16 January 2012

Vietnam and Cambodia: Thoughts About Transition to Capitalism

Recently, I found myself in Vietnam and in Cambodia for a few days. Instead of focusing on how amazing these countries were -and they are- I began thinking about their odd trajectory to capitalism.

Once a contrarian always a contrarian, I guess.

These are two neighboring countries in South East Asia with an intertwined history. They are also very poor countries by most common standards. Both of them had gone through very traumatic and violent periods in recent history. And they have both been relatively successful in economic terms in recent years.

Yet, I was struck by how radically different they were in many respects.


The first thing that strikes you when you are in Ho Chi Minh City (formerly Saigon) is the number of scooters. If you are in a car (like a taxi) you feel like a shark surrounded by a giant shoal of pilot fish. There are usually more than one person on them, a friend, a couple of kids, sometimes a family of four or a huge pile of bananas. They swarm around the bigger fish (you) with great dexterity and without paying much attention to you.

In fact, in Vietnam, you get none of the deferential treatment that Westerners routinely receive in most developing countries. Which I found very refreshing and healthy. Vietnamese could not care less about your identity and they feel absolutely no reason to treat you differently. The average person, man, woman, child exudes self-confidence.

A couple of illustrations: A taxi driver looked at one of the members of our group and told him that given his girth, he must be eating a lot more than his share and do so quite regularly. And gently patted his protruding belly. He wasn't insulting. He was mildly amused by a well-fed Westerner and saw no reason to keep this observation to himself.

Outside a pagoda, small kids came up to me to ask what my name was (somewhat puzzled by Contrarian Progressive), then ask to have their picture taken with improvised sign language. And then, they simply took away my camera to look at those photos. Very skillfully they found their way around the controls and studied their pictures. They commented about my picture taking skills and returned my camera.

These were five to seven year old kids. Actually, you could see them on the right. The girls in the back were the leaders.

The level of self-esteem is such that it is as if all Vietnamese are constantly aware of the fact that Vietnam was the only country in the world to rise up against two colonial super powers and to successfully kick them out.

The average Vietnamese is very poor: the average monthly salary is about $150 but most people live on a lot less than that.

Friends who live there arranged for a small boat to take us up the Mekong river. We stopped by local markets, pagodas, villages and even orphanages to see how people lived ordinarily. Some of the houses you see below looked like they were about to collapse. They are more shacks than houses

You could see that sanitary conditions were appalling as large families shared tiny living quarters.

And right behind them you could spot those grim sugar cube towers that are being erected everywhere. Clearly, there is a new bourgeois class on the rise.

Besides these buildings, downtown Saigon (to emphasize the colonial lexicon) was teeming with high end luxury goods, like Prada, Louis Vuitton, Dior etc.

Despite the contrast, most Vietnamese people with whom I spoke were optimistic about the future. The economy (which they call a socialist-oriented market economy) is one of the fastest growing economies in the world and it is estimated to become 35th largest economy by 2025.

Essentially, the government emulated the Chinese path to capitalism where strict regulations and rules made sure that the "invisible hands of the market" moved according to a central blueprint.

As with China, this type of over-bearing state capitalism seems to have led to petty corruption by state officials. In fact, most Vietnamese did not complain about how the majority of them lived in abject squalor while a handful of senior bureaucrats turned capitalists were getting rich by the minute. They looked at those signs of wealth right behind their shacks with equanimity if not zen-like indifference. They seemed confident that, as the economy grows, it will pull them up as well. Anecdotal evidence supported their assumption.

What bothered them the most was the daily corruption they encountered on their way up. Having to pay ten bucks to enroll their kid to a state school; having to pay bribes to secure a bed in hospital for a sick family member; having to grease the palm of nosy police officers to be able to get on with their daily activities.

It is the same story in China, with class warfare taking place not between capitalists and working classes, as predicted by Marx, but between ordinary people and petty bureaucrats.


I was in Siem Reap and in Phnom Penh. So what I observed is admittedly very urban and therefore very skewed. Nevertheless, the first thing that I noticed was how the government managed to conceal poverty. I mean conceal, as in hide and dissimulate. I went around to find the same shacks I saw in Ho Chi Minh City and I couldn't find any.

