How did China surpass Thailand?
Thailand revolutionised its political and administrative systems in 1932, well before China, which did not start until 1949. The shared drive for this revolution was the economic hardship of the populace. Both Thailand and China were poor nations. Their economy stagnated and was under the control of the privileged groups, the elite rulers in the case of Thailand, and the bourgeois in China. People in the countryside were left with economic plight and suffering. Initially, Thailand had taken a leap toward reform by changing into a constitutional monarchy following a coup led by Khana Ratsadon (the People’s Party), supported by young military personnel and Thai students who graduated overseas, to spur economic development and improve the economic well-being of the public.
As a latecomer, China was more prudent and steadfast in its political and communist ideological reform to be responsive to the needs of the massive population in rural areas. Thailand was wavering in its political reform in its own way by leaning on the constitutional monarchy. Nevertheless, in October of 1933, Prince Boworadet, a member of the royal family, staged another coup in an attempt to revive the absolute monarchy. His attempt was futile, and his rebellious army was defeated. However, that had the effect of sowing the seeds for future coups in Thailand.
These seeds grew into a mighty tree of coups in only 14 years. In 1947, the royalist-military forces staged another one and dissolved the People’s Party, a group of civilians and progressive military men, some of whom indeed were members of the group that had earlier staged a coup in 1932 which turned the country from an absolute monarchy into a constitutional monarchy. In the 1947 coup, Pridi Banomyong, the leader of the civilian faction in the party, had to flee the country. Ten years later, Field Marshal Por Pibulsongkhram, the leader of the military faction who had outlived the People’s Party, faced a similar fate and had to flee the country. Ever since then, coups have become a common political strategy to transfer power from the elite rulers to the ever-growing bureaucracy.
In 1949, Mao Zedong came to power and created the People’s Republic of China. He made great strides toward bringing the country through three critical transitions: from agrarian economic stagnation to economic growth, from political disintegration to political strength, and from military rule to civilian rule, which was the most dramatic form of political transformation. The reservoir of popular support was a tremendous national asset he could capitalise on as a national resource for economic development. Empowering and granting autonomy to people at the local level has proved to be the most stable form of political reform and an effective strategy for national economic development.
Political reform and economic reform are intertwined. No country in the world can grow its economy without political stability. An International Monetary Fund study indicated that a high degree of political instability is associated with lower growth rates of GDP per capita caused by declining productivity growth. China has confirmed this through a shared political will and a passion for the economic well-being of the citizens, continuing from former president Mao Zedong to incumbent President Xi Jinping.
With the backdrop of political instability and uncertainty, Thailand launched its economic development in the 1960s and made remarkable progress in economic development. Between 1960 and 1996, its economy grew at an annual rate of 7.5%. The rates between 1999 and 2005 declined to an average of 5% per annum. Things started to go wrong in 2006. The growth due to export-driven strategies diminished. Private investment declined dramatically from more than 40% in the years before 1997 to a meagre 16.9% in 2019. However, even with this backdrop, Thailand achieved the status of an upper middle-income country in July 2011.
In contrast, China shared the same rank as a lower middle-income country in 2005. But in 2010, it became an upper-middle-income country, one year ahead of Thailand. This was simply because since China began to open the country up in 1978, its GDP growth grew at an average rate of nearly 10%. Available statistics indicate that China, which has experienced declines in GDP growth rates during the outbreak of Covid19, is still expected to sail through the end of 2022 and become a high-income country by the end of 2023.
It is not intuitive to understand the adverse effects of political instability. It is, therefore, necessary to explain how political instability has a dampening impact on economic development. First, it shortens the horizons of policymakers in terms of economic development. Due to instability, policymakers and investors dislike thinking very far into the future. Long-term economic investment is risky, as business and politics are intertwined in Thailand.
When a new government comes into power, it usually supports rival businesses. It also alters economic development policies that create volatility and unpredictability. Business leaders, particularly foreign investors, perceive political instability as a threat to their businesses, thus negatively affecting economic development.
The frequent coups in Thailand have reinforced the political power of the bureaucracy through newly created strict rules and order. Therefore, the fledgling local government agencies must follow the rules prescribed by the Ministry of Interior. As a result, local governments in Thailand are much less accountable for the economic well-being of citizens than those in China.
Since 1978, China has devolved significant economic development control to local governments. In addition, it has allocated an average of 65% of the national budget to local governments. In Special Economic Zones such as Shenzhen, Zhuhai, Shantou and Xiamen, the government has allocated a large amount of its budget to local governments as an investment for the economic well-being of the citizens. Currently, Thailand still allocates only 29% of its budget to local governments, thus reaping much smaller multiplier effects for national economic development. Thailand should learn from the experiences of China and rectify the wrongdoing that has plagued Thailand for over seven centuries.
‘‘ Long-term investment is risky, as business and politics are intertwined in Thailand.