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The socialist-oriented market economy ( Vietnamese: ''Kinh tế thị trường theo định hướng xã hội chủ nghĩa'') is the official title given to the current economic system in the Socialist Republic of Vietnam. It is described as a multi-sectoral market economy where the state sector plays the decisive role in directing economic development, with the eventual long-term goal of developing socialism. The socialist-oriented market economy is a product of the Đổi Mới economic reforms which led to the replacement of the
centrally planned economy A planned economy is a type of economic system where investment, production and the allocation of capital goods takes place according to economy-wide economic plans and production plans. A planned economy may use centralized, decentralized, part ...
with a
market-based A market economy is an economic system in which the decisions regarding investment, production and distribution to the consumers are guided by the price signals created by the forces of supply and demand, where all suppliers and consumers are ...
mixed economy based on the predominance of state-owned industry. These reforms were undertaken to allow Vietnam to integrate with the global market economy. The term "socialist-oriented" is used to highlight the fact that Vietnam has not yet achieved socialism and is in the process of building the basis for a future socialist system. The economic model is similar to the socialist market economy employed in the People's Republic of China.


Reforms leading to establishment

The Đổi Mới economic reforms were initiated by the
Communist Party of Vietnam The Communist Party of Vietnam (CPV), also known as the Vietnamese Communist Party (VCP), is the founding and sole legal party of the Socialist Republic of Vietnam. Founded in 1930 by Hồ Chí Minh, the CPV became the ruling party of North ...
in 1986 during the party's 6th National Congress. These reforms introduced a greater role for market forces for the coordination of economic activity between enterprises and government agencies, and allowed for private ownership of small enterprises and the creation of a stock exchange for both state and non-state enterprises. The economic reforms aimed to restructure the Vietnamese economy away from Soviet-type central planning and towards a market-based mixed economy intended to be a transitional phase in the development of a socialist economy.Napier, Nancy K.; Vuong, Quan Hoang (2013). ''What We See, Why We Worry, Why We Hope: Vietnam Going Forward''. Boise, Idaho: Boise State University CCI Press. . The goal of this economic system is to improve the
productive forces Productive forces, productive powers, or forces of production ( German: ''Produktivkräfte'') is a central idea in Marxism and historical materialism. In Karl Marx and Friedrich Engels' own critique of political economy, it refers to the combina ...
of the economy, developing a firm technical-material base for the foundation of socialism, and to enable Vietnam to better integrate with the world economy. In the early 1990s, Vietnam accepted some World Bank reform advice for market liberalization, but rejected structural adjustment programs and conditional aid funding requiring privatization of state-owned enterprises.


Description

The socialist-oriented market economy is a multi-sectoral
commodity In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. The price of a co ...
economy regulated by the market, consisting of a mixture of private, collective and state ownership of the means of production. However, the state sector and collectively owned enterprises form the backbone of the economy. It is similar to the Chinese socialist market economy in that many forms of ownership, including cooperative/collective enterprises, communal, private and state ownership models co-exist in the economy, but the state sector plays a decisive role. Vietnam is the most pro-free-market country in a 2014 survey by the Pew Research Center, with 95% of its citizens support free market system.


