Foreign Aid, War, and Economic Development: South Vietnam, 1955-1975

318 Pages·2005·7.03 MB·English

by  Douglas C. Dacy

Foreign aid, war, and economic development

Foreign aid, war, and
economic development
South Vietnam, 1955-1975
Douglas C. Dacy
University of Texas at Austin
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University of Cambridge
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CAMBRIDGE UNIVERSITY PRESS
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The Pitt Building, Trumpington Street, Cambridge CB2 1RP
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© Cambridge University Press 1986
First published 1986
Library of Congress Cataloging-in-Publication Data
Dacy, Douglas C.
Foreign aid, war, and economic development.
Bibliography: p.
Includes index.
1. Vietnam - Economic conditions. 2. Economic
assistance, American - Vietnam. 3. Vietnam - Politics
and government - 1945-1975. I. Title
HC444.D33 1986 338.9597 86-937
British Library Cataloguing in Publication Data
Dacy, Douglas C.
Foreign aid, war, and economic development:
South Vietnam 1955-1975
1. Vietnam - Economic conditions
I. Title
330.9597'04 HC444
ISBN 0 521 30327 3
Transferred to digital printing 2004
To Mama

Contents
List of figures page x
List of tables xi
Preface xv
1. The rise and fall of the economy 1
Period of resettlement and reconstruction 2
Period of heightened insurgency 7
Beginning of the big war 9
Period of Vietnamization 12
Recession and defeat 16
The aid economy 20
2. U.S. aid to Vietnam: goals and programming 22
Objectives of foreign aid 23
Foreign aid and U.S. objectives in Vietnam 26
Programming the amount of U.S. aid to Vietnam 29
MACV economic aid and the piaster valuation
problem 32
Can aid be harmful? 34
Summary 36
3. The growth of national income 38
Economic activity, 1956-72 38
Overall growth of the economy 56
Sectoral distribution of net domestic product 58
4. Indicators of economic development 69
Economic development and economic independence 69
Professor Walt W. Rostow's view 71
Production 73
Imports and exports 82
Demographic changes 85
Development of infrastructure 87
viii Contents
Money and finance in Vietnam economic development 89
Attitudinal factors in Vietnam economic development 93
Simulated requirements for self-sustained growth 97
5. Land reform and income distribution in Vietnam
economic development 109
Income distribution and economic development 109
Land reform in South Vietnam 110
Land reform and income distribution 113
6. Domestic saving, foreign aid, and economic
development 121
Growth in domestic saving as an indicator of
development 121
Domestic saving in South Vietnam, 1955-73 124
Private saving 128
7. Wartime inflation 131
Programmed inflation 131
Vietnamese price indexes 132
The determinants of inflation 133
Summary 147
8. Windfall gains from importing 153
The motives for importing 154
The economic theory of windfall gains and taxation in
Vietnam inflation 155
Accounting procedure for estimating windfall gains 159
Windfall gains from importing, 1962-70 161
Analysis of results 163
Appendix 8.1: The effective exchange rate 166
Appendix 8.2: Data computation and sources 169
9. The international value of the piaster 174
The official exchange rate and misinformation 174
Measures of the value of the piaster 176
The approximate market clearing rate, 1963-70 180
The black market rate and the market clearing rate 181
A test of consistency using national income data 186
International value of the piaster, 1962-74 189
Contents ix
10. Vietnam foreign assistance 192
Defining aid 192
Four U.S. aid programs to Vietnam 194
Measures of foreign aid to Vietnam 197
The real value of aid 205
The uses of Project Aid 206
11. Financing public expenditures 211
Expenditures and revenues 211
Tax effort 221
Efficiency of aid in public finance 225
12. The fiscal dilemma 231
Dimensions of fiscal policy 232
Some consequences of wartime tax strategy 236
The dilemma restated 239
13. Foreign aid and economic development in an
environment of high military threat 240
Aspects of high military threats 241
U.S. foreign aid to high-threat nations and economic
development 244
High-threat group and comparison group 245
Vietnam, South Korea, Taiwan, and Israel compared 249
The role of foreign aid 262
Notes 266
References 283
Index 295
Figures
3.1 Indexes of real economic activity, 1960-74 page 51
4.1 Indicators of monetization and intermediation 91
7.1 Prices and money in South Vietnam, 1956-74 137
8.1 Supply and demand for imports under competition 156
8.2 Importing under oligopoly 157
8.3 Importing in extended analysis 159
9.1 Black market rate compared with market clearing rate 183
10.1 Sources and uses of aid 195
13.1 Domestic saving as percentage of gross national prod-
uct for South Vietnam, Israel, South Korea, Taiwan,
and seven Latin American countries, 1955-73 259