Why Vietnam's Communists Adopted Capitalism

Added: 2026-05-30

[00:00:00]Why did communists in Vietnam end up adopting the economic system of the country they spent 20 years fighting a war against? From 1955 to 1975, North Vietnam and its Viet Cong allies waged a bloody guerrilla war against first the French and later the Americans in order to conquer South Vietnam and bring the two countries together under a communist government. And after the fall of South Vietnam's capital of Saigon in April 1975, they finally got their wish. The result was a disaster. After taking over the country, the communists collectivized the farms. Farmers didn't get paid based on how much they grew, but rather how many days they showed up. And because there was no connection between effort and reward, the collective farming campaign ended in total failure. Famine swept the country whenever harvests were poor. Throughout the 1980s, Vietnamese families were given ration cards that determined how much food they were allowed to eat. People lined up for hours, sometimes overnight, at government food distribution centers. In less than a generation, the entire country's economy had collapsed. Nearly 80% of the population lived in poverty, while annual inflation exceeded 100%. By the end of the 1980s, Vietnam was one of the poorest countries on Earth. Now, contrast that with the Vietnam of today.

[00:01:16]It's one of the fastest growing economies in Asia with less than 2% of the population still living in extreme poverty. What's more, a famine hasn't happened in over 40 years, and Vietnam is now a net exporter of rice. And here's the crazy part. The country got there with the Communist Party still officially in charge. So, what actually happened? Is this finally proof that communism actually works?

[00:01:40]No. Turns out the ruling party didn't fix Vietnam by successfully implementing Marxism-Leninism.

[00:01:47]Vietnam was saved because the Communist Party actually abandoned Marxism. With the country facing total collapse, the VCP did something that is incredibly rare in politics. They admitted they were wrong. At the sixth party conference in 1986, the VCP itself declared, "The reasons for the current situation are to be sought above all in mistakes and errors of leadership and direction by the party and the state."

[00:02:10]In a desperate bid to pull the country out of an economic depression, a series of radical reforms was proposed and adopted. The Vietnamese called it renewal, but in many ways it was revolutionary. Businesses that had previously operated on the black market were allowed to open up and hire workers. The state's monopoly on foreign trade was dissolved. Internal customs checkpoints were dismantled. Almost all subsidies and price controls were lifted. Land and businesses that had been nationalized in the 1970s were returned to their former owners or their relatives, and foreign investment was welcomed into the country for the first time since the war. And when you look at the history of Vietnam's GDP per capita, you can see the exact moment that renewal took place. The result has been an economic miracle. GDP grew at nearly 8% a year through the 1990s. Inflation fell from 100% to less than 10%, and poverty rates plummeted for more than 30 years straight. Now, this doesn't mean that Vietnam is a paradise. The country is still a long way off from being as wealthy as other East Asian nations like South Korea or Japan. Corruption is still a major problem, and it's still an authoritarian single-party state. But ironically, the story of Vietnam's economic collapse and the miracle that happened next is perhaps best summarized by what the Vietnamese Communist Party admitted at their own party congress in 1986. When a delegate stood up and told the room what nobody in the party had ever said out loud before, "The people have lost faith in the party, and the only thing that could save it was abandoning everything the party stood for."