Thailand applies sufficiency economy philosophy to promote sustainable development

In May 2006, Kofi Annan, then secretary-general of the UN, travelled to Thailand to present King Bhumibol Adulyadej with the first-ever UN Human Development Lifetime Achievement Award. During his presentation of this great honour, the secretary-general praised not only the king’s “extraordinary contribution” to human development, but also what Annan described as the monarch’s visionary thinking.

This latter remark referred to the economic and social philosophy which the king has pieced together, thanks to many years of both practical experience and personal meditation. It is a philosophy known as “sufficiency economy”. This idea, which he first began to think about in 1972 and formalised following the 1997 Asian financial crisis, gained momentum in the 1990s and is now seen as an important contributor to the UN’s international development goals. It is also having an impact in the boardroom, where companies, from Thailand to Tuscany, have been looking at sufficiency economy for the keys to a sustainable and profitable future, both for their company and for the wider world in which it operates. Sufficiency economy places sustainability at the very core of its thinking, advancing a different approach from that of short-term, shareholder value-centred ideas of economic development. The take-up of this philosophy has also placed the country at the forefront of studies in sustainability, while also providing the world with some remarkable blueprints and success stories.

Birth Of An Idea

When the king took the throne, Thailand was a rural, agriculture-based economy with a per capita GDP of around $200. US military involvement in neighbouring Indochina, however, had a major impact on the economy’s structure in the 1950s, 1960s and 1970s, spurring GDP growth via exports, largely of agricultural products. During this time, too, the king took a close interest in the practices of the agricultural sector, touring the country and establishing development projects that ranged from the introduction of tilapia fish farming to rural road building and cloud seeding. This practical, hands-on experience of the daily life and challenges faced by rural dwellers became the subject of much meditation on his part, a practice that translated into a series of lectures, public statements and interventions – initially on the wider philosophical issues raised, but increasingly on the practical implications of his ideas for economic development.

Philosophy Of Growth

When Thailand was hit by the 1997-98 Asian economic crisis, these thoughts became all the more potent and urgent. In December 1997, the king’s birthday address to the nation took issue with the then-fashionable description of the South-east Asian economies as the “Asian tigers”. What was important, he said, was not being a tiger, but having “a sufficient economy”. What this meant was that Thailand should aim to have enough to meet its needs, without being extravagant. This became known as a foundation speech for the idea of the sufficiency economy. Drawing on Thailand’s deep Buddhist tradition, this concept emphasises the “middle way” – the importance of balance. In Buddhism, this middle way, or path, advocates the avoidance of the extremes of sensual pleasure on the one hand, and ascetic denial on the other. The middle, or eight-fold, path steers the individual to calm and enlightenment through a world in which everything is in a constant state of change and flux.

The idea of sufficiency economy is that a similar approach should be taken to human development in economics. Central to such progress are three components – moderation, reasonableness, and prudence – and two underlying conditions: knowledge and virtue. These latter two conditions conform to two of the three main groupings of the eight-fold path (the third being meditation).

These principles situate sufficiency economy close to the stakeholder philosophies of Western economic literature, which were beginning to achieve prominence in the late 1990s. They contrast shareholder theory, in which a company’s main duty is the fiduciary one of maximising its shareholders’ profits, with an idea that more parties are involved than just the shareholders – employees, customers, suppliers and communities, as well as financial, labour and governmental groups. These “other” parties also have interests in the firm, and their development is also key to its long-term economic growth and survival.

Sufficiency economy likewise sees the firm as being situated in a much wider arena than its own boardroom. It also brings the wider, human aspects of development to the foreground, a move that in post-Asian-crisis Thailand was widely welcomed.

Growing Inequality

Previous years of economic expansion had seen GDP rocket. From 1957 to 1997, annual growth averaged 7.6% while per capita income grew sevenfold. Yet the country had also experienced growing inequality and environmental degradation. Around two-thirds of the country’s forests disappeared between 1947 and 2000, while Thailand’s Gini coefficient – a measure of income inequality whereby zero is perfect equality and one is complete inequality – increased steadily over the same period, as those in neighbouring countries such as Malaysia fell.

Thailand’s rural areas also fell far behind its urban ones in terms of income, particularly as agricultural commodity prices dropped and debt mounted among farmers. Social rupturing caused by urbanisation and rapid exposure to global markets and mores also created a human landscape in which many felt excluded and powerless. All these issues were addressed by the king in that 1997 birthday speech.

Everything In Moderation

The first principle of sufficiency economy, moderation, implies a “not too little, not too much” approach – a middle way for economic planners, companies and farms. This middle way between extravagance and want implies, at a company level, a view of the balance sheet that looks for long-term profitability rather than just short-term success. It is closely linked to the idea of sufficiency itself. However, this is not the same as “self-sufficiency”. The king has been very clear that the sufficiency economy remains very much a part of a globalised economic system and is no retreat from the world. Rather, it is the need for a certain degree of self-reliance by both individuals and the country.

