The South Vietnamese Economy During the Vietnam War, 1954-1975

Korean Minjok Leadership Academy
International Program
Kim, Youngmin
Research Paper, AP European History Class, December 2007

Table of Contents

I. Introduction
II. Methodology
II.1 Extrapolation Method
II.2 Choice of the Kinds of Data
III. Analysis
III.1 On Demography
III.1.1 On Population
III.1.2 On Education
III.2 On the Total Output of the South Vietnamese Economy
III.2.1 On Food Production
III.2.2 On Industrial Production
III.3 On Aid
IV. Conclusion
V. Notes
VI. Bibliography

Teacher's Comment

I. Introduction
            The two most important aspects in wars are military strength and economics. Wars cost every culture and civilization we made throughout centuries and millenniums. For instance, the Second World War killed seventy million people, both combatants and non-combatants, flattened numerous cities in Europe. Thus, it must be extremely difficult to calculate what has been lost or destroyed by wars. However, in this paper, I calculated the losses or, if there had been any, gains of the Vietnam War, especially in South Vietnam. As determining immaterial losses, such as cultural or social damages in quantified figures, did not seem possible, I decided to focus only on financial and fiscal damage, which harmed economic growth of the nation, and the existence of growth motives in South Vietnamese economy. The economic growth, unlike the economic development, can be defined as the increase in value of the goods and services produced by an economy (1) . Therefore, I focused on whether there was economic growth, the increase of economy in size or not during Vietnam War, from 1955, when United States first deployed its ground forces in Vietnam, to 1975, when Saigon fell to North Vietnam. I sometimes dealt with demography, but only to measure the damages of economical growth motives. And I had to reveal that though I tried to discuss North Vietnam at the beginning of this project, because of lack of proper resources, I failed to do so.

II. Methodology

II.1 The Extrapolation Method
            To calculate the losses caused by war, I employed Extrapolation Method. Extrapolation Method is a forecast based only on earlier values of a time series or on observations taken from a similar set of cross-sectional data (2). I compared the growth in size of indices by using the method and the data accumulated from 1950 to 1980, except for the cases that statistics are not available.

II.2 Choice of the Kinds of Data
            I chose to analyze on the following fields: population and education to see demographical changes which can be growth potential, food output, underground resource output and industrial output to check the size of South Vietnamese economy, inflation and GDP per Capita as important economic indices. These choices are based on the categories chosen by Living Standard Survey of General Statistics Office of Vietnam (3) and The National Statistical Indicator System (4).

III. Analysis

III.1 On Demography
            An economy is the system of human activities related to the production (5). Therefore, although the productiveness of a nation, a group or an individual is heavily dependant on technology, and resources available, both the quantity and quality of manpower is also very important for the output.

III.1.1 On Population
            The quantity of manpower is dependant on the population. However, the war can drastically decimate the population, thus hampering a manpower supply and demand plan. Such was the case in Vietnam. During the Vietnam War, several million of South Vietnamese are estimated to have enrolled in the Army of the Republic of Vietnam, or ARVN, considering the fact that the Army reached its maximum strength of a million in 1972 (6). Of those several million, ARVN had lost more than 230,000 soldiers killed in action, more than 300,000 others wounded with permanent 30 per cent disability, several thousands missing in action (7). The large enrollment surely obstructed the plan to develop the South Vietnamese economy. Also, overuse of defoliant led millions of civilians to be disabled. On the other hand, however, regardless of the huge number of the killed Vietnamese soldiers in battlefield, the population growth rate during the war was unexpectedly high from 1955 to 1975.

Figure 1. The Population of Vietnam from 1950 to 1980 (8)

            As indicated in Figure 1, even during the wartime, there was a steady increase in population. And the average population growth during the wartime, from 1955 to 1973, which was 2.16%, was even higher than that of prewar period, which was 1.56%, and still compatible with that of postwar period, from 1973 to 1980, which was 2.40%. Therefore, it can be concluded that the war, although it cost hundreds of thousands of lives of Vietnamese, actually did not hamper the growth in the quality of manpower.

III.1.2 On Education
            While the quantity is simply dependant on the number of population, the quality depends on how the people are well educated. Education stimulates economic growth and improves people's lives through many channels : by increasing the efficiency of the labor force, by fostering democracy and thus, creating better conditions for governance, by improving health, by enhancing equality, and so on (9).

Figure 2. Number of Children in Schools in South Vietnam from 1954 to 1973 (10)

Figure 3. Students in Universities in South Vietnam, from 1954 to 1972 (11)

            South Vietnam put her effort to promote education. From 1954 to 1973, although it was during a severe civil war, the number of students who attended primary school, secondary school, and universities kept increasing. Especially, university students increased about 44 folds from 1954 to 1972. Though no data on literacy rates, or number of professionals was available, it is easy to assume that education provided sufficient growth motivation.
            Still there lies a question that whether or not the growth in human capital both in quality and quantity could compensate for the losses of the risky environment of wartimes. Thus, to find out the answer, it is important to know the actual economic growth.

