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From Havana to Hanoi

Vietnam’s communists are a hell of a lot smarter than Cuba’s.

Hanoi, the capital of Vietnam, thunders with economic productivity and bristles with new construction while most of Cuba’s capital Havana resembles a post-apocalyptic ruinscape.

While civilized countries have a minimum wage, Cuba has a maximum wage of twenty dollars per month for almost every job in the country. A beer costs an entire week’s salary and a meal out in a restaurants costs a month’s, so drinking and dining establishments are almost strictly for foreigners. In Hanoi, though, you can’t walk a block without passing restaurants, bars, cafes, and food stalls packed from one wall to its opposite with local patrons.

Vietnam’s middle class travels on motorbikes for the most part rather than in cars, but in the 1970s almost everyone got around on a bicycle. Cuba hasn’t even reached the bicycle stage yet. Its streets and highways are more bereft of traffic than anywhere in the world except North Korea.

You can find more goods for sale on a single block in Hanoi than in all of Havana.

Havana, Cuba

Some countries are just better at economics than others.

In Vietnam, citizens are allowed to earn and keep money. This makes them rich compared with Cubans who, for the most part, are not. But Cuba is not only poor because the government imposed a glass ceiling an inch off the floor. It’s also poor because the government has banned ordinary commerce for decades. One should hardly expect a booming economy when nearly all economic activity is prohibited.

Cuba’s president Raul Castro is experimenting with microcapitalist reforms, but billboards in Havana broadcast a soul-crushing slogan even today: “In Cuba the only changes are for more socialism.”

By contrast, Vietnam’s Communist Party figured out that communist economics were bankrupt even before the Berlin Wall fell, a mere ten years after winning the war and conquering the south, and in 1986 it implemented the reforms known as Doi Moi. Decades later, the result is an extraordinary explosion of new prosperity that nullifies nearly everything the party did and said when it first came to power.

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It wouldn’t be quite right to describe Vietnam’s reforms as economic liberalization. The ostensible goal was to produce a “socialist-oriented market economy” where the state still owned major industries. But it was still a far cry from the centrally-planned Soviet-style command economy, and as the reforms progressed the system functioned more or less as a market economy despite the fact that the largest companies were owned by the government.

Hanoi, Vietnam

Small businesses were left alone for the most part, and Vietnam developed what some have called “street front capitalism” where microbusinesses proliferated. You’ll still see them all over Vietnam now. Women sell fresh produce and baked goods from baskets. Men grill meat and sell it to passersby who sit on little stools and eat at tiny tables right on the sidewalk. Everything you can imagine is sold from little stalls in the night markets.

Nowhere in the world have I seen so many boutiques, from cafes and pubs to clothing and electronics stores. I can’t say with this with certainty, but I suspect, due to the sheer number of Vietnamese involved in one kind of small business another, that more people in Vietnam understand the basics of business and capitalism than people in the United States. And that’s in the north, which still lags behind the south.

When the communist leadership decided in the mid-1980s to put Karl Marx and Adam Smith into a blender and see what came out,” David Lamb wrote in Vietnam Now, “Southerners, exposed to capitalism for decades, were far more comfortable than their northern brethren in adapting to the demands of free markets.

“The Old Guard communist leadership of the North can bury its head in the sands of Marxist economic theory all it wants,” he added, “but its constituency wants the model that Saigon symbolized—an economy that rewards initiative, encourages private enterprise, values liberal ideas, and frees itself from rigid government control.”

He wrote those words in 2002. In the meantime, the north got what it wanted. At least it appears that way to me. I didn’t get a chance to visit the south and cannot compare them. Perhaps the south still has a freer economy, and everyone in the north will freely admit that it’s richer, but the north in 2014 is a capitalist wonderland, what Bill Hayton calls the “communist capitalist playground” in his book, Vietnam: Rising Dragon.

“The results of Doi Moi over the first eight or nine years were dazzling,” Lamb wrote. “The annual inflation rate fell to single digits from 700 percent. Farmers, freed from collectivization, transformed Vietnam from a rice importer into the world’s second-largest rice exporter after Thailand. The gross domestic product grew by nearly nine percent a year. Thirty-five thousand small businesses started up in the private sector.”

When Vietnam was still economically Marxist it was one of the world’s poorest countries. “Ninety percent of the roads were unpaved; farmers in the most impoverished provinces got by on the equivalent of perhaps five dollars per month; nationally, bicycles outnumbered cars forty-to-one…Personal freedoms had vanished for all but the communist elite. Food was rationed. A pair of shoes was beyond the means of most families, unless they were prominent Party members.”

Hayton notes that in 1993 more than half the county lived below the poverty line, but less than a fifth did by 2004. The government can cook its books however it wants, of course, and those figures are a decade old, but they seem more or less accurate now, at least in the capital.

