The Road to Serfdom and Back: the
Process of Marketization in Laos
B. James Soukam
Ph.D. Candidate
Dept. of City and Regional Planning
Southeast Asia Program
Cornell University
Ithaca, N.Y.
U.S.A.
Abstract:
In the process of reforming its economy, in response to globalization and
economic change, the Lao government has recently integrated into the regional
grouping, ASEAN (Association of Southeast Asian Nations). As the country opens
up to the world, its membership in ASEAN and incorporation into the world market
present as many opportunities and possibilities as challenges and threats. Rich
in land and natural resources, but lacking in technical skills and finance
capital, Laos could conceivably become a key node in the development of mainland
Southeast Asia. Nonetheless, the country remains at a cross-road. Surrounded by
powerful neighbors in a dynamic and fast growing region, it is either
well-positioned to benefit from economic integration, or regrettably isolated
and potentially overwhelmed by more powerful economic actors. The economic
necessity of trade, the small size of its economy, the dependence on limited
markets, and vulnerability to natural disasters will invariably condition the
country’s degree of openness. How has this government managed the socialist
transition and capitalist incorporation, while maintaining some semblance of
external sovereignty and internal legitimacy?
Relying on observations during my time on research assignment in Laos (May
2004-March 2005); interviews with government officials, members of the
development and diplomatic communities; and a literature review of on the
political economy of transition, this paper examines the process of
marketization in Laos that began in earnest in the early 1990s. By and large,
the socialist transition everywhere has involved the retreat of the state from
direct management of the economy. Yet, marketization in Laos had entailed
building a national economy, where fragmented and regional economies once
dominated. In the transition process, a strong central government capable of
regulating and enforcing economic governance has gradually eroded traditional
autonomy of Lao provincial authority. Taking a Polanyian perspective on markets,
I conclude that the contrast between markets and states tends to obscure the
ways in which governments need to structure market relations. In Laos,
consolidation of state power has gone hand in hand with the creation of a
national economic space.