Vietnam shifted to a socialist market economy in 1986 after failing to meet economic output targets of its five-year plans. Similar problems began to appear in the mid-1970s in the USSR and European socialist countries.

Under a socialist market economy, state-owned enterprises function as independent enterprises, providing income to the state through taxation. They compete with each other and with privately owned enterprises. The government guides and stimulates the direction of economic development along the lines of the five-year plans, but no longer determines the activity of individual private or state-owned enterprises. The socialist sector consists of the state-owned and cooperatively owned enterprises. The capitalist sector consists of foreign and domestic privately owned enterprises. Agriculture is primarily based on land-use rights accorded peasant families.

After 30 years of war, its countryside devastated by U.S. carpet bombing and Agent Orange, Vietnam is still one of the poorest countries in the world. Its gross domestic product is only $435 per person (double what it was in 1990) and continues to grow today at an annual rate of over 7 percent.

The shift to a market economy has had many negative effects. Vietnamese officials acknowledge that gaps continue to widen in income and living standards between urban and rural areas, between mountainous and plains areas, among different population strata, and between rich and poor regions in the country. Other negatives are prostitution, drug addiction, and organized crime, leading some socialist-oriented progressives to write off Vietnam as a socialist country.

The Communist Party of Vietnam applies the term socialist to a process in which the interests of the working people are paramount as the state guides national development toward the goal of fully meeting human needs and eliminating exploitation of the labor of one person by another. To maintain the socialist character of economic development in a mixed economy, the working class must exercise its dominant position in the state to ensure that the socialist sector remains economically dominant as production expands. Although capitalists invest only to make a profit, Vietnam facilitates investments solely on the basis of the country’s needs.

The new socialist market economy has enabled Vietnam to make progress in overcoming its most urgent problem – hunger and poverty. Using international criteria for the general definition of poverty (covering food and other basic needs), 70 percent of the population in 1990 lived in poverty; of this number, 90 percent were in rural areas. By the year 2000, the number of people below the general poverty line was reduced to 32 percent. The goal for 2010 is to reduce this to 19 percent. The percentage of Vietnamese with a daily calorie intake below the “food-poverty line” (2100 calories per day for adults), resulting in malnutrition that manifests itself in poor health and stunted growth, was 25 percent in 1993; by 1999, the percentage of the population living below the food-poverty line was reduced to 15 percent. Vietnam has a goal of reducing this to 4 percent by 2010.

Doubling the GDP in the period 2000-2010 should increase the output in industry and construction by 10-10.5 percent annually and in agriculture, forestry, and fishing by 4-4.5 percent. Vietnam’s literacy rate is now among the highest of any poor country – over 96 percent for adults in the age group 15-35, higher than in many of the more developed countries. Primary education remains free and compulsory. The goal is to provide all children with secondary school education by 2010.

Progress toward eliminating hunger and poverty and establishing adequate health care and universal education through secondary school has been greatly accelerated through the shift to a socialist market economy. All resources in the nation are deeply involved in overcoming the most socially harmful consequences of the mixed economy. If the Party can stand true to its commitment to maintain the dominance of the socialist sector in the economy as the overall economy expands, the socialist future of Vietnam will be ensured.

The author can be reached at


Erwin Marquit
Erwin Marquit

Erwin Marquit (1926-2015) was professor emeritus of physics at the University of Minnesota, where he also taught a course on Marxism. He wrote extensively on theory and practice of socialism and on dialectical materialist philosophy of science. He was the associate editor of Marxist Educational Press which published 30 books. Marquit was the founder of the Marxist journal “Nature, Society and Thought.” Longtime friend and People’s world writer Tim Wheeler wrote this obituary at Marquit’s passing “Erwin Marquit, 89: a lifelong communist.”