New Internationalist

Scrap Metal Jacket

Issue 312

new internationalist
issue 312 - May 1999

Post conflict

The defeat of the Americans in Vietnam was one of the defining moments in post-colonial history.
But, argues Michel Chossudovsky, though the Vietnamese people may have won the battle
they are definitely losing the peace.

Scrap metal jacket

The former ‘Museum of American War Crimes’ in Ho Chi Minh City (Saigon) has a new name: the ‘Exhibition House of Aggression War Crimes’. Stroll into the souvenir shop and you can purchase a model jet complete with a Coca-Cola logo on its fuselage – an exact replica of the one the US Air Force used for bombing raids in Vietnam. In the same souvenir stall you can also find an impressive selection of manuals on foreign investment and economic reform. The irony is that, search as you may, you won’t find a single text on the history of the war with the US. Outside the museum, the socialist dream of the victorious Vietnamese is in tatters. A frenzied consumer economy dominates the streets, in sharp contrast to the desperate beggars, skinny street children and sinewy rickshaw drivers.

When the US/Vietnam War ended in 1975 there was an atmosphere of confusion and inertia in the country. With reunification two vastly different economic and political systems were fused – and the outcome was not always successful. Reforms in the South were enforced narrowly, following Central Committee guidelines, with little concern for social consequences. Small-scale trade in Ho Chi Minh City was suppressed, while collectivization was carried out hastily in the Mekong River delta. Ironically, political repression affected not only those with ties to the defeated Saigon regime, but also many who had opposed it.

Meanwhile, the world was changing. The ‘globalization’ of the market system and the breakdown of the Soviet bloc (which had been Vietnam’s main trading partner) left the Vietnamese economy reeling. The Communist Party split on how to handle the crisis until 1986, when ‘open door’ economic reforms intended to integrate Vietnam into world markets were finally introduced. Inflation and repeated devaluations had already crushed the Vietnamese currency – it was only a matter of time before the country was again flooded with US dollars.

Despite its ‘open door’ economic policy the country drifted deeper into poverty. Finally, in November 1993, the Paris Club of Western donor nations pledged $1.86 billion in loans and aid to support the market reforms. But the assistance came with a humiliating price attached. As a condition for the ‘normalization’ of economic relations and a lifting of the US economic embargo, Hanoi was forced to inherit the debts incurred by the US-backed Saigon regime.

The loans pledged at the 1993 Conference required all public-works projects to be tendered to foreign construction and engineering firms. The latter in turn skimmed large amounts of money off into consulting and management fees and strengthened the grip of creditors on the Vietnamese economy. The Japanese at one point controlled more than 80 per cent of the loans for investment projects and infrastructure in Vietnam and a large share of those used to finance consumer imports. Debt service increased more than tenfold between 1986 and 1993, even before the Paris Club aid package.

Howitzer comes in handy at last in Hanoi.
TIM PAGE / STILL PICTURES

Conditions attached to Western loans also began to erode Vietnam’s industrial base. The steel industry is a good example. Eight million tons of bombs and abandoned military hardware had provided the country’s mills with an ample supply of scrap metal. However, the new policy meant that steel scrap now had to be ‘re-exported’ on to world markets to earn foreign currency. Production at Vietnam’s five major steel mills stalled due to a shortage of raw materials. Meanwhile, in 1994 a Japanese conglomerate established a steel plant in Ba-Ria Vung Tau province which imported the scrap metal back into Vietnam.

An open border to foreign investment also led to the takeover of oil and gas, mining and cement production – with Japanese conglomerates again playing a decisive role. In new areas of light manufacturing and industrial processing the internal market was ‘off limits’ to Vietnamese companies. Cheap-labour garment producers were to export their entire output while the local market was supplied with imported second-hand garments and factory rejects from Hong Kong. The result? Tailors and other small-scale garment workers were pushed into poverty with their skills no longer in demand.

In sector after sector the legacy of debt and globalized free markets had a devastating impact. The over-cropping of coffee, cassava, cashew-nuts and cotton for export, combined with plummeting world prices and the high cost of imported farm inputs, eventually contributed to the outbreak of local-level famines. In many of the food-deficit areas, industrial crops produced by farmers who had abandoned food farming remained unsold on oversupplied world markets. The upshot was famine: farmers could neither sell their industrial cash crops nor produce their own food.

The reforms also ravaged the education system. The budget was slashed, teachers’ salaries cut and ‘user fees’ introduced for secondary schools, colleges and universities. Nearly 750,000 children were pushed out of high-school during the first three years of the reforms.

Public health also suffered. The use of essential drugs dropped by 89 per cent, destroying Vietnam’s pharmaceutical and medical-supply industry. Tens of thousands of doctors and health workers abandoned the public sector. One result has been a dramatic resurgence of infectious disease. The World Health Organization found that malaria deaths increased threefold in the first four years of the reforms.

In the aftermath of a brutal and criminal war the world has scarcely noticed the deadly impact of these ‘macro-economic’ policies. The achievements and aspirations of an entire nation have been silently destroyed. Not by steel-pellet bombs, napalm or agent orange, but by the ‘neutral’ and ‘scientific’ tools of free-market economics.

Michel Chossudovsky is Professor of Economics at the University of Ottawa.
This article is an edited extract from The Globalization of Poverty (Third World Network, Penang, Malaysia, 1997).

Vietnam's external debt
(US$ millions)

Vietnam's external debt

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