Vietnamese leadership continue to succeed in balancing moderate economic prosperity, equitable distribution, social inclusion as well as environmental sustainability. That’s the future of Vietnam.
Contrary to some Vietnamese being obssessed with “miraculous rise” of China, Japan and South Korea (and these countries’ obsession with explosive growth), Vietnamese leadership seems to realize long ago that GDP is a very deceptive measure or that it is not a measure of wealth at all. It basically measures the level of “economic activity”, but not how much of that is *productive* instead of just wastes. Not only does it not control for the cost of recovering from damage, it also fails to account for cost of living and has inconsistent and dubiously useful ways to deal with goods that are produced but not purchased. GDP is extremely susceptible to something called the 'broken window fallacy,' where the cost of repairs as a result of someone breaking windows effectively *boosts* GDP despite increasing operating costs and reducing productivity of things other than window replacements. You literally can print money out of thin air and pay people to repeatedly build and blow up a bridge until you hit any GDP target you like. If not a bridge, empty apartments that in the process of building, concrete over valuable arable lands, for example.
GDP is a poor metric for economic health, growth, outlook, and citizen outcomes. The guy who *created* GDP, Simon Kuznets, said that it's "not a measure of how well we are all doing." It's so baffling and counter-intuitive that we've come to rely on this metric, to the clear detriment of everyone.
Let me provide a very simple example: assume you have a happy family of a couple and two children. There are one or two income and they spend modestly on, the essentials. and save the rest. What would happen to GDP if they get divorce? There will be an instant boost in GDP. They need to pay for lawyers' fees, court fees, the real estate agent cost to sell one house, divide up the money, buy two new houses, additional baby sitting cost, extra lessons to keep the little ones busy, depression and loneliness cost (gaming, entertainment, streaming services, etc ...).
A healthy person contribute little to GDP. A fat person to eats too much, get fat, pay for personal trainer to lose the weight, get hospitalised from obesity-related diseases, continued healthcare from chronic disease is a boom to GDP.
One of the biggest problems with GDP is that it ignores opportunity cost. This overindexes the impact of government expenditure. For example, if the government spent $1m on a program which the market could deliver at $250k, this is imputed as $1m of GDP, rather than a -$750k hit to GDP.
If you don't like my examples, here is Joseph Sitglitz, a Nobel-winning economist, talking about it.
Here's him again on where to go beyond it.
Note the year 2011. Here's the conference reporting the results of an OECD panel talking about how we should actually measure "the things that matter" next.
Here's Stiglitz writing it again in 2019 It's time to retire metrics like GDP. They don't measure everything that matters | Joseph Stiglitz then 2020 GDP Is the Wrong Tool for Measuring What Matters . and finally, here's the OECD's Better Life Initiative OECD Better Life Index
Now, the best author I've ever seen/heard talking about economic development for less developed country is Michael Pettis . He pointed out that it's actually not all that tricky to force development of a less developed country. Less developed countries need savings while not having that much. So they way you do it is to force down the domestic consumption and take that money and go build anything from bridges, roads, highways, to factories. Many countries' development has been labelled miraculous but if dozens of them have achieved growth rate of 10% or more for decades, then are miracles really miraculous?
The side effect of that is while the economy rise very fast, the workers and households are actually screwed over because their wage growth and domestic consumption as % of GDP actually goes down. In other words, countries that do well in exports manage to do so by subsidising export by cutting workers' wages.
China and Singapore has very low domestic consumption as % of GDP, around 35-40%. South Korea about 49%, Indonesia around 58%, and Vietnam is about 68%. Vietnamese workers are roughly better compensated relative to their level of productivity than most; wage growth has been far higher than GDP growth. And productivity growth has continued to double during the past decade. China’s productivity growth and wage growth had contracted sharply while Japan’s and South Korea’s is nearly ZERO (with much lower wages on OECD average). These three have workers spending chronically long hours at work, among the highest in the world with much lower productivity per person than Western states.