It also means a measured, step-by-step approach to economic development. Once the population has secured for itself a sustainable level of sufficiency in meeting its basic needs, then more sophisticated developmental steps can be taken. This approach means keeping a focus on the poor – and in Thailand, particularly the rural poor – and on ensuring that rapid economic growth in some areas does not leave others without the ability to meet their basic needs.

The second principle, reasonableness, indicates the application of wisdom to decision-making by looking for the consequences of actions – not just on the business or the individual, but on the community, the environment and society as a whole. Self-awareness is vital here too, as is compassion and empathy.

The third pillar, prudence, implies a need to develop some system of self-immunity, a framework that guards against the impact of external and internal shocks. This notion is similar to risk management, which comes not only from good planning but also from investment in research and development (R&D), cultivation of innovation, and the adoption of appropriate and useful technology.

The three principles are clearly inter-related. Prudence implies a degree of self-reliance, for example, while reasonableness governs the forward planning necessary to develop prudence. This interlinking is deliberate, and underscores the more holistic nature of the sufficiency economy philosophy.

All three are then governed by the principles of knowledge and virtue, or integrity. Knowledge here has a meaning similar to wisdom or insight – a kind of thorough knowledge. In a corporate sense, it means gathering information, interpreting it correctly and having the prudence to use that knowledge well. Decisions should thus be governed by ethics, which here means honesty, straightforward behaviour and integrity, as well as tolerance, perseverance and a willingness to work with others without exploitation.

Beyond Business

This framework is one that clearly has application beyond business and economics. Indeed, it might be argued that such a code is most often advanced outside the sphere of the economy. Applying it to economic development was therefore something of a radical approach. This point was made forcefully at the 1999 Annual Conference of the Thailand Development Research Institute. The old economic model had ignored moderation, as over-consumption slashed savings and undermined self-reliance with foreign debt. Corporations had failed to protect themselves against unforeseen shocks, while the state had ignored reasonableness by incentivising large-scale capital-intensive projects at the expense of other initiatives. Over-dependence on foreign investment and technology had also led to a paucity of home-grown R&D and of investment in human resources and innovation.

Sufficiency economy also chimed with the growing global movement to define economic progress in wider terms than just GDP growth or business profits. It thus fit naturally with the UN’s move to define millennium development goals (MDGs) in 2000, and with a major academic and political shift towards sustainability as a key concept in development economics.

Definitions

The most widely used definition of “sustainability” is that supplied by the 1987 UN Brundtland Commission report, “Our Common Future”. The commission spoke of an inseparable link between development and the environment. It further stated that “sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs”. This definition sits comfortably with sufficiency economy, as it underscores the need for moderation (dealing with limited resources, for example), for reasonableness (looking for the consequences of actions on others) and for prudence (ensuring against risks so that a company or economy can survive future shocks).

Sustainability is thus at the very core of the sufficiency economy. So too is another key concept: human development. The UN has been a champion of this approach, which places people at the centre of a nation’s wealth. The first UN Human Development report, published in 1990, put a strong emphasis on quality of life as the key determinant of economic progress. Enlarging people’s choices is seen as the way to human development, a point later elaborated when the human development index (HDI) was devised as a way to quantify this concept. Sufficiency economy also places people at the centre, but adds spiritual development to the HDI. It also advocates a way of making decisions that helps achieve human development goals. This is a key part of the philosophy: sufficiency economy is not a description of the formal economy, but rather a process for working within it that leads to sustainable outcomes advancing social, economic, environmental and cultural well-being.

These ideas of sustainability and human development undoubtedly informed the UN’s MDGs, set in 2000, as well as the sustainable development goals (SDGs) that came out of the Rio+20 UN Summit in 2012 and were agreed in 2015. The SDGs set the goal of ending poverty and hunger worldwide by 2030.

When Don Pramudwinai, the foreign minister, became chairman of the Group of 77 at the UN in January 2016, he highlighted this interconnectedness, suggesting that sufficiency economy could be used as a way to achieve all of the 17 SDGs. As examples, he said that SDG 12 – reasonable consumption and production – was a clear fit with the king’s philosophy, which also encourages holistic farm management systems that minimise farmers’ vulnerability and promote sustainability, food security, water preservation and biodiversity. This aligns with SDG 1 on eliminating poverty and SDG 2 on eliminating hunger.

Broader Influence

In Thailand, sufficiency economy has meanwhile become part of the constitution, as well as a philosophy adopted by governments, businesses and individuals. Its principles have since formed the basis of national development plans, including the 11th, which runs until 2016.

