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The relation between economic growth and social development based on advanced and fair principles

Combining economic growth with social development on the principle of progression and fairness are seen as two of the pillars of the rapid and sustainable development that many countries around the world are keen to reach. However, in fact, this is a difficult problem that it is not any times, anywhere people can find the adequate answers.

Children in resettlement areas going to kindergarten classes

 

Photo: VNA

1. Main development models in the world from the viewpoint of handling the relationship between economic growth and social development

In the world, there were several different development models applied:

Development model of the classical liberalism. Applying this model, it is assumed to let the market operate, because under the guidance of the “invisible hand” of the free competition in the market - even with the most selfish motivation - it finally brings about

unexpected results of social harmony. But the experience of the capitalist market economy existed about hundreds of years has proved: in the freely competitive environment always happening scenes “ strength won, weak lost” “ the great fish eats the small”, wealth of countries increased but most fall into the pockets of the wealthy upper class, the weak lower class falls into poverty. Spontaneous harmony of society in the free market economy has not been proven by the fact.

Development model of the new liberalism. To implement this model, we have lowered the state’s role, promote self-regulation of the market, reduce spending from the national budget for the public benefit, adjust the distribution of income enter in the direction unfavorable to workers but the favor of the world capitalism in order to encourage them to “save and invest”. Implementing these measures, they promised to public employees: economic growth precedes, social justice will follow, and the poor should wait still! In fact, this is the viewpoints of the wealthy perspective, regardless of the essential needs of the majority of workers. With the application development model, economic growth often leads to negative social consequences, which typically are the unemployment rate increase and the deepening wealth polarization.

Development model of democratic socialist perspective. This is the pattern combines capitalist market economy with the implem entation of a system of social welfare policies to create a consensus for development. Swedish State is a typical example of this model. The State spending for welfare policy system is among the highest in the world. In some first decades, many people think that is the ideal model. However, with the large welfare policy, the majority of people easily abuse social assistance, while capitalists seek to move capital abroad to avoid high progressive tax on income. As a result, the market economy in recession and the social welfare state has also significant signs of exhaustion (1).

Development model based on a non-market centrally planned economy. For a long time, in the Soviet Union and the former socialist countries, this model had promoted a positive effect on socio-economic development. However, through times, it revealed many defects, which are mainly social needs exceeded the response of an undynamic economy, delaying in the application of scientific achievements and modern technology in production, due to a centralized planning mechanism gradually turning into centralized bureaucracy and mainly egalitarian distribution. That had held back and even eliminated the driving force of development, which made the application of the model gradually fall into stagnation, and even social breakdown in some countries.

2. Resolving the relationship between economic growth and economic development on advanced and fair principles in our country for more than 25 years of innovation.

In the pre-renewal period, the bureaucracy centrally planned economy of our country felt into stagnant and seriously recessional state. In this condition, many objectives of social progress can not be made, social justice is synonymous with “equally poor”(2).

 Recommended to get the country out of crisis, gradually get to stability and development, the 6th Congress of the Communist Party (12-1986), the Party and State has put forth and continually supplied, perfect the comprehensive innovation road of the country. In which, the breakthrough guidelines and viewpoints are: erasing the old economic model, switching to socialist-oriented market economy.

According to this model, we use the market mechanism as the fruits of human civilization, as a method to automate and accelerate the pace of economic growth, constantly improve people’s life. We have not modeled the free-market economic model - whether it is based on the theory of classical liberalism or new liberalism. In fact, the free market economy itself does not automatically lead to progress and social justice; on the contrary, it may burden the implementation of the above objectives, raising complicated economic and social issues. We should consult and selectively grasp the good experience of the market economy model regulated by the social welfare state, but should not copy this model. Because the socio-economic situation and cultural traditions of each country has its own specialties, therefore, cannot be applied mechanically a certain external model.

From the characteristics of the country after decades of revolutionary conducted under the banner of national independence and socialism, the Communist Party advocates to properly use tools and macro management of the State for the socialist-oriented market economy in order to harmonize economic growth with social progress and justice at every step and every development policy.