Note that as every country in the Sino culture sphere develops, their birth rates crashed through the floor: China, Japan, Taiwan, Singapore, South Korea, etc while their (corporate, government or household) debt skyrocketed. It is the consequence of subsidizing unproductive investments for the sake of employment from output surplus that can only be absorbed by either unemployment or debt. I use the Sino culture since it equalises the cultural factor. Young people in these places just don't care enough to meet new people, form long-term relationship, and have children. You dig deeper and there are epidemics of loneliness, depression, exhaustion, burnouts among the urban young.
My question is: if that's the path to economic development, is it worth it? Doesn't the economy exist to serve us, to make our lives easier and better and not the other way around? Everything seems to be sacrificed at the altar of "the economy" in Singapore, China, Taiwan, or Japan: family, children, community, nations, etc ... They never came to grip with that issue.
I have come to rely on much simpler measurements that already exist: Total Fertility Rate + Life Expectancy. If both drop too much, there is something fundamentally wrong, regardless of what the GDP number says.
Vietnam’s Life Expectancy is already on par with China, about 9 years below Japan and 8 years below South Korea at a much lower level of economic development. But that doesn't make a flashy story like GDP growth, isn't it? Even though the population is living longer, healthier and enjoying better economic fruits after decades of war and famine.
In terms of Total Fertility Rate, Vietnam never managed to destroy its demographic future. With the ageing crisis coming across the globe, China’s is following the path of Japan’s and South Korea’s grim and predictable demographic winter for the remainder of this century while Vietnam still looks like it can buy itself some time to prepare and enjoy the “demographic dividend” for the two or so decades to come. A shrinking population means smaller workforce, and a smaller market, and if productivity won't rise enough, we have the elderly population chasing a fraction of what we as a society could produce previously. Your savings is only worth a fraction as much otherwise.
You can cope with the loss of children being born, temporarily, by immigration from places still with high birthrates; but those places are now few, far in between, and with very foreign cultures: India, the Middle East (Muslims and Arabs), and Africa. Singapore pays for its very high GDP with very low birth rate and Indian immigrants, which causes a lot of political problems. Is it worth it?
Historically, kinship group provides all the functions that a modern state provides: security, social safety net, etc ... When you transfer some of that functions and responsibilities from family to the state, you can atomise the family. Anthropological studies suggest that places that evolve to having smaller families are associated with regions having severe weather where people have to move about a lot. Ironically, capitalism puts us into the same situation where we are thrown about by the whims of the market. In the same way that we occasionally have dysfunctional families, we do have dysfunctional aspects of the state in providing those functions that kinship groups used to provide. Case in point, COVID response.
I've always love this piece , particularly, the sections by Edward Luttwak.
"The market," he says, "invades every sphere of life," producing a "hellish society." In the same way that market values once threatened national security, they now threaten the economic and spiritual well-being of society. "An optimal production system is a completely inhuman production system," he explains, "because...you are constantly changing the number of people you employ, you're moving them around, you're doing different things, and that is not compatible with somebody being able to organize an existence for himself."
"I believe that one ought to have only as much market efficiency as one needs, because everything that we value in human life is within the realm of inefficiency—love, family, attachment, community, culture, old habits, comfortable old shoes."
People don't like being lonely, so something will fill that hole. Addictions of all kinds (internet, sex, drugs, gaming, etc...), New Age religions and cults (you probably can notice how large cults tend to also be in developed countries. That Shincheonji church in South Korea, Aum Shinrikyo in Japan, Scientology, numerous Evangelical churches in Singapore and Taiwan, Falun Gong among the Chinese diaspora.) Christianity in Vietnam remain shockingly vanilla: Catholics, Anglicans, etc ... Different Internet movements and groups: incels, MGTOW, Red/Black Pills, anti-vax, conspiracy theory, etc ...
Is this really what we want to build on from as a (on paper) economically prosperous society?
The focus of Vietnamese government should be about making as much thing as possible, lasting for as long as possible, at as low cost as possible, to benefit as much people as possible. After that, they can forget about GDP and focus on accumulate wealth instead of GDP growth and debt. In other words, they should provide funding for things and services that are important and socially productive, but not financially profitable: like infrastructure, research and development, education, healthcare, public health, etc ...
Currently, the Vietnamese gover