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