Havana, Cuba

The same thing may eventually happen in Cuba after Fidel Castro is no longer with us. He doesn’t govern the country directly anymore—his less-doctrinaire brother Raul has been president since 2008—but it’s spectacularly unlikely than a Vietnam-style renovation is possible in Cuba until Raul and whoever follows him is entirely free of Fidel’s baleful presence and influence.

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Hoan Do’s father was a fighter pilot for South Vietnam, and the communists put him in a re-education camp after the fall of Saigon.

His wife broke him out and they fled the country by boat. They were boarded by pirates, escaped to another boat, and finally made their way to the United States. Their son Hoan lives today in the Seattle area and works as a motivational speaker for high school students.

Hoan’s father has never gone back and doesn’t want to. He’s afraid the police will arrest him if they find out he escaped. He has so many bad memories there and doesn’t even like to discuss it.

But Hoan has been twice, eighteen years ago and again three years ago. The difference between Vietnam then and now, he said, is startling.

Hanoi, Vietnam

“It’s like night and day,” he told me. “The economic changes in the cities are incredible. The farmland hasn’t changed much—poverty is poverty—but the commerce in Saigon blows me away. It’s incredibly Americanized. The number of malls, shopping districts, and restaurants is amazing compared with when I was a kid. 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 onto Facebook and YouTube.”

Internet access in Cuba, though, is all but non-existent. Last year I was occasionally able to log on at a hotel in Havana on a shared dial-up connection if I paid the equivalent of a week’s local salary per hour, but it took almost that entire hour just to download my emails from the server. Internet access in private homes is still banned. You certainly can’t surf the Web from a smart phone, which hardly anyone in Cuba can afford to buy anyway unless they receive remittance cash from abroad.

In Vietnam, though, all the middle class kids seem to have smart phones and almost every hangout spot I found in Hanoi has blazing fast wi-fi. Facebook is no longer blocked like it once was.

The press is heavily censored, but I found the New York Times and the Wall Street Journal for sale whereas I couldn’t find any media whatsoever in Cuba that wasn’t produced by the Communist Party. Even if Western newspapers weren’t for sale on the newsstands in Hanoi, the Vietnamese can read them for free on the Internet.

I spoke with Nguyen Pham, the founder of a high tech startup incubator called 5desire. Her company manages small- to medium-sized investment funds for technology startups and advises on operation, growth, funding, partnership and expansion. 5desire is based in Vietnam, but it has three managing partners in Silicon Valley.

“The incubation and funding of tech startups is still a fragmented segment of our economy,” she said, “and we’re working on streamlining the process and modeling it rigorously after those in Silicon Valley.”

Ho Chi Minh could not have even imagined high tech startups backed by angel investors. Not even Americans could imagine the likes of Facebook, Google, and Amazon.com back in the 60s. Fidel Castro is perfectly aware of such companies, but when he was president he never would have allowed anyone to develop something similar, especially not for profit.

The Cuban government blames the US embargo for the poverty of its people, but the truth is the Castros love the embargo because it allows them to deflect blame onto outsiders. Even if that weren’t the case, it was Cuba, not the United States, that cut off all economic relations after the communists seized power.

Vietnam, though, is forging as many economic ties with the United States as it can. The government is forging ties, and so are companies like 5desire.

“We organize technology events that attract world-class foreign speakers and investors,” Nguyen said. “One of our notable events was Hackathon Vietnam 2014 in August where we partnered with Formation 8, a well known venture capitalist firm from Silicon Valley and the Ministry of Science and Technology in Vietnam. More than a thousand people attended, more than 60 percent of them developers. Joe Lonsdale, co-founder of Palantir Technologies and managing partner of Formation 8, has spoken at our events, as have Ngo Bao Chau, Mathematics professor from the University of Chicago, and Jonah Levey, the CEO and co-founder of Vietnamworks.”

You don’t need as much capital to become an angel investor in Vietnam as you need in the United States. A few thousand dollars will do the trick. Even investments of that size, though, are large enough that many Vietnamese still feel reluctant to make their investments publicly known. Prejudice against the rich goes down hard, especially in a country, capitalist playground or not, that is still run by a nominal Communist Party. It may fade in time, and perhaps it already has more in the south than in the north, but it’s still there. It has been a long time since Ho Chi Minh’s goons ran around the north executing landlords, but that bloody period in Vietnam’s history is still within living memory of older generations.

With all this technology, Nguyen said, “we have seen great improvements, but the bad side is huge too. It’s easier to communicate, but people are more lonely than they used to be. When you walk into a restaurant it’s common to see a group of friends sitting together without anyone saying a word. They’re all concentrating on their smart phones. A large number of Vietnamese youths are addicted to online games.”

