So the Vietnamese Are Now Better At Enforcing the Rules of Capitalism than We Are

Whenever I’m at a dinner party and the subject of the public-education system in the U.S. comes up, inevitably the conversation turns to America’s consistently dismal performance on international standardized tests in math, reading and the rest. When asked what I think would be a challenging yet still doable goal for our nation’s schools to shoot for, I smile and say, “Well, some day, I’d like for us to be in the same league with Estonia.”

I don’t think I’m asking for the moon. I mean, hey, I’m not hoping to compete with, say, Lithuania. Let alone a colossus like Singapore. After all, America’s educational system is still developing.

As it turns out, in the area of market capitalism, too, the U.S. could stand to learn a good deal from other countries—specifically, from one of the last four Communist nations left on earth.

Vietnam is a small country. Market-wise, it has a way to go. Yet to all appearances, the Vietnamese have arrived at some innovative new approaches for dealing with corruption and monetary malfeasance. In Vietnam, if someone does something bad, especially something bad that involves other people’s money, they arrest the offender. Afterwards they proceed to investigate and prosecute that person, regardless of his or her business clout, political ties or potential ability to undermine other financial firms by means of the tentacles they’ve insinuated into crevices in the system.

Exhibit A: On Sunday, the Vietnamese Ministry of Police arrested Ngyuen Duc Kien, the 48-year-old business mogul who founded Vietnam’s Asia Commercial Bank (ACB), one of the country’s top lending institutions. The charges are as yet unspecified; the tight-lipped arresting officers have stated only that Kien was involved in “illegal business” with three private firms.

Kien, though, would appear to have fingers in many different pies in the banquet that, up until very recently, was his country’s developing economy. In addition to being a major shareholder in several Vietnamese banks, he is also the chairman of both the Hanoi Football Club and the V-League, a professional soccer association. He also has close ties to Vietnam’s prime minister, Nguyen Tan Dung, who himself is under suspicion of financial Lehmanism. In 2010, Kien resigned from ACB’s board of directors; the bank’s current vice-president issued a statement online two days ago distancing himself from the disgraced tycoon’s misbehavior, calling the indiscretions a “personal matter” that would not affect his company’s operations.

Kien’s fall comes in the wake of a long financial ride, for both himself and Vietnam. The country boasted one of the fastest-growing Asian economies in the first years of the new millennium, with annual GDP growth cruising along at 7% until the 2008 financial crisis. At this point, the government, hoping to avoid going down with the ship of unbridled Western capitalism, overstimulated the economy, causing inflation to skyrocket to 23% one year ago. The Viet Fed then took away the punchbowl. Construction sites around Hanoi fell silent as scores of major projects failed. At present, the central bank is easing up on the credit bit, hoping to restore a modicum of tranquility to an overheated system.

Needless to say, Kien’s arrest has hit Hanoi’s stock exchange hard; the HNX was down more than 5% on Tuesday, the biggest drop in over four years. ACB’s share price fell first 7% on Monday, then 6.6% on Tuesday. (The maximum daily drop allowed by the regulation-rife Vietnamese government is 7%.) All this is on top of the knot of problems in which Vietnam is already entangled: the country has more bad debt than any other Southeast Asian nation, largely because its bank officers customarily make loans not on the basis of the financial soundness of the projects under consideration, but as a result of cronyism and connections.

The pattern here is eerily familiar. Relaxation of traditional economic restraints. A runaway stock market. Shenanigans at the top by the entitled rich. A sharp crash. But the Vietnamese seem to have maintained their moral clarity about one thing: if predators jeopardize the system through their misdeeds, they have to pay the price.

It wouldn’t the first time Hanoi has understood something Washington hasn’t.

America fell into recession in 2008. Four years and no high-level arrests later, many of us are still wondering about what has happened to our country’s ethical foundation. What has happened to America that the Communists are getting capitalism right, but we’re not?

As police carted Kien away from his Hanoi mansion, a neighbor, Tran Trung Thanh, 33, expressed concern:

“People around here felt very surprised,” he said. “We thought that he’s working in the banking system, so he must be doing clean business.”

Posted by on August 23rd, 2012 at 10:39 am


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