Like many Americans, they didn’t realize that Vietnam is a major tourist destination. Data show that nearly 18 million tourists visit Vietnam annually. While that is far below European destinations like France (102 million), Spain (94 million), Italy (65 million), and Germany (35 million), Vietnam’s year-on-year growth rate of nearly 40% is among the highest in the world.

Tourists are going to Vietnam for the same reasons they take trips anywhere else: They want beautiful scenery, vibrant culture, convenience, and affordable prices. (And of course, good food.) 

Like most Americans, my baffled friends were under the impression that Vietnam is a very poor country. This is a misconception.

For years, I’ve been writing about Vietnam’s economic miracle. In 1990, Vietnam was indeed very poor. In fact, its per capita GDP of $98 ranked dead last in the world, behind famously impoverished countries like Somalia and Madagascar.

While some may assume Vietnam’s poverty was primarily the result of its war with the United States, the primary cause was its own economic policies. Following the U.S. withdrawal from Hanoi in 1975, Vietnam fully embraced communism.

In his book How Nations Escape Poverty, historian Rainer Zitelmann explains that in the aftermath of the Vietnam War, the country introduced a series of collectivist food programs. The results were disastrous. Vietnam, once a major rice exporter, could no longer feed its own population. The collectivized farms produced little food. The food that was produced was distributed based on family status.

“State employees received more,” Zitelmann wrote, “factory workers less.”

This, of course, is not what socialists promise in their utopian visions, but similar patterns of inequality are conspicuous in other socialist regimes. The USSR, for example, had its nomenklatura (literally “list of names”), a term for party elites who enjoyed privileges unavailable to ordinary citizens.

This period, known today in Vietnam as Thoi Bao Cap, was a dark chapter in the country’s history. And it shows that socialist systems deliver neither prosperity nor equality, as those who waited hours in line for a single sack of rice can attest.

In 1986, however, something changed. Communist leaders acknowledged the system was not working. At the Communist Party’s Sixth National Congress in December of that year, they introduced a series of reforms known as Doi Moi, meaning “innovation” or “renovation.”

Before Doi Moi, the Vietnamese state controlled “almost everything,” the BBC noted. Afterward, reforms gradually shifted economic decision-making away from central planners.

The results were dramatic. In a 2013 paper, economists Brian McCaig and Nina Pavcnik found that Vietnam’s real GDP grew at an average annual rate of 7% between 1986 and 2008.

Growth has continued since then. As of 2024, per capita GDP stood at roughly $14,400, about 150 times higher than in the mid-1980s. (Adjusted for inflation, the increase is roughly 3,000–5,000%, depending on the baseline and methodology.)

Vietnam is still a poor country by U.S. standards, and its economy is not a capitalist ideal. It ranks about middle of the pack of global economic freedom indices, slightly ahead of France and Paraguay, and slightly behind India and Spain. Economists rightly point out that Vietnam still has work to do.

Still, the country’s transformation shows how even a moderately freer economic system can empower people to dramatically improve their living standards, turning one of the world’s poorest countries into a society of opportunity in a single generation.

The formula for prosperity, which is also on display in Javier Milei’s Argentina, is simple, and it was articulated 250 years ago.

“Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice,” Adam Smith observed in The Wealth of Nations, “all the rest being brought about by the natural course of things.”

America’s founders read Smith and understood the secret sauce of prosperity, which is why they created a decentralized system of government designed to facilitate trade and limit state power through checks and balances.

WINDS OF CHANGE IN LATIN AMERICA

Those checks and balances have eroded over time, though not entirely. As populists on both the left and right propose expanding the role of government, Americans would do well to look at Vietnam, which stands as a case study for what happens when the state retreats and allows markets to operate.

Maybe, like me, they’ll even decide to see the country’s transformation with their own eyes.