06BANGKOK5706 WHAT IS THE “SUFFICIENCY ECONOMY”?

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TAGS: ECON, ETRD, EINV, PGOV, SOCI, SENV, TH

SUBJECT: WHAT IS THE \”SUFFICIENCY ECONOMY\”?

 

1. (SBU) Summary: Much has been written about a \”Sufficiency

Economy\” this year due to the King\’s championing the idea in his

birthday speech last December and the perceived \”capitalist

excesses\” of the Thaksin administration. The Sufficiency Economy\’s

Buddhist-like principles, promoting hard work, moderation and

self-reliance, are considered by many as antidotes to crony

capitalism, corruption, consumerism and indebtedness. The general

idea is not recent. It was first floated by the King in 1974 to

justify royal development projects and was revived after the 1997

Asian financial crisis. Economists note that the principles have

been expressed in vague terms that limit their practicality, and

while RTG institutions pay lip service to them (as with any ideas

supported by the King), they have so far been applied only to

small-scale farming projects. End Summary.

 

2. (SBU) The term \”Sufficiency Economy\” has been a fixture of

newspapers, conferences and political debate through much of this

year, since the urging of King Bhumipol in his December 4, 2005

birthday address to consider self-sufficiency and moderation as

cures for the perceived excesses plaguing Thailand\’s economy. The

King\’s speech summarized the idea as follows: \”If one is moderate

in one\’s desires, one will have less craving. If one has less

craving, one will take less advantage of others. If all nations

hold this concept, without being extreme or insatiable in one\’s

desires, the world will be a happier place.\”

 

3. (SBU) The King has in fact been advocating \”Sufficiency Economy\”

ideas for over 30 years, initially borrowing from the \”Small is

Beautiful\” movement inspired by economist E.F. Schumacher. They

gained renewed prominence after the 1997 Asian financial crisis and

the realization that the speculative boom/bust of the mid-1990s

could have been avoided with curbs on excessive investment. Yet,

beyond exhortations to \”live within one\’s means\” and to \”act

prudently\”, no specific policy recommendations were made to rein in

the factors that led to the 1997 crisis. Likewise, guidance for

economic policy today is sorely lacking from pro-sufficiency

pronouncements, despite growing popular belief that cronyism,

corruption, consumerism, and household debt are on the rise in

contravention of sufficiency economy principles

 

Background

———-

 

4. (SBU) Some general observations about the Sufficiency Economy

\”model\”:

 

— It was first advocated by the King in 1974 to support royal

development study centers for farmers.

 

— It borrows from a chapter titled \”Buddhist Economics\” in E.M.

Schumacher\’s 1973 book \”Small is Beautiful\”, which the King

translated into Thai.

 

— Royal advisers insist it is not anti-trade, nor does it place

environmental considerations above the need for economic

development.

 

— Its tenets are vague and malleable (calling for prudence,

reasonableness, moral behavior, and resistance to excess) and

subject to interpretation.

 

— Viewed as the King\’s personal economic model, it benefits from

public reluctance to criticize anything associated with the revered

King.

 

— It has been seized by Thaksin\’s critics as an indictment of

economic growth fueled by consumption, over-investment and

indebtedness.

 

— A government advisory board includes its recommendations in

five-year plans that carry little weight in policy formulation.

 

— Practical programs inspired by it are limited to agriculture,

with royal research projects focused on sustainable development for

small-scale farmers.

 

5. (SBU) The Sufficiency Economy framework is not easily described

in traditional economic terms. The economist who inspired it,

Schumacher, said himself that economists suffered from \”metaphysical

blindness\” by measuring standards of living only by material wealth.

Schumacher\’s aim, in his words, was to \”obtain the maximum of

well-being with the minimum of consumption,\” with \”well being\”

defined in spiritual as well as material terms. This, he said,

dovetailed neatly with Buddhist or Gandhian principles, which he

observed while during his research in the early 1970\’s in Burma and

India. His \”Small is Beautiful\” ideas were particularly

well-received by environmentalists, inspiring the formation of

Greenpeace among other groups. (Western economists were not so

inspired, however, with one Oxford economist publishing a rebuttal

book titled \”Small is Stupid\”.) Thai observers have also noted

similarities with ideas put forth in 1972 by the King of Bhutan, who

called for the measurement of a GDH, Gross Domestic Happiness, to

replace the more materialistic GDP.

 

6. (SBU) Thailand\’s King, as his advisers have admitted in the past,

adapted Schumacher\’s thinking as a reasonable \”middle path\” of

development between the extremes of socialist autarky and laissez

faire capitalism. The aim, his advisers said, was to eschew the

pursuit of fast economic growth in favor of balanced growth,

self-sufficiency, and immunity from shocks in the domestic or

international economy. Development, in the King\’s view, should

proceed in stages, with farmers first providing basic sustenance for

their families and their communities before seeking greater income

through long distance trade. (An example of a non-sufficient farmer

might be one who converted his entire production to a single export

crop, borrowed on credit to invest in the technology to produce that

crop, only to find himself in debt and unable to feed his family in

the event of a market collapse.)