Local markets are still the main focus of most Vietnamese startups, but some are aggressively expanding outside the country, especially in Asia and Africa. “Going global is a dream of many developers now,” she said. “After the success of Flappy Bird, many game developers aim for the global market with some success, such as AmazingBrick from Tung Hoang and NinjaRevenge from Divmod. Adatao has a team in Silicon Valley.”

Vietnam’s economy, capitalist as it is, is still directed to an extent by the government. It doesn’t own the company that made the Amazing Brick game, of course, but it steers things from on high much the way China’s government does. The system is hopelessly opaque to an outsider like me and isn’t entirely understood by average Vietnamese either, so I had to ask: does the state get in the way of a company like 5desire or does the government do anything to make its job easier?

“The Vietnamese government is now paying more attention to innovative technology,” she said, “and the Ministry of Science and Technology wants to take bigger steps to improve the startup community. They’re operating a fund backed by the World Bank. That’s good for us because startups will have more access finance and support. Some investors still complain about the high fees and bureaucracy when they invest in Vietnam. I believe the government is trying to fix this, but it won’t happen any time soon.”

There was a time, not long ago, when the government wanted everyone to think it and only it was responsible for technological advancement. I saw two statues in Hanoi of men wielding gigantic power plugs, presumably representing the Communist Party’s electrification of the countryside.

Power Plug Guy, Hanoi, Vietnam

Communists governments all over the world have bragged about their electrification of poor rural countrysides despite the fact that, once discovered, electricity spread all over the world under every conceivable form of government, from liberal to monarchist to fascist as well as to communist.

It’s not like Saigon lived in the dark before 1975. Electricity would have found its way to the countryside no matter who was in charge. So it’s a bit of a stretch to credit the Communist Party with improvements that likely would have happened regardless, but the party deserves all kinds of credit for voluntarily scrapping communist economics. Hanoi’s rulers learned much faster how to enrich their country than the Castro family, which is only just now beginning to implement the kind of reforms that will allow people to join the 21st century after walling them off from nearly all progress the human race has experienced since the 1960s.

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Southerners still hold grudges against the north for what it imposed on them in 1975, despite the fact that Vietnam is communist-in-name-only and despite the fact that South Vietnam wasn’t a free country either. Southerners today are arguably more free and are certainly more wealthy than they were when the United States defended their republic from the north during the war.

“We hate northerners,” said Tuong Vi Lam, “because they changed our lives overnight. Everyone became workers.”

“In the south there’s still amazing prejudice against the north,” her American husband Alex Kasner told me. “Whenever a crime is committed, someone always blames northerners. They are supposedly uneducated. Not all people think this way, but it’s astounding to me how much of it there is. They’re all Vietnamese, but at the end of the day they’re not the same people.”

Even though the north is richer than it used to be, the south is still vastly more wealthy. It only suffered full-blown communist economics for a decade or so. Almost everyone still remembered how capitalism worked once it was permitted again.

Saigon is the center of economics and culture while Hanoi is the center of government. The north dictates to the south and has since 1975. Southerners naturally feel resentment about it. They also resent the north for changing Saigon’s name to Ho Chi Minh City, which to this day many refuse to acknowledge.

The hatred, for the most part, goes only one way.

“I’m from the south,” Huy Dang told me in Hanoi, “but I live in the north and I married a northern girl. In the south they don’t like the north, but northerners feel okay about the south. Northern people see southerners as open and happy all the time. Northerners are more reserved. They’re more careful and lazy.”

“Hanoi doesn’t look at all to me like a lazy place,” I said. Really, it doesn’t. Everyone is busy going somewhere and doing something all the time, even in the unspeakable heat of the summer, which, for quirky reasons of climate, is hotter and more stifling than the south for a few months of the year.

“It’s lazy compared with the south,” Huy said. “Northerners do things slowly. They procrastinate. If you tell them to do something they’ll say, ‘Okay, I’ll do it tomorrow.’ But the next day they still haven’t done it. Northerners like working with people from the south because we meet deadlines. We get it done. We are responsible. But not here in Hanoi.”

I have no idea how much of that is true, how much of it used to be true, and how much of it is simple prejudice. I’m not qualified to say. I can tell you just by looking around that Hanoi is not objectively lazy by global standards, but I didn’t get a chance to visit Saigon and can’t compare the two.

“Why is the south so different?” I said to Huy.

“The south has been with the Western world for a long time,” he said, “much longer than the north, for several generations. The north has opened up, but less so and it happened more recently. Young people haven’t had time to learn it from their parents yet, but in the south it’s part of their culture. Saigon is like New York and Hanoi is like Paris.”

