WHAT IS THE "SUFFICIENCY ECONOMY"?

UNCLAS SECTION 01 OF 03 BANGKOK 005706 DEPT PASS TO USTR TREASURY FOR OASIA SENSITIVE/NOFORN/SIPDIS E.O. 12958: N/A 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