What does the Sufficiency Economy mean for this government's policy? (1)

30 october 2006

The Surayud government says it will follow the Sufficiency Economy. That commitment is written into the preamble of the Interim Constitution. So what is the Sufficiency Economy, and what might it mean for government policies?

The official Thai definition of the Sufficiency Economy, drawn up in 1999, can be summarized as follows:

“The Sufficiency Economy is an approach to life and conduct which is applicable at every level from the individual through the family and community to the management and development of the nation. It promotes a middle path, especially in developing the economy to keep up with the world in the era of globalization. Sufficiency has three components: moderation; wisdom or insight; and the need for built-in resilience against the risks which arise from internal or external change. In addition, the application of theories in planning and implementation requires great care and good judgement at every stage. At the same time, all members of the nation – especially officials, intellectuals, and business people – need to develop their mental commitment to the importance of knowledge, integrity, and honesty, and to conduct their lives with perseverance, toleration, wisdom, and insight, so that the country has the strength and balance to respond to the rapid and widespread changes in economy, society, environment, and culture in the outside world.”

This statement has a history. Since the 1970s, the King had frequently given talks on the learnings from several thousand Royal Projects of local development. He observed that people too easily got carried away by enthusiasm for development, and little people too often got left out. Real progress was measured by the ability to stand on one’s own feet, and have control over one’s life and future. Successful projects tended to be those which evolved gradually, and which were driven by an inner dynamic, especially the accumulation of knowledge and expertise. Such projects did not rely heavily on outside assistance, especially loans, which tempted people to blunder beyond their own capability.

In 1996, the King crystallized these learnings in the example of a model family farm. By dividing up the average Thai holding of 2.4 hectare into a pond, rice paddy, and space for trees and vegetables, a farming household could theoretically achieve self-reliance. For many families, which had sunk steadily deeper into debt as cash mono cropping delivered lower returns and higher risks, this model was an alternative. But it was not an end in itself. Full self-sufficiency was, in the King’s words, “only a Stone Age Economy…. There must be some gradual development, some exchange and cooperation.” A measure of self-reliance was only the foundation for the household to progress to more trade and specialization within the local community, and then for greater engagement between the community and the outside world. The King later explained, “Progress is not just about planting enough rice to eat. There must be enough to create schools, even works of art, so that Thailand prospers in every way, with no hunger or poverty, food for body and soul, and many other things.”

After the financial crisis of 1997, the King commented on the national economy in the same vein. The country had got carried away by growth, relied too much on the outside world for finance, indulged in extravagant projects which stretched local capabilities, and thus invited the crash. The solution required the same approach as the model farm, but adapted to the national level. Aim for greater self-reliance. Progress at the pace of the country’s real capabilities. Avoid risky debts and obligations. The 1999 statement on the Sufficiency Economy became the manifesto for this approach.

A team then codified the approach into three simple principles to facilitate applications of various kinds. First, follow moderation or the middle path. The Thai term for sufficiency (pho phiang), just like the English, has the dual meaning of both not too much and not too little. The right course avoids extremes of both extravagance and excessive economy. Second, use insight, in the sense of being aware of both the causes and consequences of any planned action. Third, build self-immunity or resilience to deal with unexpected shocks.

The team added that these principles would only work if people fulfilled three other conditions: they acquired the knowledge to know what they were doing, they acted with honesty and integrity, and they worked hard.

The core idea is that heavy dependence implies high risk. The solution is to cultivate greater self-reliance, not in order to be isolated from the outside world, but as a basis for dealing with it more securely and more profitably.

The Sufficiency Economy is not so much a theory about how the world works, more a set of simple maxims about what brings success, based on practical experience. Know what you’re doing. Act honestly. Work hard. Exercise moderation. Apply insight. Build up inner resilience. According to the enthusiasts for this approach, these maxims can be applied in any situation, from the family farm to the national economy.

But the disarming simplicity of these maxims also means they are capable of varying interpretations in different hands. In 1999, Thailand’s economists got together to discuss the Sufficiency Economy and happily concluded that it was fully compatible with the skills and tools of their discipline. The idea of moderation could be approximated to new ideas on fuzzy optimization. The idea of resilience emphasized the need to return to Thailand’s tradition of conservative macro management which had been abandoned before the crisis. And so on.

But at the same time, a more radical fringe of economists claimed Sufficiency rejected the whole acquisitive principle at the core of mainstream capitalist economics. And the Thaksin government claimed to be following the Sufficiency approach while it dreamed megaprojects and sprayed cash into the villages.

So to predict what the Sufficiency Economy may mean for the policies of the Surayud government, understanding the ideas alone is not enough. We need to understand those who are interpreting them too