Ho Chi Minh's Nightmare

Six months ago I wrote a long essay about Hanoi for City Journal. The magazine is quarterly, and the story got bumped from the Spring issue since it’s not time-sensitive, but it’s in the Summer issue. Here’s the first part:

After the Vietnam War ended in 1975, Hanoi, capital of a now-unified, Communist Vietnam, was a bombed-out disasterscape. Residents lived under an egalitarian reign of terror. The grim ideologues who ran the country forbade citizens to socialize with or even speak to the few foreign visitors. People queued up in long lines past government stores with bare shelves to exchange ration coupons for meager handfuls of rice. The only traffic on the street was the occasional bicycle.

Since then, however, Hanoi has transformed itself more dramatically than almost any other city in the world. Today, the city is an explosive capitalist volcano, and Vietnam is rapidly on its way to becoming a formidable economic and military power. “Many revolutions are begun by conservatives,” Christopher Hitchens once said, paraphrasing John Maynard Keynes, “because these are people who tried to make the existing system work and they know why it does not. Which is quite a profound insight. It used to be known in Marx’s terms as revolution from above.” That’s exactly what happened in Vietnam, though the revolutionaries weren’t conservatives. They were Communists.

Hanoi had a rough twentieth century. The French invaded and made it the capital of colonial French Indochina in 1887. The Empire of Japan seized the city in 1940 and annexed Vietnam to its fascistic Greater East Asia Co-Prosperity Sphere. Ho Chi Minh declared Vietnam an independent state after World War II, and his Viet Minh forces controlled a few scraps of territory, but the French returned in force in 1946 and didn’t leave until Ho’s Communist army forced them out in 1954. Hanoi then became the capital of the misnamed Democratic Republic of North Vietnam. Decades passed in squalor and brutality. Ho’s centrally planned Marxist-Leninist system ravaged the economy, and war with the United States and the American-backed government of South Vietnam—which included aerial bombardment of Hanoi itself—made the devastation complete. More than 1 million Vietnamese died.

The North Vietnamese won their civil war in 1975 and imposed the same draconian economic and political system on the South. Saigon, the South’s former capital, suffered when the North took over. “All the schools were shut down,” says Tuong Vi Lam, who vividly remembers when her side lost the war. “My aunts and uncles were in college and they had to quit. They just couldn’t get there. Property was confiscated and given to northerners. Communist propaganda was even put in our math books. We had questions like this: ‘Yesterday a soldier killed three Americans and today he killed five. How many Americans did he kill total?’ The books don’t have those kinds of questions anymore, but they did for five or ten years.”

Vietnam was finally independent and unified, but it fared no better than the Soviet Union, North Korea, or Cuba—and almost everyone knew it, including many in the Communist leadership. In the mid-1980s, a fight broke out between those who wanted to continue with the old system and those who had already benefited from quiet micro-capitalist reforms enacted in 1979 and wanted to expand them. Southerners made noise about returning to the pre-Communist system that they knew, from personal experience, worked much better. The relative economic success of other Southeast Asian nations, especially Thailand, was obvious even to the ideologues.

The advocates of change won the argument, and in 1986, the government officially abandoned Marxist-Leninist economics and announced the Doi Moi reforms, defined as an attempt to create a “socialist-oriented market economy.” Presumably, party leaders left the word “socialist” in there because they were embarrassed by Marxism’s failures and couldn’t admit that they’d been wrong. Or perhaps they feared that their remaining supporters were allergic to the word “capitalism.” No matter. Vietnam officially junked Communism a mere 11 years after imposing it on South Vietnam.

State subsidies were abolished. Private businesses were allowed to operate again. Businessmen, investors, and employees could keep their profits and wages. Farmers could sell their produce on the open market and keep the proceeds instead of giving them up to the state. The results were spectacular. It took some time for a middle class to emerge, but from 1993 to 2004, the percentage of Vietnamese living in poverty dropped from 60 percent to 20 percent. Before Doi Moi, the command economy contracted, and inflation topped out at over 700 percent; it would eventually shrink to single digits. After years of chronic rice shortages, Vietnam became the world’s second-largest exporter of rice, after Thailand. Progress hasn’t slowed. In 2013, Vietnam’s economy grew by 8.25 percent. “The number of malls, shopping districts, and restaurants is amazing compared with when I was a kid,” says motivational speaker Hoan Do. “Eighteen years ago, the entire country was broken down. There was hardly any technology, but now even poor people can go to an Internet café and log on to Facebook and YouTube.”

The South led the way. “When the Communist leadership decided in the mid-1980s to put Karl Marx and Adam Smith into an economic blender and see what came out,” reporter David Lamb wrote, “Southerners, exposed to capitalism for decades, were far more comfortable than their northern brethren in adapting to the demands of free markets.” Yet Hanoi eventually liberalized, too, and though it still lags behind Saigon (which the government renamed Ho Chi Minh City in 1975), it has made breathtaking economic progress.

