Strategic hamlets were a measure introduced by President John F. Kennedy in South Vietnam in 1961 to try and help the United States win the guerrilla war against the Viet Cong. They basically amounted to forced population transfer, uprooting the peasantry from the countryside and placing them in heavily-fortified camps where they would be easy to control. To sweeten the deal, the U.S. and South Vietnamese government were supposed to pour money into education, healthcare and other public services in the hamlets. The leadership of the camps would be chosen by secret ballot and would oversee a modernization of production techniques that would show the peasants a brighter future than the one offerred them by the Communist guerrillas.
By 1961, the government in Saigon had lost control of huge parts of the countryside. The clique that ruled the country had precious little interest in the peasants anyway and was not used to seeing its role as providing for their well-being. In the countryside, a small number of landlords controlled the vast proportion of the land and wielded considerable political and social power; this made many villagers sympathetic to the Viet Cong, who promised to redistribute land and unify the country under a government committed to the well-being of the ordinary man. Where the guerrillas were resisted, they responded with a campaign of assassination and intimidation, and they were able to find shelter among the peasantry from those sympathetic to them or too scared to resist. Government forces were at risk outside of all major urban centres.
The Saigon regime had hence come to view the countryside as essentially an alien country, a "them" who were hostile to "us". Concerns for their own security amid the advance of the guerrillas made them realize that they needed to win the peasants over somehow by offering a program that would match the appeal of the Communists. In Washington, studies conducted by the administration concluded that the main reason peasants joined or supported the Viet Cong was because they were desperate for an identity and a program of positive political action that would allow them to change their world for the better.
Interpreting events through the paradigm of modernization theory, which also lay behind Kennedy initiatives like the Alliance for Progress and the Peace Corps, they saw South Vietnam as a society making the transition from a rural socio-economic structure to a modern, urban economy. During this period, poor peasants who were socially dislocated would be liable to fall victim to Communist propaganda unless they were shown an alternative, gentler path to modernity. Strategic hamlets were supposed to provide just such a path.
The hamlets were supposed to provide a sense of identity and internal cohesion among villagers so that they would be better able to pull together and defend what was theirs against the Communists. The idea was to physically remove the peasants from contact with the Viet Cong so that they could not be intimidated or brainwashed. Furthermore, an infusion of aid into the hamlets would allow the peasants to enjoy social services and government assistance that would accustom them to seeing Saigon as their friend and protector. In effect, the South Vietnamese regime was trying to legitimize itself and create loyalty to undercut Viet Cong claims to represent the true Vietnamese national movement. The Communists were to be defined as the enemies of the "true" Vietnam, which delivered its citizens protection, economic growth, and social services.
Another advantage of the program so far as Saigon was concerned was that it made the peasantry much easier to control. Rather than roaming countryside, jungle and swamp which the government could not easily penetrate, they were all sat tightly in little strategic hamlets were they could be found, policed, and taxed. The desire to create a "modern" social structure was also a desire to create a social structure that was legible to the Saigon state; it knew who its citizens were and what their responsibilities were, be it in the army or civil defence in the hamlets. As a means of achieving this goal, it was rather more extreme even than the ancient Thai rulers who used to tattoo their subjects so they could not easily escape.
The strategic hamlet program was a dismal failure for numerous reasons, not least being the annoyance expressed by millions of peasants at being uprooted from their ancestral lands and plonked in the middle of acres of barbed wire and sandbags. The program was also implemented at breakneck speed, meaning that the resources allocated to it were never sufficient to meet its promises; social services failed to materialize, people died in the relocations, and the hamlets were repeatedly destroyed by the Viet Cong.
The much-vaunted new South Vietnamese nationalism failed to materialize, and the Saigon state instead showed itself to be intrusive, repressive, and not even capable of providing security in its treasured creations. The program was eventually abandoned in 1964 after the assassination of President Ngo Dinh Diem. In the years that followed, vast new influxes of U.S. troops would be needed to fulfill the defensive needs left unmet by citizens who saw little reason to die for the South Vietnamese state.
Michael E. Latham, Modernization as Ideology: American Social Science and "Nation Building" in the Kennedy Era is the best source on the program. James Scott, Seeing Like a State: How Certain Schemes to Improve the Human Condition Have Failed is the most insightful book available on the intellectual mistakes that underlie this sort of program in general.