From Plan to Market

Fforde and de Vylder wrote this analysis of Vietnam's transition from central planning to a market economy, based on long field research in the country.

Their central argument distinguishes Vietnam's path from the transitions in Eastern Europe. Vietnam's reform was not designed and imposed from above. Instead, as the planned system failed to supply what enterprises and households needed through the late 1970s and early 1980s, participants at every level began transacting outside the plan: state enterprises sold output on the side to obtain inputs the plan did not deliver, cooperatives contracted land to households, and local authorities permitted arrangements the centre had not authorised. The authors call this fence-breaking. The reforms formalised in 1986 and after largely ratified practices that had already spread rather than introducing new ones.

The analytical implication is that market institutions emerged from the failure of the plan through decentralised adaptation, and that the formal policy changes followed rather than led. This explains why Vietnam avoided the output collapse that accompanied Eastern European transitions: the market activity was already operating when the plan was abandoned, so there was no institutional vacuum.

They also cover the agricultural decollectivisation that produced a rapid supply response and turned Vietnam from a rice importer into a major exporter, the currency and price reforms that ended high inflation, the treatment of state enterprises which were reformed rather than privatised, and the political arrangement under which economic liberalisation proceeded without political liberalisation.

The book is academic and from 1996, so it covers the early transition rather than the subsequent industrialisation and export growth. Its argument about bottom-up institutional emergence remains the standard account of the Vietnamese case.