Hanoi’s economy looks and feels entirely unregulated; the city bursts with activity. Though luxury boutiques, technology stores selling Apple products, high-fashion clothing outlets, and international food chains are easy to find, individual street-front proprietorships predominate. The state still owns or controls some of the largest companies, but the vast majority of businesses are too small to be centrally managed. On a single block, I saw the following for sale: Vietnamese flags, Ho Chi Minh T-shirts, candles, incense, bolts of cloth, used clothing from the U.S., fake money to burn in offerings to ancestors, Angry Birds toys, exotic fruit, meat skewers, iPhones, tea, jewelry, Italian shoes, French pastries, spices, herbs, motorcycle helmets, bootleg CDs, bootleg cigarettes, Japanese BBQ, carpets, funeral boxes, silk, paintings, and bootleg paperbacks with misspelled blurbs on the back.

The city is extremely business-friendly. I asked a local man who works for an American company how hard it is for foreigners to invest and go into business in Hanoi. “The Vietnamese government makes it easy,” he says. “Just present them with a business plan, tell them what you want to do, and you’re good to go.” The same goes for small businesses. All you have to do, he says, “is rent the space, pay the taxes, and that’s it.”

The United States didn’t normalize diplomatic relations with Vietnam until 1995, so American companies got into the game only recently, but their presence is evident now. It’s impossible to miss the Starbucks, KFC, Pizza Hut, and Burger King franchises. General Motors, Dell, Visa, General Electric, and countless others have invested here, too. The Vietnamese want more and will soon get it: Washington is poised to enact the Trans-Pacific Partnership (TPP) with 11 Pacific Rim nations, including Vietnam. The TPP will remove outdated bureaucratic trade obstacles on both sides while enforcing labor standards, environmental protections, and intellectual property rights.

Vietnam even boasts its own high-technology start-ups. “The incubation and funding of tech start-ups is still a fragmented segment of our economy,” says Nguyen Pham, founder of the start-up incubator 5desire, “but we’re working on streamlining the process and modeling it rigorously after those in Silicon Valley. We organize technology events that attract world-class foreign speakers and investors. One of our notable events was Hackathon Vietnam 2014, where we partnered with Formation 8—a well-known venture capitalist firm from Silicon Valley—and with the ministry of science and technology in Vietnam. More than a thousand people attended, more than 60 percent of them developers.”

I’ve been to 15 formerly Communist countries, plus Cuba, which is still Communist. (See “The Last Communist City,” Spring 2014.) Vietnam is the only one with good cuisine. I can’t recall enjoying a single quality meal in Europe’s former Communist bloc. Marxism bulldozed restaurants along with everything else, and chefs in post-Communist Europe haven’t had much time to master their craft. Cuba’s food is still mostly terrible, though a handful of restaurants are privately owned and offer tolerable fare. The biggest problem there is a chronic shortage of quality ingredients. Yet Vietnam—still nominally Communist—somehow has outstanding food everywhere, even on the street. It must be some combination of the ingredients, the cooks, and the cuisine itself.

Prosperity never guarantees an aesthetically pleasing urban environment, but Hanoi is easy on the eyes. The city center is dominated by the charming but chaotic old quarter and the more stately and orderly French quarter, just minutes away on foot. Both neighborhoods are anchored by Hoan Kiem Lake, the city’s cultural center. Its name means “returned sword,” after the weapon that the gods supposedly gave Emperor Le Loi in the fifteenth century, which he used to drive out the invading Chinese. Hanoi sparkles with lakes—Hoan Kiem is only the most famous—and it’s studded with an even larger number of ancient Buddhist pagodas with vertical Chinese characters on the walls.

The most exquisite buildings are French and Chinese, but the simpler Vietnamese homes can also be striking. Many look as though the architects mashed Victorian, French, brownstone, and Thai architecture together, and then squeezed the final product into a vise to make it taller and narrower. (Homes and businesses get taxed by their width.) Vietnam’s Communists were wrong about almost everything, but at least they elided some of the mistakes made by their comrades elsewhere in the war against anything old. Hanoi is blessedly free of an asteroid belt of Soviet-style garbage architecture on the outskirts, the kinds that blight so many formerly Communist cities in Europe. I did see a few soul-crushing structures made of poured concrete, but for the most part, these kinds of buildings were never built, or were torn down, or have been overwhelmed by an explosion of new and better construction. Hanoi has grown exponentially since its worst days—the city’s population, under 1 million in 1979, now exceeds 7 million, making it larger than every American metropolis but New York—so perhaps the ugly stuff has just been obscured.

Read the rest in City Journal.