Comment on “Siamese Twin Failures: Structural and Regulatory Transformations in Unequal Thailand”

Abstract

Kanchoochat (2022) takes an institutional approach to explaining the persistence of inequality, poverty, and low growth rates in Thailand over recent decades. He focuses on two institutional transformations: a “structural transformation,” meaning a move away from agriculture, and a “regulatory transformation,” meaning efficiency-enhancing reforms in public administration, decentralization, anti-monopoly policies, and taxation. Kanchoochat argues that the high-growth countries of East Asia, especially Taiwan and South Korea, achieved these two transformations, resulting in higher growth and declining inequality, while Thailand has failed. This is a succinct, elegant, and original approach to an important issue.

On the structural transformation, Kanchoochat has excellent charts showing the extent of Thailand's failure compared to other Asian countries to move people out of agriculture and to improve productivity. He attributes this failure to two causes: government subsidies of inefficient agriculture, especially since the 1990s, and the continuing role of the farm as a form of social security in the absence of state provision. He suggests that ending subsidies and constructing a comprehensive social security system would overcome the problem. While I would welcome these reforms, I doubt they would achieve a “transformation,” because I think other factors are important in sustaining this inefficient agricultural sector. Most important of all, access to and use of land, the single most important input into agricultural production, is still lumbered with many restrictions. Around 60% of land is still ultimately controlled by government. Large areas are not available for economic use, and others have restrictions on their use (Cripps, 2020). Without a far-reaching reform of the tenure system, the potential of agriculture will not be realized. Another restraining factor is the very low rate of public investment in agriculture over the long term.

On the regulatory transformation, Kanchoochat shows how moves toward democratization, decentralization, and progressive polices on tax and competition foundered on the intransigence of the “traditional elite,” meaning the military, and segments of the bureaucracy, professions, and politically connected entrepreneurs. This alliance created a new institutional framework featuring appointed bodies and the judicial system which blocked or reversed reforms. Kanchoochat argues that change requires a larger role for electoral institutions and a “new social contract” under which citizens will agree to pay more tax and entrepreneurs will be happy with less monopoly. But it is not clear what social forces might drive such changes.

Kanchoochat, following North, Aoki, and others, argues that institutions are created by human will to form a stable structure for the conduct of everyday life. According to this definition, institutions are susceptible to change but there is a tendency for “a self-sustaining system of shared beliefs” to hinder reform of institutions that fail to perform. My major concern is that explanations which see institutions as the critical players beg the question of what social forces shape these institutions and also what social forces might alter the situation. In short, what can disturb the dominant role of the “traditional elite” which seems quite happy to live with an inefficient agricultural sector, an inefficient state, and high inequality?