By insisting on the implementation of the mentioned policy and viewpoint, our country’s renewal cause over the past 25 years has made great achievements in many aspects, including the encouraging achievements in social development on the advanced and fair principles setting in relation to stick with organic growth, but there are still many limitations and weaknesses to overcome.

a, Achievement

On economic growth: the Vietnamese economy achieves the high growth rate for many years. Average annual growth rate of the 1986-1990 period was 4.4%, the period of 1991-2000 is 7.5%, 2001-2005 is over 7.5%, and 2006-2010 is 7%, although this rate slightly reduced in comparison to a few times before (due to the impacts of the financial crisis and global economic downturn), still it stands in the group of countries with relatively high growth rates in the region and the world.

Gross domestic product in 2010 at current prices is estimated at 101.6 billion dollars, up to 3.26 times compared with 2005. GDP per capita increases from US$ 100 in 1986 to US$ 1.168 in 2010(3). Lives of the majority of people are significantly improved.

On social progress and justice: in labor and employment fields, from 1991 to 2000, in average, the country has annually created from one million to 1.2 millions works for laborers; 2001-2005, the annual average works rate was about from 1.4 to 1.5 million people and in 2006-2010 period, that number increased to 1.6 million. Vocational training gradually developed, contributed in increasing the rate of trained laborers from below 10% in 1990 to around 40% in 2010(4).

The work of poverty reduction achieved impressive results. According to national standards (upgraded several times), the poverty rates decreased from 58% in 1993 to 29% in 2002 and to about 14.2% in 2010. Thus, Vietnam has “completed earlier than the global plan: halve the poverty rate by 2015”, which the Millennium Development Goals (MDGs) of the United Nations has set (5).

The education career has new development in the scale, diversification of school types from primary to college, university. In 2000, the whole country has achieved national standards of literacy and generalized primary education; until the end of 2010, all provinces have reached generalization standards of secondary education. From 2006 to 2010, the annual average size of intermediate vocational training increased by 10%; colleges and universities increased by 7.4%. In recent years, about 1 - 1.5 million poor students got the Social Policy Bank loans with preferential rates for their studies.

Scientific and technological activities have made remarkable progress. Scientific and technological staff (including social sciences, natural sciences, technical sciences) have contributed to provide the scientific foundation for the planning road, guidelines, innovational policy of the Party and State; acquisition, ownership and an effective application of the technology imported from abroad, especially in information field - communication, breeding several varieties of crops and high productivity’s livestock, gas oil exportation and extraction, construction of bridges, high-capacity ship building, production of vaccines… and initially there are some innovative information technology. People’s healthcare operations had progress. Health insurance has expanded to more than 60% of the population. Community health indicators are raised. The under 5 year infant mortality rate was reduced from 81‰ in 1990 to 28 ‰ in 2010; the percentage of malnourished children under 5 has decreased respectively from 50% to about 20%. Expanded program on Immunization has been carried out; many previously fatal diseases have been eliminated or controlled. The average life expectancy of people rises from 62 in 1990 to 73 today.

Human Development Index (HDI) increased steadily and continuously throughout the decades: from 0.561 in 1985 respectively increased to 0.599 in 1990, 0.647 in 1995, 0.690 in 2000, 0.715 in 2005 and 0.728 in 2010(6) .

b, Limitations and weaknesses

On economics: so far, Vietnam is still a developing country, with a per capita income among the low average group. Economic growth is still based on broad development factors; slowly turn to the growth model in depth. In 2003-2008 period, the growth in GDP, the share of capital contribution factor was 52.7%, the labor factor was 19.1%, the Total factor productivity (TFP) was 29.2%, while a number of other countries in the region TFP contribution rate was 35 - 40%. Electricity consumption of 1 unit of GDP of Vietnam is 1.7 times compared with Thailand, 2.5 times with Philippines, 3.3 times with Indonesia(7). Global competitiveness Index of Vietnam ranked 68/131 in 2007, 70/134 in 2008.

On the society: the speed of poverty reduction in recent years tends to slow down, the re-impoverished state is popular, especially in remote areas, ethnic minority areas, and disaster-prone areas… Until the end of 2010, the national poverty rate was 14.2%, equivalent 12.3 million people out of a total of over 86 million people. The income gap between the richest 20% and poorest 20% of the total population has increased from 4.4 times in 1992 to 9.2 times in 2010(8). Thus, reducing poverty and helping the poor people get average income and be better-off is still a major challenge for social development perspective on advanced and fair principles in our country.

