Rent Seeking and Interest Group Contestation: A Harmony-of-Interest Approach to Vietnam's Economic Reforms

This dissertation investigates the questions (a) how an authoritarian regime like Vietnam could demonstrate to the global markets a credible commitment to limited rent seeking, and (b) why economic and coercive (political) elites do not collude with each other at the expense of non-elite groups. These questions are crucial in explaining (i) how Vietnam became an investment magnet with one of the world's highest capital inflows when measured by size of the economy, and (ii) why the often hypothesized convergence toward the lowest common denominator in terms of labor protection and wage levels did not take place. In response to these questions, this dissertation proposes a harmony-of-interest theory, in which each major societal interest group is better off in the new arrangement that followed from Vietnam's 1986 market-opening reforms than from an alternative approach. Taking a political-economy, rational-choice, game-theoretical approach, the dissertation shows the inter-relation between (1) central government, provincial governments both in (2) jurisdictions that benefit from reform and (3) those that are (relative) reform losers, (4) investors and (5) workers. It concludes that a harmony of interest among these societal interest groups arises when all factors - goods, capital and labor - are mobile and as a result can bargain with each other in an expanding economy where all factors are scarce. This harmony-of-interest theory represents a model by which one can explain successful elite self-restraint and the associated social and economic changes. For this self-restraint to function, it does not require democracy, constitutional checks and balances or enlightened rulers. Instead, it functions based on the harmony of interest among interest groups that comes with contestation for benefits that no group can command by coercive power, but instead must attract by exhibiting a credible commitment to mutual benefit and limited rent seeking among all actors.