The National Economic and Social Development Board (NESDB) is key to these, and thus to the national implementation of the principles of sufficiency economy. In its 2012 introduction to the 11th National Economic and Social Development Plan, the NESDB noted the growing uptake of sufficiency economy as a set of ruling principles by the general public, citing a 2007 survey which found 74% of communities applied those principles to a moderate level and 13.6% to a high level. The NESDB has also formed a new body, the Research and Development Institute of Sufficiency Economy, which operates under its umbrella.

At the same time, many independent studies have been undertaken to assess the philosophy’s value in real-world economics. One of the first was that conducted by Apichai Puntasen and associates in 2003, which looked at the application of sufficiency economy principles in 296 small and medium-sized enterprises (SMEs) that had survived the 1997 crisis. The study found a strong correlation between these principles and the SMEs’ business practices. Another study, “Measuring Corporate Sustainability: A Thai Approach” by Sooksan Kantabutra, looked at three characteristics of a successful, sustainable enterprise, and their relationship with geo-social development, perseverance, prudence, moderation, sharing and ethics. These were five factors identified by an earlier study into sufficiency economy in the workplace. The three key outcomes were the capacity to deliver strong performance; the capacity to endure social and economic crises; and the capacity to deliver public benefits – this last being a key marker of sufficiency economy principles. The survey’s conclusion was that perseverance and prudence were directly related to a company’s ability to achieve strong performance. Perseverance, prudence and moderation were also key to surviving crises, while geo-social development, perseverance and prudence were directly related to a firm’s ability to deliver public benefits.

Perseverance and prudence were the most important qualities in delivering a successful, sustainable outcome for a business, with this fitting many corporate philosophies. Employers and employees who do not give up, who “go the extra mile”, are more likely to succeed, while firms that take account of the changing nature of the world and plan for external and internal shocks seem naturally to do better.

Public Good

The capacity to deliver public benefits, rather than just shareholder benefits, is a key way for companies to establish brand loyalty, recognition and positive public perceptions – all good for company sustainability. Sufficiency economy naturally encompasses corporate social responsibility (CSR). Other studies have found a positive link between the king’s philosophy and business sustainability. Kantabutra and Siebenhuner’s 2011 paper, “Predicting Corporate Sustainability: A Thai Approach”, and other collaborations between Kantabutra and Avery, Suriyankietkaew and others, have arrived at similar conclusions: that the precepts of sufficiency economy are either direct or indirect predictors of a firm’s capacity to achieve successful sustainable development.

The philosophy has not been without its misunderstandings, critics and controversies. In particular, sufficiency economy’s advocacy of self-reliance has sometimes been taken to mean a rejection of the global market, giving rise to policies that imposed exchange controls or tried to limit foreign capital or reliance on exports. A populist localism has also sometimes been mobilised around a misunderstanding of sufficiency. Yet as the king himself said in 1997, “As we are in the globalisation era, we also have to conform to the world.” Similarly, the philosophy has also been criticised for its stress on moderation, which has at times been interpreted as advocating fiscal conservatism, even at times when some public figures have advocated fiscal expansion and looser monetary policies. However, advocates of sufficiency economy might also point to the global financial crisis of 2007-08 as sufficient proof of the dangers of ignoring moderation, reasonableness and prudence.

Next Steps

In 2016, Thailand joins its neighbours in the ASEAN Economic Community, a trade bloc that seeks to further integrate the economies of the 10 member states. Thailand is also discussing its relationship to the Trans Pacific Partnership, a 12-nation free trade agreement that further liberalises trade across the Asia-Pacific. The forces of globalisation are continuing to exercise their pull on Thailand, while the global economy is in slow-down and an atmosphere of uncertainty is prevalent around the world.

In these circumstances, sufficiency economy clearly has much to say. Indeed, Thailand continues to spread the message, through development projects undertaken by the Thailand International Cooperation Agency (TICA) and through other bodies. These include a meeting of experts at the UN’s Group of 77, which Thailand chairs in 2016. TICA, meanwhile, is continuing a range of training activities under the sufficiency economy rubric, in areas such as organic agriculture and sustainable agricultural systems, and with hands-on projects like that recently started in Tonga, also in agricultural development. The Cabinet has also approved a project to support chairmanship of the Group of 77 by making the ideas of sufficiency economy more widely known outside of Thailand.

Meanwhile, on the ground in Thailand, the application of sufficiency economy in achieving sustainable development continues to be a major policy directive for the government. With many businesses continuing to operate according to more short-term goals, clearly much remains to be done. Yet many of the ideas first outlined by the king have now been taken up by companies, both large and small. In CSR, for example, many corporates and SMEs now practice such community outreach, and sustainability has become a common approach to business planning. That many of these developments owe their provenance to the early experiments and meditations of the king is a remarkable testimony to his rule.

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The Report: Thailand 2016

Sustainability chapter from The Report: Thailand 2016