Vietnam’s inflation last month, 27%, reached highest position in asia. Prices of everything go all the way up, especially necessities like gasoline, food and clothes (e.g: food prices increased 74%). Overdose foreign investment and technologically backward industry seemed to be the causes. Besides, overty rate has reduced to 15% from 58% since 1993, but now it is likely to raise again. Some workers who led vietnam’s rise from poverty are suffering from expensive city life, planning to return to their rural home. The people become disappointed as they see no efficient solution from the government. However, most economists think this period is just a temporary bump in growth.
Detailed information from the article:
- “the government raised the price of gasoline by 31 percent to an all-time high of 19,000 dong ($1.19) per liter (or roughly $4.50 a gallon). Diesel and kerosene prices rose still higher.”
- “people are cutting back on food, limiting travel, looking for second jobs, delaying major purchases and waiting for the cost of a wedding to go down before marrying.”
- “rumors of price increases have caused panic buying of fuel and rice.”
- “vietnam is suffering from the worldwide economic downturn and from high inflation that has spread through southeast asia.”
- “as dong, drops in value, people say they are moving their money into dollar bank accounts”
Analysis
- General type of inflation: galloping
Normally, an inflation rate of 1-2% is acceptable for an economy (it usually goes with growth rate of 3-5%). Galloping inflation is 10-20% rate and begins to get out of control. In this case, vietnamese inflation rate has increased gradually up to 27% at the moment and does not seem to stop yet. It can possibly turn into hyperinflation if the government cannot deal with the problem. However, since vietnam had grown in 8% for the last decade, the situation is not that pessimistic.
- Cause
o Cost-push: cost-push inflation happens when there is a decrease in aggregate supply.“vietnam is suffering from the world wide economic downturn and from high inflation that has spread through southeast asia.” Price of fuel, an important resource has gone up worldwide, driving the cost of raw material and transportation up as well. The higher the cost of the production, the lower the number of production, which leads to a decrease in aggregate supply.
o Demand-pull: demand-pull inflation happens when there is an increase in aggregate demand ( total demand increases as consumption, investment, government spending or net export increase) “rumors of price increases have caused panic buying of fuel and rice.
In “The Devil and Tom Walker”, Irving reveals many aspects of the humanity especially how economic depression plays in the society. Some may disregard what really happens throughout the world because they ponder that the situation is “inapplicable” to their lives. Others are able to determine the problems of it but the Media/News Organizations seem to be more anxious about the people’s entertainments rather than talk about the economy. As declared by John Bellamy Foster, a professor of sociology at the University of Oregon and also editor of Monthly Review, the world economy is “experiencing by far its worst economic crisis since the Great Depression.” In some instances, research illustrates that money is not the problem in the economy instead the problem is the people that are corrupt, “never was sinner taken more unawares” (Irving 16). The economic problems that have been gradually increasing over the past few years in established economies throughout world just continue to intensify.
Inflation occurs when consumers are spending like crazy, and “the central banks flood the system with too much money,” (DPE, 37). They do so through
Vietnam had no prosperous period before its independence in 1945. Since then Vietnam’s development path can be divided into three periods. The first period runs from 1945 to 1975 and was a period in which Vietnam was a major battleground of the Cold War with two Indochina wars. The First Indochina War (1946-1954) was between France, supported by the USA and its allies, and the communist force known as Viet Minh supported by China and the Soviet Union. The Second Indochina War was from 1954-1975. The USA and other members of the Southeast Asia Treaty Organization (SEATO) combined with the forces of the Republic of Vietnam (the South) to fight against the army of the Democratic Republic of Vietnam (the North), which was de facto supported by the Soviet Union and China. During this period, both market economy and central planning economic models were imported and mechanically applied in Vietnam. Neither model generated the expected results however, partly due to the two wars, a lack of necessary conditions for growth, and the general failure of the economic models adopted. As a result, real GDP per capita increased just 2.9 times (or 4.8% per year) over the period 1955-1973 (the peak year before the war’s end), with real GDP per capita increasing by just 64 percent (or 2.8 percent per year) (Tran et al. 2000).
When the last United States forces left South Vietnam on March 29, 1973 in over-stuffed helicopters and crowded aircraft carriers, it was to be the closing of book whose chapters lasted through four presidencies. When North Vietnam successfully invaded South Vietnam and captured Saigon on April 30, 1975, an embargo originally placed on the north by the United States was extended onto the entire, newly-named Republic of Vietnam. That embargo, ordered by President Richard M. Nixon, stayed in place until President Bill Clinton dropped it on February 3, 1994. President Clinton has asserted on numerous occasions that the only reason he improved any relations America had with Vietnam was solely in the context of achieving the fullest possible account for Americans held as prisoners of war (POW) or missing in action (MIA) from the Vietnam War. Besides many things may shows that President Clinton's explanation involved a lot more than MIAs and POWs, but was resultant of power center influences on policy-making. History between the United States and Vietnam as well as Vietnam's relationships with the Soviet Union, China and Japan are aspect that can proves the truth of this thesis.
Being a communist country, the government controls all fascists of the economy. Civilians have no control of their economic state because free trade is illegal. The most common job for the vietnamese people is in the agricultural sector. They have many valuable exports that include: oil, rice, marine products, coffee, rubber, and tea. Many problems caused major setbacks on economic growth. Foreign domination had direct negative effects on progressive infrastructure, and spending capital on wars rather than economic development. The Encyclopedia of Modern Asia states “The economic development of Vietnam suffers from three serious impediments. During the time they controlled Vietnam, the French developed only those economic sectors that brought profit to the French themselves; long wars have marred recent history; and a decade of unfortunate postwar socialist experimentation with a centralized economy has left deep scars” (Lam 62). With the combination of foreign domination and communist ruling, Vietnams economic state has been poor throughout their history. In The Sorrow of War, Kien grew up with poor financial conditions. When he returns to his home, the condition of his stepfathers house explains his feeling towards living in poverty. “The house was old and greyish, surrounded by a sad, unkempt winter garden which itself was ringed by wispy eucalyptus that rustled in the light breeze. The
With economic growth, there is always a danger present that demand may grow faster than the potential for production. This will lead to inflation, which will affect the country's competitiveness in the export and severely impact the living standards of the people. Viet Nam faced astounding rates of inflation in the years after Doi Moi, 400 percent in 1988...
The subordination of Southeast Asia’s economy to the capitalist structure of the western world through colonialism greatly increased its significance in the global economy and saw the transformation of a subsistent to commercial economy. However, the exceptionally rapid and at times reckless expansion of economic growth also has its disadvantage which was to expose Southeast Asia to the vulnerability of experiencing fluctuations of the international market (Tarling(ed)(1992: 192). This became evident during the Great depression.
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Second, inflation prices are going up, because of the gas prices high it effected everything a round from goods and services. Goods and services depend on gas for transportation and moving the goods from place to another. Services are going up due to higher cost of the gas. People are cutting back in the necessity like food, health insurance, and shopping. Many people have steady income and cannot effort much higher cost of anything.
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