Although the unemployment rate fell from 9% in the late 80s of last century to 4.64% in 2007(9), since 2008 the unemployment rate tended to increase (in which most the citizens are low-skilled and unskilled labor) by many businesses to close or narrow production-business in the context of the financial crisis and global economic downturn, as well as rising inflation in the country. In particular, in rural areas in recent years, due to tens of thousands of farmers suffered from land acquisition for industrialization, urbanization, the majority does not support the new training to earn a living, thus the unemployment is quite serious.

In the field of education, in general, the quality of education and training was still low; human resources did not meet the requirements to promote industrialization and modernization. There still exist a clear difference about the learning conditions, school facilities between urban and rural areas, the plains and the mountains.

In people’s healthcare services, although the healthcare network is expanded, still the facilities and technical equipment are in shortages, allocation is not reasonable, andconvenient for people. Health insurance policies, fees and health care for the poor are still insufficient. It is estimable that thousands of the poor have high-interest loans or sell assets to pay hospital fees per year. Thus, for the poor and near-poor who suffer from illness, especially severe illnesses requiring high-quality health services, it is a risk that could push them into poverty.

In particular, in dealing with the relationship between economies and society, many branches and localities often tend to favor economic growth while underestimate progress and social justice. Hospitals, especially at the central level are always overloaded while there are too many golfs course. Lack of kindergartens, farmers lack production land while more than half of the land of 200 industrial parks are left vacant to grass. More visibly rich bosses, meanwhile a significant proportion of employers at those places work with the salary which only meet about 60% of essential needs. Tens of thousands of farmer households suffer from land acquisition for industrialization, urbanization are compensated by only at extremely low prices, while investors for the project to convert agricultural land uses get richer quickly. Salary of teachers, scientists and creative intellectual labor and high sense of responsibility are placed nearly at the bottom of the administration salary schedule and far lower than the officials and employees of the economic and financial sectors. Dozens of hydropower construction in the Central region urgently but do not appreciate the attention to the negative impacts both on the environment and the society. In particular, corruption is increasingly spread, those illicit enrichment make collusion with degenerated, spoilt officials in the state apparatus, causing pressing in public opinion.

 The above limitations and weaknesses have made the combination between economic growth and social development in the direction of progress and justice in the country over the past 25 years not achieved the desired results.

3. Some recommendations

On the viewpoints, we should continue to grasp thoroughly:

Firstly, in the socialist-oriented market economy, economic growth and social development on advanced and fair principles are related closely with each other. Economic growth facilitates material conditions to make progress and social justice; in turn, making good progress and social justice become the spirit of promoting economic growth. There can be no progress and social justice on the basis of an economy which is less efficient, low-quality. It may not be a fast-growing, efficient and sustainable economy in a society in which many workers are in low education and skill levels; a significant percentage of the population is poor due to unemployment or lack of jobs…

Secondly, combining economic growth with social development based on the advanced and fair principles must continue to be done at each step and each development policy. We should neither wait until the economy reaches new high level of development to implement the advanced and social justice, nor sacrifice social justice and progress for merely economic growth. For this, every economic policy aims to ensure progress and social justice; each policy of ensuring social progress and justice are contributing to promote economic growth, either directly or indirectly, short or long term.

On key measures:

Firstly, accelerate the progress of economic restructuring, implementation of growth models in depth based on the increasingly high quality human resources.

Entering on the period of 2011-2020, we can not extend the model of broadly developing economic growth model which applied over the past few decades. Because this development model uses an intensive capital, outdated technology, the majority of low-skilled labor mainly to machine, adjust, exploit and sell cheap raw and roughly prepared resources. As a result, the quality and efficiency of the economy are not high, the income of a significant part of workers is low, and their lives are so difficult. Therefore, there should be appropriate mechanism, policy and roadmap to restructure the economy, moving to a growth model in depth, with the majority of educated and highly skilled workers with the capable to adapt to modern technology line and every step in the field of design, manufacturing high extra value products.

