Investment Incentives and Rural Conflict: The Case of South Vietnam

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In the pages that follow, a study of variations in farm assets among South Vietnamese farm households reveals that the effect of greater assets on the income stream is very low. The analysis shows only a small positive relationship between farm assets and income, and because of this it appears that the motivation to channel savings into farm assets is weak. If there are no alternative prospects, then expectations are likely to be frustrated, the sense of commitment to the established order will be low, and the opportunity cost of participation in activities (including revolution) to change the order will be small. The association between assets and income appears to be weaker and less constraining for those households less dependent on the traditional economy.

This pattern is especially important because it is not an outgrowth of abject poverty in rural South Vietnam or the absence of real advantages from new capital accumulation. Rather, it is a response to the distorted incentives of a dual economy - the very same dual economy that set the stage for the revolution in the first place.