III.2 On the Total Output of the South Vietnamese Economy
            Growth motivation is important but the more important is how it is reflected in real economy. In other words, how the economy grew is to be focused more. To find out the growth of economy, I looked into the output of the South Vietnamese economy, in two different fields, on food production, and on industrial output.

III.2.1 On Food Production

Table 1 : Table 1. Output of South Vietnam Crops from 1954 to 1973 (12)


Area of Main Arable Food Crops(in thousands of hectares)

Output of Main Arable Crops (thousand metric tons)

Maize Rice Sweet Pots Cassava Maize Rice Sweet Pots Cassava
1954 24 2162 N/A N/A 2132 N/A N/A
1955 28 2139 N/A N/A 20 2631 N/A N/A
1956 28 2540 N/A N/A 31 3412 N/A N/A
1957 20 2719 N/A N/A 30 3192 N/A N/A
1958 31 2291 34 28 29 4358 137 163
1959 27 2400 41 34 26 5092 203 181
1960 28 2318 38 34 27 4955 222 220
1961 31 2352 42 41 32 4607 236 255
1962 36 2479 49 49 38 5205 273 313
1963 37 2538 47 52 37 5327 300 389
1964 37 2562 48 43 46 5185 301 289
1965 36 2429 43 43 44 4822 279 232
1966 29 2295 39 39 35 4436 246 290
1967 29 2296 38 37 33 4688 254 262
1968 29 2394 35 35 32 4366 235 260
1969 29 2430 32 32 31 5115 226 233
1970 29 2510 33 30 31 5716 220 216
1971 31 2625 33 36 34 6324 230 270
1972 36 2700 38 32 42 6348 241 247
1973 40 2830 40 48 51 7025 279 320

            Table 1 mainly tells two things: pegging agricultural areas and increasing agricultural output. The area actually increased but in relatively small degree. From 1954 to 1973, the area that cultivated rice increased about 30%, while the output of rice increased about 203%. This tells something about a unique aspect of Vietnam War. U.S. Air force's constant bombing missions covered both North and South Vietnam. The most intensive bombings were conducted in the site of frequent incursions by North Vietnamese troops and Vietcong/NLF guerrillas into South Vietnam through the so-called Ho Chi Minh Trail that ran from North Vietnam through Laos and Cambodia (13) . Not only bombs, but also chemical anti-plants, and land-clearing tractors were used to scorch the environment of South Vietnam. Especially, of the 72 million liters of chemical anti-plants, 14 percent was directed against agricultural land, primarily for the destruction of rice (14). Thus, it is no wonder that South Vietnam suffered pegging, or sometimes decreasing, arable land.
            From 1954 to 1973, the rice output per a hectare more than doubled from 1.06 to 2.48. It was due to the introduction of advanced agricultural techniques, though most of the techniques and fertilizers were subsidized by U.S. Government. In addition, the land reform in South Vietnam to eradicate tenancy probably helped to increase the productivity. In 1955, it is estimated that about 15 percent of the owners controlled 75 percent of the cropland (15). In 1957, Ngo Dinh Diem promulgated "Ordinance 57" to reform land ownership. Under Ordinance 57, the government acquired 422,000 hectares between 1957 and 1961 and distributed 267,000 hectares (Douglass 1986). Though the Ordinance, as the war intensified and brutalized, proved its pledges broken, the land reform raised the income of farmers by 30-50 percent and, thus, the farmers might work harder.

III.2.2 On Industrial Production
            Although South Vietnam during the war was mainly an agricultural country, it is meaningful to examine the efforts of the South Vietnam government for the nation to advance from an agricultural society to an industrial society. Such advancement can best be represented by analyzing Industrial Production Index, or IPI. The IPI is an economic indicator which measures real production output. Production indexes are computed mainly as fisher indexes with the weights based on annual estimates of value added. This index, along with other industrial indexes and construction, accounts for the bulk of the variation in national output over the duration of the business cycle (16).

Figure 4 : Industrial Production Index of South Vietnam (1962=100) (17)

            During the Vietnam War, South Vietnam experienced average 6.86% increase in IPI, although it was not constant due to ups and downs of the War. In 1968, when Tet offense brought the war to the cities and thereby removed the exemption that hitherto had applied to industrial production (18), and public dissent suddenly rose, the industrial output sharply fell. The produced electricity in South Vietnam increased about fourteen folds from 1954 to 1973. The South Vietnamese industry enjoyed a great growth in quantity.

