As His Majesty the King celebrates his 79th birthday today, he finds his "sufficiency economy" theory at last being taken to heart by policy-makers in the government. The concept seems poised to genuinely become a way of life in Thailand.

Unfortunately, few people fully understand the theory. Some have translated the King's advocacy of setthakij phopiang as "self-sufficiency economy", suggesting a denial of globalisation.

In fact, His Majesty has never suggested a self-sufficiency economy - only a sufficiency economy.

In his speech to well-wishers gathered at Dusit Palace on his birthday in 1999, the King clarified his theory, expanding on an address he gave the previous year.

"Self-sufficiency is not a sufficiency economy - it's a Stone Age economy," he said.

"A Stone Age economy is a kind of sufficiency economy, but it must gradually develop. There must be some exchange. There must be cooperation between villages or between the so-called districts, provinces and countries. There must be some barter or some insufficiency. That is why I said that, if we have only one-fourth of a sufficiency economy, it will be satisfactory."

His Majesty introduced his sufficiency theory several decades ago after dismaying at the number of Thais still living in poverty. He sought a way to help these poor people improve the quality of their lives. He wanted to initially ensure them a sufficient life - pho mi, pho kin - and then enable them to use natural resources as efficiently as possible.

If most Thais enjoyed sufficiency, he reasoned, Thailand itself would be stable.

"Sufficiency economy has been interpreted as 'community economy'," His Majesty said, meaning village or local sufficiency, which seeks to give local people at least enough to survive. It begins with having enough to eat.

"Many years ago - 10 or more years ago - I talked about the sufficient quality of living. But sufficiency is only the beginning of economy."

As the King has suggested, sufficiency theory has other dimensions. It also encourages trade among villages, districts, provinces and countries, in the interest of increasing wealth and sharing financial risks.

"When the Metropolitan Electricity Authority or the Electricity Generating Authority have an electrical power failure," His Majesty said in his 1999 speech, "without a sufficiency economy, everything will stop, and what are we to do? Everything that uses electricity will come to a standstill.

"In foreign countries people sometimes commit suicide when there is an electrical power failure, but here we are used to it. We are not seriously affected if we have a relative sufficiency economy.

"If we have a generator, we use it to generate electricity. In olden times we would use candles. There are always ways to get along.

"There are degrees in sufficiency economy. However, to say a sufficiency economy should be a 100-per-cent self-sufficient is not possible. There must be exchanges and cooperation. If there is cooperation and barter, it cannot be called self-sufficiency. Sufficiency in the royal theory means to be able to make a reasonable living."

The King would like Thailand to adopt a sufficiency economy to prevent another financial crisis. His theory calls for people to live within their means. In other words, they must not spend their future income with such avidity that they're saddled with debt beyond their ability to repay.

A sufficiency economy would give Thailand the ability to withstand any external shock. The 1997 crisis taught us to never again rely on foreign borrowing beyond our ability to repay debt from our earnings.

"Those who believe in sufficiency economy should practise it," His Majesty has said. "It will keep them going, though they might live not very comfortably."

The King's sufficiency theory is not at all inconsistent with capitalism. Under capitalism, workers use their income and returns from savings to finance their spending. They can't spend more than their lifetime earnings, although they can borrow in the short term.

What they don't spend becomes savings, which are used to finance investment and capital accumulation. An economy can't accumulate capital if everyone spends all of his income.

"This is very consistent with sufficiency economy - consumers can't live beyond their means," a noted economist has said. "Suppose all Thais spend all their income and have no savings. Thailand can then only fund investments by borrowing from abroad. But they can't borrow forever. At some point, they will have to save and pay back the debt.

"Plus, low-return investments will make an economy so feeble that it's unable to pay its debts, as in Argentina.

"Economic growth rests on the return on capital, not the volume of borrowing," the economist said. "Japan hasn't had to borrow overseas because its citizens save a lot. Japan's savings were channelled to productive sectors of the economy from the 1950s to the 1970s. The people who bought their goods were foreigners, so the Japanese accumulated capital through export revenue.

"Capital that contributes to economic growth is quite broad. It covers physical investment - factories, electricity plants, land, water, schools, libraries, transport infrastructure, natural resources like forests and fisheries - and human capital. It is not about money.

"But the voodoo economists advocate borrowing and opening financial markets. They are not talking about productive capital accumulation. They are just addicted to borrowing."

Thanong Khanthong

The Nation