International Expert Workshop:

Labour Market and Industrial Relations in Vietnam

8 & 9 October 2012 Nürnberg

Uwe Blien Phan thi Hong Van

(IAB, Nürnberg)

The Interaction between Culture and Economy in Vietnam

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Motivation and Intention

In recent times Vietnam has shown high rates of economic growth.

Within just 20 years Vietnam transformed from a country which was one of the poorest in Asia (with “boat people” leaving their home) to a “middle income country” according to World Bank standards.

Is Vietnam a “Miracle or (a) Model” (Klump 2006) for other developing countries?

We will argue that it is necessary to look at the cultural conditions of the development process.

Development of Vietnam‘s Economy

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Motivation and Intention (II)

A case study – but with a general interest in behind

Discussion of some general interaction effects between culture and economy/ labour market

Focus on economic influences on culture

Focus on cultural influences on the economy and the labour market

Basic thesis: explanation of development processes fundamentally incomplete without this cultural focus

Complementary thesis: description of internal structure of modern societies incomplete without cultural aspects

Framework

Vinh

Historical outline of the development of the Vietnamese society and culture

Properties of the culture generated

Modern development of Vietnam

Some general conclusions

Berlin, 7.

10.09

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Vietnam: Small businesses on the roadside

Berlin, 7.

10.09

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Irrigation works in Vietnam Road construction works

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Traffic and transport

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Prehistory of Vietnam

Farmers used the fertile soil of the Red River delta to develop a rice growing culture some hundert years B.C.

They had to fight floods by the river which is able to tremendous and fierce flood-waters.

The construction of dams required large-scale societal organization.

Under the conditions of a low-developed society this could only be done by installing an absolut ruler.

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The creation of a state in the delta of the Red River

There are myths about the creation of the Vietnamese state, but hardly any pieces of definite archeological evidence

It is sure that there was a highly developed civilisation around the Red River delta B.C.

It is also sure that this was the infant stadium of the Vietnamese state since the culture and language created persisted through Chinese occupation

Vietnam was a Chinese colony between 111 B.C. and 939 A.D.

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Theory on “Oriental Despotism”

The basic hypothesis was published by Wittfogel (1957/62).

Wittfogel described the generation and structure of „Oriental Despotism” in a “Hydraulic Society” e.g. with respect to China.

Large scale waterworks in an ancient society required an absolute ruler.

These societies (Egypt, China, Cambodia) were characterized by a high density of population and a high level of culture.

External features were the construction of large palaces and other buildings (temples, pyramids).

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Structure of the Vietnamese Society after 939 A.D. (independency from China)

Existence of dams is documented (Le Thanh Khoi 1969: 114).

An emperor was the absolut ruler of the country.

Overwhelming part of the population consisted of rice farmers, who did not have an ascript („leibeigen“) status.

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Structure of the Vietnamese Society after 939 A.D. (II)

The country was organized and controlled by a bureaucracy of mandarins, who acted in the name of the emperor.

The position of a mandarin (member of the ruling class) was not inherited, but was acquired by the passage of an exam.

The position of the emperor was not threatened by the mandarins.

The society was basically static.

Later, it was therefore an easy victim of Western colonial powers.

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Confucian system of educational exams

Access to positions in the bureaucratic hierarchy of the state could only be achieved by passage of an exam.

The exams took place at provincial level or in Tang-Long (Hanoi, at the “Temple of Literature” – Van-mieu).

The final exams were sometimes guided by the emperor, who recruited his ministers there.

The system of exams and the general orientation on Confucianism were imported from China

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Structure of the traditional Vietnamese Culture

High-esteem of education: Education was the only access to high positions in state (education also emphasized in Confucianism).

Integration in society: Living in a “hydraulic society” required the regard of the needs and decisions of many other people.

Adaptation to the authority of a benevolent ruler: One basic relationship in Confucianism is the one between ruler and peasant.