III.3 On Aid
            "We are there because we have a promise to keep. Since 1954 every American president has offered support to the people of South Vietnam. We have helped to build, and we have helped to defend. Thus, over many years, we have made a national pledge to help South Vietnam defend its independence." - President Lyndon B. Johnson, April 7, 1965 (19)
            As President Lydon Johnson said, United States of America heavily supported the South Vietnamese economy so that 'domino' should not be triggered. Most of economic development during the wartime can be contributed to aid programs. Of all allies of South Vietnam, USA not only constituted the largest portion in South Vietnam trade but also aided South Vietnam most. The support ranged from military aid, technical support, and relief supplies. There were four USA aid programs: the Commercial Import Program, PL 480, Project Aid, and Piaster Subsidy Aid. Although the titles of the programs were different, essential concepts of the programs were the same: "help South Vietnam defend its independence." The programs were mainly funded by USA government budget, except for Project Aid, which was funded by US civilians. Also, other types of aid from US existed. Military aid composed the largest part of total assistance. This kind of aid peaked especially in 1973; of total assistance of 3,880.6 million Dollar, military assistance composed 3,349.4 million Dollar. Another way was through net resource transferred. The needs of South Vietnamese people were mostly compensated by foreign aid.

Figure 5 US economic and military assistance to South Vietnam by fiscal year, 1955-1975 (million Dollar) (20)

            The aid increased as the War intensified except for in 1974 and 1975, when the US army withdrew its men from Vietnam and the War came to an end. This cut in aid kept paces with attempted Vietnamization of South Vietnamese economy.

IV. Conclusion
            In short, despite the prolonged civil war of 20 years, South Vietnam did not lose her growth motives. Generally speaking, her population grew both in quantity and in quality (education). With support from USA and other allies, her economy grew greatly though the War kept intensifying years after years.
            In short, the arable area even decreased, because of the devastating effects of Vietnam War, such as Agent Orange, use of tractors and intensive bombing. The agricultural production of South Vietnam, like other economic indicators such as IPI, increased. Different from my previous assumptions, the South Vietnam experienced economic growth during the war time. If it had not been the War, there might have not been the aid that helped South Vietnamese economy develop overtime. However, it must be dangerous to conclude that the War and U.S. involvement was beneficial to Vietnam, because wars, as I stated in the introduction, cost more than material goods.


(1)      Article : Economic_growth, from Wikipedia
(2)      Armstrong 2001c p.2
(3)      "Living Standard Survey 2002" General Statistics Office of Vietnam.
(4)      "The National Statistical Indicator System" General Statistics Office of Vietnam.
(5)      Article : Economy, from Wikipedia
(6)      Article : Vietnam Veteran, from Wikipedia
(7)      The South Vietnamese Disabled Veterans, VietQuoc.
(8)      IHS p.61
(9)      Gylfason 2000 p.3
(10)      IHS p.991
(11)      IHS p.1005
(12)      IHS pp.169, 203
(13)      Edward Miquel and Roland 2005 p.29
(14)      Westing 2002 p.3
(15)      Bredo 1968
(16)      Article : Industrial Production Index, from Wikipedia.
(17)      Dacy 2005 p.52
(18)      Dacy 2005 p.58
(19)      "American Policy in Vietnam", American Experience. Vietnam Online.
(20)      Dacy 2005 p.200


Note : websites quoted below were visited in October-December 2007.
1.      Douglas C. Dacy (2005), "Foreign aid, war, and economic development" Cambridge University Press
2.      B. R. Mitchell (2003), International Historical Statistics: Africa, Asia and Oceania, 1750-2000, Palgrave Macmillan, 4th ed.
3.      Article : Economic_growth, from Wikipedia, 08 Oct. 2007.
4.      Armstrong, J. S. (2001c), "Extrapolation for time-series and cross-sectional data," in J. S. Armstrong (ed.), Principles of Forecasting. Norwell, MA: Kluwer Academic Press.
5.      Living Standard Survey 2002" General Statistics Office of Vietnam. 05 Sep. 2007.
6.      The National Statistical Indicator System General Statistics Office of Vietnam. 07 Sep. 2007.
7.      Article : Economy, from Wikipedia. 01 Oct. 2007
8.      Article : Vietnam Veteran, from Wikipedia. 01 Oct. 2007
9.      The South Vietnamese Disabled Veterans, VietQuoc. 01 Oct. 2007
10.      Thorvaldur Gylfason. (2000), "3. More on Education" in "Natural Resources, Education, and Economic Development," International Macroeconomics. (Centre for Economic Policy Research), London
11.      Edward Miquel and Roland. (2005), "The Long Run Impact of Bombing Vietnam",
12.      Arthur H. Westing, (2002), "Assault on the Environment" in "Long-Term Consequences of the Vietnam War : Ecosystems"
13.      William Bredo (1968), "Land Reform in Vietnam", Stanford Research Institute
14.      Article : Industrial Production Index, from Wikipedia. 21 Nov. 2007
15.      "American Policy in Vietnam", American Experience. Vietnam Online. 05 Oct. 2007