Well, that's not exactly true. There was this one tiny area in Phnom Penh, a short street left over from a neighborhood that was burned down a few years ago to be zoned (hastily) into a green area. Once former residents moved away it was rezoned to permit the building of tall edifices. And there, in that short street, I could see tiny shacks constructed with leftover building materials, with their ill fitting doors and glassless windows. With small kids playing in dirt under the distracted gaze of their toothless grand parents. A time machine of sorts. But it zipped by so fast that I couldn't take a picture.

All other signs of poverty were simply erased from the central areas in both cities. The number of scooters and cars were inversely proportional to Ho Chi Minh. In Phnom Penh, cars outnumbered scooters by a ratio of ten to one.

Signs of wealth was everywhere. Affluent men in large cars with pretty young women; high rise residences and five star hotels; Western fast food chains and consumer goods. Interestingly, foreign brands did not include high end European stuff. No sign said J'adore Dior. Most brands belonged to mid-level American or Asian goods (China, Singapore, Vietnam).

When I inquired about the country's main economic activities, I was told that the perpetual prime minister of Cambodia created an economy that consisted primarily of selling off Cambodia's assets to foreign investors (i.e. Chinese, Vietnamese and Malaysian). These could be land or timber concessions or mega-projects like dams or casino permits or brothels (apparently owned by Vietnamese).

Everything seemed for sale. While I was there, a bunch of foreign pedophiles were "pardoned" after serving a tiny fraction of their sentences. As the linked article states, these people were able to have sex with young children for $10 and after their release, not only they were not expelled as convicted pedophiles but they were allowed to stay in Cambodia legally. Everybody I asked told me that their early release and their authorization to stay in the country was certainly secured through high level bribes.

Although I use the term bribe signifying corruption, the Cambodian case seemed very different from the Vietnamese one. If you exclude agriculture and selling off assets to foreign investors, Cambodian economy "is heavily concentrated in trading activities and catering-related services" and lately in tourism 

To put it another way, unless you are affiliated with the ruling family and its extended circle, in this kind of economy, the only thing you have for sale is your own labor. If your labor does not get you what you want in that consumer market (and it wouldn't) that often means selling yourself.

I don't simply mean prostitution or human trafficking, even though both are rampant and involve a large number of children. I mean a general commodification of human beings.

The general fabric of society, its common institutions like family and its basic principles about what is right and wrong are all transformed by this new system. For instance, for young women, wealth became the only criteria in selecting a husband. They accept a subservient position in their marriage knowing that these men can divorce them to marry someone younger down the line. They also accept his inevitable mistresses and routine domestic violence as a reasonable price of this arrangement. And the general society, far from condemning it, views this as a laudable model.

People in decision making positions no longer base their actions on ethical criteria. If they are offered a bribe, they are happy to take it and comply with the request. What is worse perhaps is the fact that if a lone individual resists by citing ethical considerations, the rest of the society sees his actions as foolish, pointless and stupid. "He should have taken the money and looked the other way" is the near universal view.

In fact, this is the most radical difference between these two countries, at least to my eyes. Unlike Vietnamese who seemed very upset about corruption, Cambodians didn't mention it much. I got the impression that they viewed it as an inevitable and normal practice through which wealth trickled down to ordinary folks. It was not a practice they condemn, rather something in which they would like to participate.

To me, it is not the corruption that is the primary problem but the normalization of it. It destroys the ethical foundations of a society.

Two Models to Capitalism?

Just as Vietnam reminded me of the Chinese model to capitalism, I was struck by how much Cambodian example resembled to that of Russia.

Just like the CP of USSR, the Cambodian People's Party (CPP), the ruling party of Hun Sen was a Communist organization. Just like Russia, the transition consisted of a massive privatization of the economy and an almost simultaneous grab of these assets by people close to power. A parasitic oligarch class appeared almost overnight in both countries.

We forget how human trafficking and prostitution exploded in Russia at the time. In fact, since the end of the Soviet era, Russia has become one of the major sources of prostitutes and sex slaves. The commodification of women was not confined to prostitution. The institution of marriage in Russia was also negatively affected by the new system. Young and pretty women either tried to find rich husbands domestically and when they couldn't they sold themselves off to affluent foreigners through agencies, catalogs and Web sites.

More importantly, Russia experienced the same kind of normalization of corruption as Cambodia.

Take a look at the corruption perception index of Transparency International. Russia is ranked 154th among 178 countries. Tellingly, Cambodia shares the same ranking.

It is a shame, as Cambodians are really lovely people. They suffered a lot in the past and they deserve better.

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