One of the great tragedies for all concerned during the late 1960’s and early 70’s was the Vietnam War.
For those who don’t remember it, the conflict began with a Vietnamese independence movement making life so difficult for the French, who had colonised the country that is steeped in natural resources, that they pulled out in the mid 1950’s.
This was the era of the Cold War when the West felt the threat of communism from both the USSR and China. One of the geopolitical theories being peddled at this time was if Vietnam fell to the communists that other surrounding countries would follow – the so-called ‘Domino Effect’. The Americans felt ‘obligated’ in their own view to ‘save’ Vietnam, leading to more than a million deaths, mostly Vietnamese civilians, and an eventual American humiliation and withdrawal.
Three decades later Vietnam has become an industrial powerhouse, replacing China as the ‘go to’ manufacturing centre in the Far East. This is causing another American invasion – this time to do business. Microsoft, now the owner of former phone giant Nokia, has just announced that it’s moving its phone production to the Vietnamese capital Hanoi, following the lead of many other major manufacturers who are moving out of China to the cheaper labour costs of Vietnam.
Even small Irish companies are using Vietnam as a manufacturing base. This is the economic reality. No one wants a race to the bottom with wages but for those who want wage rises in Ireland, they need to understand the reality of how mobile both manufacturing and services have become. We don’t compete with the UK or Europe – we compete with world.
It’s doubly ironic that China, Vietnam’s main backer during the war, is now faced with another war, this time an economic war, with its old ally as it watches chunks of its manufacturing base marching towards Vietnam. The question now is how will the Chinese economy react – and what the domino effect will be on our little economy?