Secondly, the investment in the resources of the State for the country’s development should be specifically structured and planned to balance the investment among regions as well as various factor.

The higher portfolio for dynamic economic regions is essential in order to create the “locomotive” of the growth to pull the “train” of Vietnamese economy to develop. However cannot help but pay attention to the appropriate investment to other regions, especially in remote areas, the ethnic minorities, in order to reduce the gap in the level of development among regions, gradually overcome the state of “natural injustice” and “historical injustice”, maintain social and political stability, to ensure the social development based on the principles of progress and justice associated with the economic growth of all regions in the country.

At the same time, it is necessary to improve the current basic salary, find out exactly the suitable “compatibility” for fairness (not leveling) on the income of people who work in the different social and economic sectors. This may be considered as the important effect of promoting economic growth while ensuring social progress and justice at every step and development policy.

Thirdly, harmonize the redistribution by the reasonable regulation in the income of people strata with building and strengthening the social security system multi-level.

In the country’s particular circumstances today, the object of social policy is very  diverse, thus, it is necessary to build, strengthen and perfect the system of multi-level social security policies. That system include: i) The social preferences policy ensuring at least above average of living standard for people who previously contributed to the revolution and the resistance war; ii) the social insurance policy to mobilize the accumulated income of the employee reserved for spending at the difficult time (unemployment, sickness, age…) ; iii) The social assistance policy to help the weak and vulnerable people, such as the disabled, the lonely elderly, homeless orphans…; iv) Social relief policy to carry damages caused by natural disasters, sabotage or risks in life.

The implementation of a multi-level social security policy system is an indispensable indicator of an advanced, fair and civilized society, at the same time, is an important factor to arouse positive, enthusiasm of the people strata in the production - business for poverty eradication beyond and strive to enrich themselves and to the country.

Fourthly, it is necessary to carry out an uncompromising struggle in order to prevent and combat effectively the phenomenon of illegal enrichment.

Illegal enrichment now mainly belong to two groups: the first one is cheaters, defrauders, speculators in the market; the second one is degenerated  staff, party members who only seek to abuse their position and power allocation (especially in the areas of land management, taxation, etc.) to chisel cut the property of the State and the people. Moreover, the fact that many major economic case also clearly shows sophisticated cahoots between the two groups. This phenomenon may undermine the innovation from the inside, turning the socialist-oriented market economy into the “wild” market economy, has hindered the rapid and sustainable economic growth and held back the social progress and justice, causing discontent in the people, made up of major risks threaten the survival of a rich, strong, democratic, civilized country which the Party, the people are making every effort to reach.

PROF., DR. PHAM XUAN NAM

VietnamNational Academyof Social Science

 

Further reading:

 

(1) Sophie Bessis: from social exclusion to social cohesion- a policy agenda, UNESCO, Paris, 1995, p.31.
(2) According to the data of General Statistics in 1980, the income per capita/month of household staff is 40.85 dong, in which 83% on food, including 12.3 kilogram of rice, 0.69 kilogram of meat, 0.51 kilogram of fish and 0.95 egg. The level of per capita/ month of household members of cooperatives even lower: 10.6 kilogram of food, 0.59 of meat, 0.42 kilogram of fish, 0.52 eggs.
(3), (4) Communist Party of Vietnam: 11th Resolution of National Party Congress, National Political Publishing House, Ha Noi, 2011, p.151, 253.
(5) United Nations Agencies in Vietnam: Taking the Millennium Goals into the People, Ha Noi, 2002, p.1.
(6) United Nations Development Program: Human development report 2009, Saigon Economic Times, issued on November 9th 2011, p.168.
(7) Communist Party of Vietnam: Detailed outlines Strategic Report on the implementation of 10 years Socio-economic development from 2001 to 2010 and the strategy of socio-economic development from 2011 to 2020, Ha Noi, June 2009, p.9.
(8) General Statistics: Living survey results in 2010, Statistical Publishing House, Ha Noi 2011, p.21.
(9) General Statistics: Statistical Yearbook 2008, Statistical Publishing House, Ha Noi, 2009, p.61.

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