Saturday, February 3, 2007

Deconstructing Commisioner Mehdi's Defense of "Sufficiency Theory"

The philosophy behind the sufficiency economy

The economic crisis of 1997 affected everyone in Thailand, even His Majesty the King. Seeing many of his subjects suffering, he advised the Thai people to change their economic philosophy in order to cope with present economic adversity and withstand future economic insecurity.

OK, let us look at the context of 1997 crisis:

During the 1990's Thailand was booming. Thais were borrowing capital from abroad to finance stock and real estate speculation. When imbalances in the Thai economy came about, many foreign lenders called in their loans. Many private financing companies couldn't afford to pay back these loans and what collateral existed was mortgaged to the hilt, so the Thai government had to cover these losses. This, plus a growing a trade deficit threw the Thai government into bankruptcy in the sense that it no longer had any foreign reserves. So the Thai government had to borrow from abroad to cover its trade deficits. But in order to get this money, the IMF and member lenders told the Thai government it had to reform its economy. Thailand took the terms of loans and reformed their economy. Thailand went through a lot of pain for a year and a half, but bounced back fairly quickly.

The problem was never globalization or foreign trade. The problem was Thai greed. But Thais never take responsibility for their actions, so it is easier to blame somebody else or some other entity for their problems.

So during the post-crisis period, many Thai intellectuals chose to go after the IMF, the US, George Soros, the Jews, globalization, Washington Consensus policies, anything else besides the Thais and the institutional structures of the Thai state and economy that were responsible for the problems in the first place.

His Majesty's words have become known as the philosophy behind the sufficiency economy and have been used as the guiding principles in the drafting of the current Ninth National Economic and Social Development Plan.

What does this mean? Thais should never submit anything in the English language without a good copy editor. What are His Majesty's words exactly? How can you discuss words without the text? This kind of sloppy writing makes me want to pull my hair out.

The philosophy is summed up in the following paragraph: sufficiency economy is a philosophy that guides the livelihood and behaviour of people at all levels, from the family to the community to the country, on matters concerning national development and administration. It calls for a "middle way" to be observed, especially in pursuing economic development in keeping with the world of globalisation. Sufficiency means moderation and reasonableness, including the need to build a reasonable immune system against shocks from the outside or from the inside. Intelligence, attentiveness, and extreme care should be used to ensure that all plans and every step of their implementation are based on knowledge. At the same time we must build up the spiritual foundation of all people in the nation, especially state officials, scholars, and business people at all levels, so they are conscious of moral integrity and honesty and they strive for the appropriate wisdom to live life with forbearance, diligence, self-awareness, intelligence, and attentiveness. In this way we can hope to maintain balance and be ready to cope with rapid physical, social, environmental, and cultural changes from the outside world.

Basically the king is telling people the same thing our teachers and parents have told us for generations: "Don't buy what you can't afford." "Don't borrow what you can't pay back." "Work hard and play by the rules." " There is no such thing as a free lunch." "Don't lie, cheat and steal." "Save your money for a rainy day." "Spend a little, save a little."

Most Thai intellectuals are idiots. Instead of relying on pedantic rhetoric, they should speak clearly and concisely. They should stop distorting the meaning of the English language with a lot of inane gibberish. Nobody is impressed with a large vocabulary if that vocabulary does nothing but cover up a sloppy analysis.

The King is advocating common sense. There is no theory.

This philosophical statement has lent itself to interpretation by diverse groups of people. First, we can dismiss outright the extreme interpretation that sufficiency economy means complete self-reliance, or autarky. In an autarkic system, a country or unit thereof relies upon itself and its people to produce all of its needs with no dependence on others. It may do this voluntarily (cutting off contact with the outside world) or by necessity (because it is incapable of generating those contacts). But His Majesty the King explicitly rejected this interpretation: "This self-sufficiency does not mean that every family must grow food for themselves, to make clothes for themselves; that is too much. But in a village or sub-district there should be a reasonable amount of sufficiency. If they grow or produce something more than they need they can sell them. But they do not need to sell them very far; they can sell them in nearby places without having to pay high transport costs."

There is no philosophical statement. King Bumibol isn't Socrates. Thailand can't be autarkic, because Thailand doesn't produce anything of value on its own. Every aspect of Thailand's modernization it owes to foreigners, foreign trade and globalization. Most Thai farmers, however, can live an autarkic existence. In other words, it is possible that Thai peasants and their communities can take care of their basic needs first before selling what they have for a profit. What troubles the elites is that Thai peasants want a taste of good life, the life that they see on TV, like when royalty, politicians and movie stars in Bangkok are living in fancy mansions, driving Mercedes, and talking on expensive mobile phones. Why is it always the peasant who is asked to sacrifice, but those who are exploiting and stealing from the masses never sacrifice shit? When was the last time you saw a Thai big shot take public transportation or use a public telephone?

Also, funny how nobody talks about the Chinese middle man/distribution network that has been screwing the farmers for hundreds of years. Nobody talks about the Thai bureaucrats who have been cheating the farmers out of the value of their work and products by subsidizing rice to Bangkokians and for external export. Nobody should lecture the peasants without addressing exploitation, which the monarchy has a long history of sustaining.

The problems that exist in Thailand have nothing to do with sufficiency. The problems are institutional.

Some people have attempted to link this economic philosophy with the so-called "Gandhian Economy". Along the lines proposed by Mahatma Gandhi, this is an economy based on family-level or village-level small-scale enterprises and traditional methods. It may have been appropriate to India in the mid-twentieth century, when the people were poor and technology was limited. But in the present, it may be too restrictive to expect families to do everything by themselves using simple tools and machinery, such as traditional spinning wheels to make cloth. Perhaps the basic idea of Gandhian simplicity - a life less encumbered by modern needs and modern technology - could make people happier. But in the very open world of today, self-sufficiency a la Gandhi is too extreme.

