of what a world with fewer restrictions can achieve; contrary to the nationalist ideology, it allows people who wish to immigrate to another nation to understand the formal and informal institutions of a State before choosing their destination, allowing them to adapt before their departure. Globalization allows knowledge and labor sources to travel across the world.
Globalization has allowed Vietnam, through VinFast, to export electric vehicles to the United States. Its VF8 Eco Trim model has been so well received in California that leasing prices have fallen by about 50%, and the US market plans to invest 4 billion dollars in an assembly plant in North Carolina in favor of the Vietnamese factory. Now the United States is Vietnam’s second strategic trade partner after China.
Ludwig von Mises indicated that the best society was the one that most efficiently satisfied people’s needs. If the only way to meet human needs is to generate wealth, then there is no better way to generate wealth than free trade. Globalization, as witnessed in the case of Vietnam, is the best tool against poverty, and it has also been shown that trade is the best means to achieve lasting peace.
* Gabriel García Álvarez is currently an intern at Fundación Internacional Bases
Source: We Are Innovation
