AT the moment, Deputy Prime Minister Korbsak Sabhavasu is the only Cabinet member who really understands the Thai economic situation. He wants to pay more attention to the domestic economy by working on the sufficiency economic model. We should invest in small, environmentally friendly industries or businesses that make us happy rather than going for heavy industries that create community conflict and adverse environmental consequences.
"We gave support to the industrial sector for decades by focusing on economic growth, but were rarely concerned about impacts in other dimensions. However, Map Ta Phut is a good case, causing us to reconsider whether we've come in the right direction for developing the industries or not," Korbsak said yesterday. Still, he felt it might be too early to abandon export industries, which account for 70 per cent of Thailand's GDP. He suggested there should be a master plan to locate industries in a zone to avoid environmental impacts and conflict with local people.
Thailand was traditionally an agricultural society. But we adopted an industrial policy, as recommended by the World Bank in the early 1960s, as a way to achieve high economic growth. Once we got into industrial production, we had to further open our economy and develop financial capitalism to go along with it. As a result, Thailand has fallen into the boom and bust cycle, without economic stability but with growing social inequity and income distribution problems.
An industrial policy may help temporarily improve poverty problems, but over the long term we'll have nothing left to live on. Mass factory production turns out industrial waste, and manufactured products pile up beyond our ability to consume them.
In the long term, the economic well-being earned from industrial success is not sustainable. Look at the case of Japan. Yukio Hatoyama, the new Japanese prime minister, is steering Japan away from exports, but he is not sure yet how to maintain prosperity if the country is to reduce its exports and to rely more on the domestic economy.
As the world's second largest economy, Japan is an economic success story. Exports drove economic growth in the 1960s, 70s and 80s. But the Japanese machine faltered in the 1990s. Over the past 20 years, Japan's economic growth rates have averaged less than 1 per cent, but it has kept the yen competitive to promote exports. By doing so, Japan is carrying US consumers, who have enjoyed a strong dollar, on its back.
Japan and Asia have gone into a mode, buoyed by technological advancement, of excess production, while the US has slipped into over-consumption. This global imbalance is the source of instability that is threatening to plunge the world into the worst recession since the 1930s.
All the wealth of Japan is amassed in US dollar paper and channelled into real estate. If you travel in Japan, you'll see big buildings everywhere. China's Shanghai is moving in the same direction. These properties, after 10 years of cost depreciation via accounting rules, will have high maintenance costs. Now Japan is afraid that the US dollar might suffer a sharp devaluation because the US financial system has become bankrupt. Its wealth, as stored in real estate, might turn out to be a mirage, because when the economy heads into recession, there will be empty buildings everywhere. It will become a big concrete graveyard.
That's the end game of industrial development and financial capitalism - enough is never enough. Both will take a country toward excess until the bubble bursts, leaving only empty buildings and dead stocks of unsold goods. Cars, TVs and refrigerators have become dead stock because there are no buyers. The system has reached saturation from excess industrial production, excess financial bubble and excess consumption.
It is not too late for Thailand to reverse this trend by doing away with industrial policy development. We should focus on agriculture, renewable energy and the service sectors. The transition from industrialisation and export-oriented industries toward the domestic economy might be painful, but in the long term Thailand will become more sustainable with the little that we have rather than with the excess that destroys everything we have.
At this point, I would bet that Thailand is in better shape than Japan, which has nowhere to go if the world economy heads further into recession. The industrial revolution is over.