Huy works for General Motors, so I thought he might have an idea how easy or difficult it is for an American company to open up shop in Vietnam.

“It’s very easy,” he said. “After Bill Clinton's visit, the post-war restrictions were lifted. Just present them with a business plan, tell them what you want to do, and you're good to go.”

“What about small businesses?” I said. “I see a lot of them on every street, so I imagine it's not too hard, but let's say you want to run coffeeshop. Can you just rent the space and open it up, or do you have to go through some complicated bureaucratic procedure?”

“It’s easy,” he said. “Just rent the space, pay the taxes, and that's it.”

That seemed slightly hard to believe, but Vietnam is one of the most capitalistic places I've ever seen. It can’t be too difficult to go into business if so many people are doing it. “Is there anything left of communism here aside from the name of the ruling party?” I said.

“The Communist Party still controls electricity, communications—including the cell phones companies—mining companies, and shipping companies,” Huy said. “But they're now selling stock to the employees like your stock options in the US.”

After sunset I walked through the local night market in the Old Quarter when the heat was slightly less oppressive. Individual proprietors set up shop in the middle of a street closed to vehicle traffic. I saw grilled meat, clothing, bootleg DVDs, sunglasses, smart phones, incense sticks, fake money to burn as offerings to dead ancestors, motorcycle helmets—you name it. The market reminded me of a Middle Eastern souk, only this one was out in the open under the sky.

Ad hoc markets have been a feature of local economies for millennia. Today we call this capitalism, but nobody needed to construct an ideological ism before it took off. Buying and selling is what people naturally do when governments don’t get in the way and ban commerce. You don’t have to read Adam Smith to figure out how it works. You don’t even need to be literate. The process is natural, organic, and it’s universal across cultures.

Cubans would naturally behave much like the Vietnamese do if the government would let them, but Raul Castro’s reforms are still in their infancy. The tiniest businesses are still micromanaged by the state to the brink of oblivion. Even a ruined and shattered country like Iraq is more economically robust than Cuba right now.

In Havana there is hardly anything to buy. Across the street from the Melia Cohiba Hotel, which is known as the most luxurious in the country even though it’s faded and drab, is a “mall” where “rich” people go. It’s a concrete box from the 1960s. You can buy a washing machine or a TV there, or you can hit the grocery store and pick up a few things that aren’t available with government ration books, but I’ve never seen such a pathetic mall in my life, nor have I seen such a grim grocery selection.

Royal City Mall, Hanoi, Vietnam

Hanoi, though, has one of the most extraordinary shopping malls I’ve seen in the world. I wandered around the Royal City mega mall for hours without retracing my steps, gawking at its splendor and vastness. Enough middle class families fill it at any given moment to populate a small city. I would have been impressed by the Royal City if I found it in Los Angeles, and I don’t even like malls. I can only imagine how it would look to somebody whisked there from Havana.

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All communist countries revert to capitalism eventually. Some just get there quicker than others.

Hardly anyone bothers to defend Cuba’s groaning economic system anymore, but a stodgy core of calcified defenders haven’t quite given up yet.

Havana, Cuba

Oliver Stone—whose documentary Comandante was axed by HBO for being “incomplete,” as the channel euphemistically put it—said Fidel Castro is “one of the Earth's wisest people, one of the people we should consult.”

And The Nation magazine recently took travelers to Cuba on an “educational” trip.

The Nation,” writes editor Katrina vanden Heuvel, “for decades has covered Cuba in a way that few publications have done or dared.”

That’s true. And the article produced by the magazine’s “educational” trip is yet another in its long line of ludicrous reads. “Cuba has democracy and freedom but they are defined differently,” vice president Miguel Diaz-Canel is uncritically quoted as saying.

The piece as a whole isn’t uncritical, but it bristles with defensiveness about a system that even its president realizes needs to be overhauled.

Decades of disinformation to the contrary, Cuba never had a kinder and gentler version of communism that works. No, the island is not North Korea or Cambodia under Pol Pot, but it was never any better than Vietnam or East Germany in the 1970s and the 1980s. It just had better PR. The sorry truth is that of all the communist regimes that have ever existed—with the single exception of North Korea’s—Cuba’s is the most stubborn, the most reactionary, and the slowest to figure out how economics actually works.

It’s too bad the individuals who paid good money for The Nation’s dog-and-pony show didn’t head to Vietnam when they were finished. Every single one of the Cuban regime’s talking points would have been shown up as absolute nonsense within an hour of leaving Hanoi’s airport. The fools who think Cuba is anything but a disaster need to visit Vietnam post-haste and see what Fidel Castro’s socialist paradise will look and feel like when his imbecilic ideology is finally overthrown or reformed out of existence.

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