If Duncan Green, Head of Research for Oxfam, is to be believed, then Vietnam is a truly outstanding success story in poverty eradication. Consider these figures. Poverty has fallen from 58% in 1993 to 16% in 2006, with urban poverty down from 25% to 4% and rural from 66% to 20%. That all this has not come with minimal dislocation in the social fabric is indicated by the Gini Coefficient, which has barely shifted from 0.34 in 1993 to 0.36 in 2006. That appears to indicate that poor people have really shared in the benefits.
While this remarkable growth has pulled millions of people in the nation out of poverty, it is now apparently running into a set of problems that cannot be addressed through traditional growth based poverty reduction strategies. Inequality, especially between the top and bottom deciles, is widening; the chronically poor are getting left behind; and the uncertainty inherent in an integrated global economy makes those marginally above the poverty line vulnerable to external shocks.
Market based approaches cannot help the chronically poor, who need aggressive and focussed government support for a sustained period of time. Nor can it address the growing inequality concerns, as the example of US bears out. Markets can only make people at the marging vulnerable to external shocks, but cannot insulate them from such disruptions. Universal social safety nets, health insurance protection, food security mechanisms may all be necessary to help these and those marginally above the poverty line. In any case, experience from both developing and developed countries clearly shows that all these would require pro-active government intervention.