 

7. (SBU) The King\’s advisers sought to put his agricultural ideas

into practice by creating a series of rural Royal Development Study

Centers from 1979 to 1983. Their aim was to \”improve the living

standards of farmers by means of land development, water resource

development, forest rehabilitation and application of plant and

animal production techniques.\” The centers were to demonstrate the

King\’s 1992 \”New Theory of Agriculture\”, which, among other things,

directed small farmers (those with less than 2.4 hectares of land)

to devote 30 percent of their land to water storage, 30 percent to

rice cultivation, 30 percent to multiple other crops, and 10 percent

to a residence and farm buildings.

 

Easier Said Than Done?

———————-

 

8. (SBU) Although couched in terminology that makes it difficult to

criticize (as one economist said, \”Who can oppose a model that

promotes \’reasonableness\’, \’good behavior\’, \’and \’protection from

shocks\’?\”) schisms have arisen where activists interpret

\”Sufficiency Economy\” to oppose policies or projects supported by

the King. NGO activists, for example, incurred the King\’s anger in

the 1980s and 1990s when they cited the model\’s environmental

language in opposing the construction of large-scale reservoir dams.

The King, who has long advocated dam construction as a necessary

water management tool, sharply criticized those groups, explaining

that limited deforestation was in some cases necessary to provide

consistent energy and water sources for farmers.

 

9. (SBU) Likewise, anti-trade activists have used Sufficiency

Economy language to oppose trade expansion, arguing that trade

exposed farmers to market risks that threatened their ability to be

self-reliant. Members of the King\’s Privy Council, however, explain

that the model is not anti-trade or anti-globalization, but seeks to

accommodate global trends through \”reasonable trade\” to generate

farmer income and promote the rational allocation of resources.

 

Thaksin\’s \”Dual Track\” Vs. \”Sufficiency Economy\”

——————————————— —

 

10. (SBU) The King and his advisers have maintained their customary

restraint from directly attacking specific policies of the ruling

political party. Yet their public pronouncements are carefully

studied for nuance. The King\’s renewed emphasis on the Sufficiency

Economy in his recent public statements are interpreted by many as

an oblique criticism of Thaksin\’s economic priorities. Thaksin\’s

critics have increasingly cited \”Thaksinomics\”, with its emphasis on

GDP growth fueled by exports, domestic consumption and

infrastructure investment, as antithetical to the \”moderation is

good\” ethos of the Sufficiency Economy.

 

11. (SBU) Thaksin\’s has described his economic policies as having a

\”Dual Track approach\”:

 

— 1) Promote domestic demand by emphasizing grassroots and

small-to-medium size enterprise development.

 

— 2) Improve international competitiveness and linkages, including

the negotiation of Free Trade Agreements (FTAs).

 

12. (SBU) A member of the National Economic and Social Advisory

Council (NESAC) told us that the first track of Thaksin\’s approach

diverges from Sufficiency Economy principles by \”fostering

consumerism and encouraging easy credit for farmers, which have led

to high rates of indebtedness among rural households.\” \”As for

the second track,\” he said, \”your FTA has gone nowhere since

Thaksin\’s political troubles began.\” He added that the national

organ charged with implementing Sufficiency Economy principles in

economic planning, the National Economic and Social Development

Board (NESDB), \”has an advisory capacity only and no authority to

implement change.\”

 

13. (SBU) Similarly, Kosit Panpiempras, executive chairman of

Bangkok Bank and former head of the NESDB, has publicly criticized

the Dual Track approach for promoting an \”unsustainable level of

domestic consumption\” that can only diminish in the face of rising

household debt and inflation. Easy credit for farmers, he said, was

being used to purchase cellphones, refrigerators and TV sets rather

than farming equipment

 

14. (SBU) The NESAC economist cautioned, however, that Thaksin\’s was

not the only administration at fault. \”There is no political party

that stands out as promoting \’sufficiency economy\’ ideas.\”

\”Everyone pays lip service to it,\” he said, \”but their plans offer

vague language and no practical proposals.\” \”In any case,\” he

added, \”crony capitalism and corruption have been around forever –

the only difference being who\’s in power and who benefits from the

excesses.\”

 

15. (SBU) COMMENT: Pretty much every political party has included

fealty to \”sufficiency economy principles\” as part of their platform

in the run-up to election scheduled for later this year. The

question we have asked ourselves is whether there is any intention

by any serious political group of actually implementing sufficiency

economy elements. The answer seems to be \”no\” because 1) no one

really has a clue what such elements would look like for anyone but

a small-scale farmer and 2) politicians realize that sufficiency may

sound good, but in practice people are going to want to continue

consuming beyond the level of mere sufficiency. No one here (at

least overtly) has noted the irony of adherence to the \”sufficiency

principle\” with the reality of Thailand\’s status as one of the most

export-dependent economies on earth.

 

Arvizu

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