High-esteem of family relations: Another basic relationship is between father and son.

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Generation of traditional Vietnamese culture

The preferences of the individual members of society got transformed by social life.

Even after the demise of hydraulic society its norms were transmitted from parents to children by education and socialization.

A specific Vietnamese culture was generated, which exists now (relatively) independent of the economic needs of the society and also independent of individual members of society.

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Vietnam’s Development in Communist times

Idea of Communism corresponds closely to traditional Vietnamese culture.

The Communist “command system” was very effective in war times.

After the war Vietnam’s economy war characterized by stagnation (also a result of trade embargo).

The country did not produce enough rice to feed its own population.

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Vietnam’s Transformation Process

From 1986 on, the idea of “Doi Moi” (renovation) came up.

Prices were set free to follow market forces at the beginning of the nineties.

Privatization was realized very slowly (no big-bang transformation).

Today, Vietnam has a market economy with a Communist party as the solely ruler and with some features of a welfare state.

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The Success of Vietnam’s Transformation Process

In the nineties, growth of the economy increased to reach a stable phase of development since then.

Today, Vietnam is the second largest rice exporter in the world.

Rates of poverty decreased, there is no mass-starvation anymore.

Today, Vietnam has an export share of 75% of its social product, it exports textiles, oil, food, and (with an increasing rate) electronics and other complicated products

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Own research in Vietnam: Regional pilot study in the city of Vinh (200,000 inhabitants)

Three surveys (1999, 2005, 2009) with over 2000 house-holds (with over 7000 people) respectively, the last two forming a panel

Genuine random sample of the population

Vinh not representative for the whole of Vietnam but seems to be in no way “special”, definitely not one of the leading cities

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Growth of income in Vinh

  1999 2005 2009

nominal 486 1071 2432

real 486 846 1216

Growth (%)   74 150

Income in 10,000 VN Dong

Source: own computations with data from the Vinh surveys

Yearly growth 99-09 with a rate of 10.1%, higher than the “official” growth rate for the country of 7.1%

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Social product and literacy rates of various countries

Indikator unitViet-nam

Sri Lanka

LaosThail-and

Countries with low income

Countries with low and middle income

Social product per head 

1990 US$ 130 490 200 1520 390 860

1995 US$ 250 730 370 2760 410 1060

2001 US$ 410 840 300 1980 420 1160

2006 US$ 690 1300 500 2990 650 2037

Social product in purchasing power

2005 US$ 3000 4520 2020 8440 2486 5151

2006 US$ 3300 5000 2050 9140 2698 5664

Literacy rate

1990 % 90,4 88,7 56,5 92,4 49,9 68,4

1995 % 91,5 90,2 60,6 94,1 54,0 71,7

2001 % 90,3 91,9 65,6 92,6 63,9 78,4

2004 % 90,0 91,1 69 93,0 62,0 80,0

Source: World Development Reports

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Vietnam’s population is relatively educated

Relatively high literacy rates for Vietnam: over 90 %, more than in most other countries with low income.

Number of university/ high school students increased from 600,000 (1999) to 1,600,000 (2006).

Number of universities & High schools increased to over 200.

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Positive correlation between education and economic growth

Correlation between growth and education shown in studies for many countries

In Vietnam demonstrated by Klump & Nguyen (2006) at provincial level

Conclusion: Education contributes to economic growth in Vietnam

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Family ties and economic growth

Parents try to secure economic success not only for themselves but also for their children.

They show high savings rates (1995: 18 %).

Analyses on Chinese people (Perkins 2000) show that family ties can substitute (partly) the lack of state guarantees of contracts and obligations. The argument also applies to Vietnamese people.

As a consequence many people started businesses in the informal sector of the economy and contributed to growth.

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Conclusion

Vietnamese culture is a major precondition of high economic growth.

Since this culture is specific for the country Vietnam cannot serve as a model for other developing economies.

Vietnam represents neither a “miracle” nor a “model”.