Who is linking King Bumibol's Sufficiency rhetoric with Ghandi? So what is exactly the distinction? What is too extreme? What is the paradigm of extremeness?

We also hear people relating the sufficiency economy to the knowledge and applicability of Buddhism. In Buddhism, life, especially spiritual life, is enhanced by cutting out excessive wants and greed. True happiness may be attained when a person is fully satisfied with what he or she has and is at peace with the self. To strive to consume more leads to unhappiness if (or when) consumption is not satisfied or falls short of expectations. A sufficiency economy in this context would be an economy fundamentally conditioned by basic need, not greed, and restrained by a conscious effort to cut consumption. This is probably acceptable insofar as it does not reject gains in welfare and well-being due to greater consumption.

What is this mealy-mouthed bullshit? Who determines "True Happiness?" Who determines what is enough consumption? How is this any different from the Ghandi model? Why does this paragraph contradict itself? I love this sentence: "True happiness may be attained when a person is fully satisfied with what he or she has..." This is a line the elite has used to keep Thais enslaved for centuries while the elite gobbles up the resources of the state, sells it abroad for a profit, then uses the money to buy luxury goods and a hi-so lifestyle.

His Majesty has talked about the sufficiency idea since 1974. In his customary birthday speech of that year, he wished everyone in Thailand "sufficient to live and to eat" (por yoo por kin). This was indeed a precursor to the sufficiency economy. His Majesty also said: "The development of a country must be by steps. It must start with basic sufficiency in food and adequate living, using techniques and instruments that are economical but technically sound. When this foundation is secured, then higher economic status and progress can be established." (See Apichai Puntasen, "The King's Sufficiency Economy and Its Interpretation by Economists".)

How does the king's model differ from the Ghandi and Buddhist models when the rhetoric is the same?

This is very clear: it shows that His Majesty did not deny economic progress and globalisation, as some people have interpreted. Indeed the word globalisation is used in the statement on sufficiency economy that His Majesty has endorsed. The notion that sufficiency economy is anti-globalisation should be put to rest forever.

Nothing is clear. Nobody knows what the hell they are talking about, and try to pretend that they do with a lot of bullshit. Nothing this guy has written supports or rejects the king's views on globalization, which are totally unknown.

Still, there are attempts by various segments of the Thai population to dissociate this new economy from the realm of mainstream economics that stresses economic rationality and efficiency in resource allocation. It is obvious that His Majesty's sufficiency economy is not the type found in a mainstream economics textbook, but it would be inaccurate to interpret it as the antithesis of mainstream economics in every respect. On the contrary, I think we can understand sufficiency economy within the framework of economic rationality and efficiency in choices. The difference is not in type, but in degree or magnitude of economic behaviour. His Majesty used the phrase "middle path" or "middle way" to describe the pattern of life every Thai should lead - a life dictated by moderation, reasonableness and the ability to withstand shock. Can we find something in mainstream economics that captures the spirit of this philosophy?

More Thai bullshit. Another paragraph that says nothing. Capitalism/globalization is based on making a profit, a return on investment, which is antithetical to a feudal socialist or sufficiency model. There is no such thing as sufficiency globalization. Capital searches for profits abroad, not sufficiency.

I propose to use my own understanding of economic optimisation. It is possible to see the sufficiency economy as consisting of two frameworks. One is the inevitability of facing the globalised world in which economic efficiency and competition are the rules of the game; the other is the need for economic security and the capacity to protect oneself from external shock and instability. Thinking within the first framework - the basic tenet of mainstream economics - we must realise the opportunity costs involved in every decision we make. We gain from specialisation and division of labour because the opportunity costs of doing everything by ourselves is much higher. But it would be foolish to pursue all-out specialisation without basic security, especially in food, shelter and clothing. This is where the framework of the new sufficiency economy comes in. This concerns the basic capacity of the people of a country to look after themselves. The optimisation principle applies when we seek to answer the question: how much of our time and energy should be devoted to the first and second frameworks, respectively? In other words, how much resources should be allocated to producing for trade based on the comparative advantage principle, and how much for basic security? The best mix between the two allocations would represent the optimal state of affairs, both in mainstream and sufficiency economics.

This is my interpretation, which is consistent with Thai policy: The Thai economy is for Thais only. We should protect our food, our land, and our industries first. Take things from the foreigners that help us, but screw them wherever you can in any way you can without it costing us any money or making any sacrifices. Keep the farmers poor and stupid, so that they don't use their mental and physical resources to sell their labor power in the market place, and keep them so stupid that they don't challenge the aristocratic and capitalist elites that don't practice what they preach. In other words, this guy wants to keep the status quo.

Medhi Krongkaew is a commissioner of the National Counter Corruption Commission.

Who is this guy? What kind of home does he live in? What kind of car does he drive? Where does he send his kids to school? What kinds of toys and gadgets does he have? How many wives does he support?

He is on the NCCC, yet what has he done to rein in Thai greed and corruption? What is his record in using the law in putting an end to the corrupt excesses of Thai politicians and bureaucrats?


fall said...

I know a propaganda piece when I see one.
But to actually take it apart sentence by sentence...wicked.

Anonymous said...

Medhi used to be an economics professor at Thammasat, but after retirement, moved to NIDA. Although he's one of the few professors who actually did a lot of academic research, he also had something of a reputation for being a government asskisser. He's been an advisor of pretty much every government for the past 25 years.

Fonzi said...

With so many qualifications you would think he could write a coherent piece about sufficiency theory or economics.

It ain't rocket science.