Compared with the Chinese model

In contrast to the Chinese model (dubbed the socialist market economy), the Vietnamese system is more explicitly characterized as an economy in ''transition'' to socialism and not as a form of socialism, with the process of building socialism seen as a long-term process. Claiming to be consistent with Marxist theory, socialism is understood to only emerge once Vietnam's
productive forces Productive forces, productive powers, or forces of production ( German: ''Produktivkräfte'') is a central idea in Marxism and historical materialism. In Karl Marx and Friedrich Engels' own critique of political economy, it refers to the combina ...
are developed to a point where socialism becomes a technical possibility. As such, it is similar to the Chinese position on the primary stage of socialism. Vietnam's socialist-oriented market economy shares many common characteristics with the Chinese ''socialist market economy'' in its institutions and policies, combining fundamentally market-based economies with the predominance of state-owned enterprises, the coexistence of a vibrant private sector, a single-party political system, and the existence of five-year economic plans. This has led development economists to consider both these countries sharing the same basic economic model. The differences between these two models includes a higher degree of decentralization and autonomy of local governments in Vietnam (being higher than in other East Asian developmental states), with greater income redistribution between provinces resulting in a lower Gini coefficient. Some authors associate this model with the
East Asian model The East Asian model pioneered by Japan, is a plan for economic growth whereby the government invests in certain sectors of the economy in order to stimulate the growth of specific industries in the private sector. It generally refers to the mode ...
of
state capitalism State capitalism is an economic system in which the state undertakes business and commercial (i.e. for-profit) economic activity and where the means of production are nationalized as state-owned enterprises (including the processes of capital a ...
, while others associate it with market socialism. Common to other East Asian developmental states, Vietnam shares mutually supporting institutions and active public authorities with strong capacities to implement long-term economic plans.


Theoretical basis

The Communist Party of Vietnam maintains that the socialist-oriented market economy is consistent with the classical Marxist view of economic development and historical materialism, where socialism can only emerge once material conditions have been sufficiently developed to enable socialist relations. The socialist-oriented market model is seen as a key step for achieving the necessary economic growth and modernization while being able to co-exist in the contemporary global market economy and benefit from global trade. The Communist Party of Vietnam has re-affirmed its commitment to the development of a socialist economy with its Đổi Mới reforms. This economic model is defended from a Marxist-Leninist perspective, which states that a planned socialist economy can only emerge after first developing the basis for socialism through the establishment of a market economy and commodity-exchange economy and that socialism will only emerge after this stage has exhausted its historical necessity and gradually transforms itself into socialism.Zhongqiao, Duan
''Market Economy and Socialist Road''
(PDF).
Proponents of this model argue that the economic system of the Soviet Union and its satellite states attempted to go from a natural economy to a planned economy by decree without passing through the necessary market economy phase of development.Vuong, Quan-Hoang (2010). ''Financial Markets in Vietnam's Transition Economy: Facts, Insights, Implications''. Saarbrücken, Germany: VDM Verlag. . Proponents of socialist market economies distinguish themselves from market socialists with the view of market socialism that markets are a central feature of socialism and that markets are the most feasible mechanism for a socialist economy.


See also

*
Developmental state Developmental state, or hard state, is a term used by international political economy scholars to refer to the phenomenon of state-led macroeconomic planning in East Asia in the late 20th century. In this model of capitalism (sometimes referred to ...
* Dirigisme *
East Asian model The East Asian model pioneered by Japan, is a plan for economic growth whereby the government invests in certain sectors of the economy in order to stimulate the growth of specific industries in the private sector. It generally refers to the mode ...
*
Economy of Vietnam The economy of Vietnam is a mixed socialist-oriented market economy, which is the 38th-largest in the world as measured by nominal gross domestic product (GDP) and 26th-largest in the world as measured by purchasing power parity (PPP) in 2022 ...
* List of communist ideologies * Market economy *
Market socialism Market socialism is a type of economic system involving the public, cooperative, or social ownership of the means of production in the framework of a market economy, or one that contains a mix of worker-owned, nationalized, and privately owned ...
* Primary stage of socialism *
Socialism with Chinese characteristics Socialism with Chinese characteristics ( zh, s=中国特色社会主义, hp=Zhōngguó tèsè shèhuìzhǔyì) is a set of political theories and policies of the Chinese Communist Party (CCP) that are seen by their proponents as representing ...
* Socialist market economy *
State capitalism State capitalism is an economic system in which the state undertakes business and commercial (i.e. for-profit) economic activity and where the means of production are nationalized as state-owned enterprises (including the processes of capital a ...
*
Transition economy A transition economy or transitional economy is an economy which is changing from a centrally planned economy to a market economy. Transition economies undergo a set of structural transformations intended to develop market-based institutions. T ...


References

{{Socialism by state Socialism Market socialism Mixed economies Economic systems Economic ideologies Economy of Vietnam