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Vietnam - market ethics

by Simon Longstaff

Vietnam is in the news. While some journalists and commentators explore the geo-political significance of President Clinton's decision to resume full diplomatic relations, others analyse the latest business opportunities as Vietnam opens her markets to the world.

As things stand, Vietnam has been getting a mixed press. A number of features have been very positive - concentrating on the opportunities available to those who invest in the latest of the emerging ‘Asian Tigers’.

Yet, even the most optimistic of assessments has been tinged by a measure of caution. Some investors have been badly burned - either worn down by the grind of dealing with a complex bureaucracy or stymied by a sudden change in their standing with people of influence. In many cases, foreign investors have come to share the experience of local people who have experienced some of the negative aspects of an economy that is still in transition.

I have recently returned from Vietnam. During my time there, I was asked by the Government of Vietnam to assist in the development and implementation of a most challenging and unusual project. Basically, St James Ethics Centre has been requested to work with senior Vietnamese government officials, academics and business people as they pursue two related objectives. The first is to define a core framework for business ethics in Vietnam. The second objective is to develop a series of practical measures that might be applied in order to give that framework positive effect.

The assignment is seductive as an opportunity to play a role in helping to shape the contours of an evolving economy. It is also overwhelming in its scope and degree of difficulty. Being realistic, it is unlikely that the energies of all of the less admirable 'animal spirits', currently running free in the Vietnamese economy, can be tamed and turned for the common good of the Vietnamese people. Yet, with a strong central state lending its support to the process, there is a real chance that the Vietnamese could effect significant reform and, in doing so, leap beyond some of the initial dangers faced by those who let tigers loose.

As with virtually every society, the Vietnamese have experienced some of the less welcome effects of economic liberalisation: corruption, a proliferation of unsafe products dumped on an unsuspecting public, a rise in the number of fraudsters and scam-merchants (local and imported), wanton degradation of the natural and built environment, and so on.

Being a Socialist state, many are inclined to conclude that the behaviour of greedy, rapacious, dishonourable people is to be expected in a market economy. Many think this to be the necessary price paid for economic progress. Many emulate the worst forms of commercial behaviour; as if doing so were a prerequisite for success.

Yet despite this, the leadership of the country has realised that, in the medium to long-term, the operation of efficient and effective markets depends on the existence and application of an underlying set of ethical principles. This in itself suggests a level of maturity in policy analysis that is noteworthy.

One key concern for Vietnamese policy-makers relates to the effects of entering into the global economy; firstly as newly admitted members of ASEAN and then later as members of APEC. The basis for this concern is multi-faceted. There are bound to be domestic political considerations at work. However, there are also issues to do with preserving a hard-fought for independence and a suspicion that other (more experienced) players may seek to take advantage of the country and its people.

In thinking about how best to respond to the Vietnamese, I have been forced to go back to the roots of my thinking about what makes for the operation of efficient and effective markets. Like the Vietnamese who invited our participation in their initiative, I believe that markets only operate properly when an underlying ethical base is at work.

For example, markets are distorted when people lie. They are distorted when people cheat. They are distorted when they collude. They are distorted when the strong use their bargaining power to oppress the weak. The list of distortions growing out of poor ethical behaviour can be extended.

Market distortions, of the kind outlined above, involve a cost for the whole community. For example, lying can frequently lead to a mis-allocation of goods. Yet, there is another effect of equal or greater significance for a community; namely, the level of trust operating in the market is eroded by such unethical behaviour. Instead of sealing an agreement with a 'shake of the hand' a whole new set of legal and administrative arrangements must be devised and funded in order to ensure that agreements are kept.

I am comfortable that arguments linking ethics and the efficient operation of markets are sound. However, I also realise that, in practice, a considerable number of people act 'as if' applying a quite different model (I say 'as if' because I doubt that many have an explicit model in mind). In this model, 'selfishness' has been substituted for 'self-interest'. The 'tooth and claw' competition of laissez-faire (where there is seldom a concern about the ethical status of the means used to achieve an end) has supplanted the more ethically mature idea of the free market (with its underlying framework of ethical principles within which the pursuit of self-interest occurs).

All of us need to make decisions about the 'character' of our economic life. Yet, it is clearly not for me (or any other foreigner) to decide what should happen in Vietnam. All we can do is offer support and assistance - perhaps pointing out the kinds of mistakes that we have made and indicating some of the lessons that we have learned along the way.

Ultimately, Vietnamese problems require Vietnamese solutions. Fortunately, the Vietnamese are a sophisticated people with a rich tradition on which to draw. Bearing this in mind, we are keen to embark on the next phase of this project, confident that we will learn far more than we can teach.

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