Thailand · The Institutional and Political Underpinnings of Growth

Rapid economic growth in East Asia has sparked a great debate. The role of the state is the cental issue in that debate. Proponents of a minimalist state argue that East Asian governments have succeeded because they have confined themselves to the maintenance of macroeconomic equilibrium, the provision of basic physical and social infrastructure, and to boosting education. On this view the state has an important role, but one confined largely to establishing the conditions for the efficient operation of markets. This paper deals with the role of the state in fostering growth and considers the issues of the effectiveness of state intervention and of how far the model has been copied. The paper advances two main arguments. First, Thai economic policy has been most effective in maintaining a macroeconomic environment conducive to trade, investment, and the growth of private firms. It has been least effective in identifying and implementing sectoral objectives. Second, an activist state may require certain institutional skills that on many measures have eluded Thai economic policy. Macroeconomic stability, combined with the dynamism of private firms, has helped overcome certain weaknesses on the sectoral side. The paper reviews Thailand's macroeconomic policy, performance, sectoral policies and their results. It looks at the institutions of economic policy-making in Thailand and analyzes the political economy of macroeconomic decision-making. The paper also provides some conclusions about the Thai government's success in promoting growth and industrialization.