Human-Scale Economics: Economic Growth and Poverty Reduction in Northeastern Thailand
By Joel D. Moore and John A. Donaldson

Human-Scale Economics: Economic Growth and Poverty Reduction in Northeastern Thailand

Apr. 28, 2016  |     |  0 comments


Under what conditions does economic growth benefit the poor? Most development experts, economists, and policy makers agree that expanding the value of goods and services in any economy — that is, economic growth — has the potential to reduce poverty (Kanbur, 2001). This consensus breaks down, however, at the questions of how consistent the connection between the two actually is, and which kinds of economic activities reduce poverty most effectively. One way to answer these questions are to focus on exceptions to the purported relationship between economic growth and poverty reduction. Examining economies that yield dramatically more poverty reduction than others despite their similar economic growth rates can unearth new ideas — policies, economic activities or other types of interventions — regarding how to make economic activity better serve the poor.

Here, we compare the experiences of two exceptional provinces in northeastern Thailand:  Surin and Si-Saket. These neighboring provinces are similar across a number of factors — they face a unitary central administration, are similar demographically and geographically, and had similar initial levels of development and poverty rates — yet have had sharply contrasting and unexpected records in reducing poverty despite similar growth trajectories. Between 2000 and 2010, Si-Saket province experienced an average annual GPP per capita growth rate of 13.4 percent (NESDB, n.d.-a) while its poverty rate dropped only modestly, from 62.2 percent to 55.9 percent (NESDB, n.d.-b). Meanwhile, the poverty rate in Surin province fell a startling 56.3 percentage points, declining 73.8 percent to 17.5 percent (NESDB, n.d.-b) despite having a lower (though still heady) average annual growth rate of 10.7 percent (NESDB, n.d.-a). How did this pattern emerge? To find out, we supplemented secondary research with weeks of fieldwork in both provinces. We interviewed scholars, officials and farmers to unearth why Surin’s growth was especially good for the poor, while little of Si-Saket’s economic growth translated to poverty reduction. Based on our research, three factors emerged as fundamental to understanding Surin’s surprising pace of poverty reduction.

(1) Organic Rice Production – Rice production has long been the chief agricultural activity in Thailand (e.g., Baker & Phongpaichit, 2014). Yet the capital requirements for inputs compelled many small-scale farmers to resort to formal and informal credit markets. In addition, because agricultural commodity prices change rapidly, farmers have been compelled to borrow money (e.g., Menkhoff and Rungruxsirivorn 2011).  As farmland is often used to secure these debts, indebted farmers face losing their land — their main source of livelihood — due to circumstances over which they often have little control. For many Thai farmers, shifting to organic farming presents an opportunity to break this vicious cycle. Organic farming allows agriculturalists to shift what had been subsistence grain production into a cash crop — one with high international demand yet low cost in terms of inputs (Raynolds, 2004).

While production of organic jasmine rice increased in many rural provinces in Isan, the results in Surin province have been astounding. According to data from the Ministry of Commerce’s Organic Marketing Intelligence Center (n.d.), Surin province accounts for two-thirds of all Isan farmers engaged in cultivating leading varieties of certified organic rice. The province also accounts for half of the total area planted and just over half the total production area in the region. Si-Saket, by comparison, has less than half of a percent of farmers and area planted in the region — and just over three percent of regional production. The director of one NGO in Si-Saket indicated that some communities have local markets for “green” agriculture but these are unconnected, feature no systematic certification process, and tend to be for local consumption (Interview 46). Moreover, large-scale organic rice production farming is dominated by members of a reclusive Buddhist sect which neither certifies its rice nor acts in accord with market forces (e.g., Ellis et al., 2006). Surin was thus able to leverage organic rice production, whereas Si-Saket was not.

(2) One Tambon One Product (OTOP) – Surin did especially well in OTOP, a central government initiative intended to provide alternative incomes for low-income farmers by promoting local handicrafts. It has had the second largest number of the highest, five star ranking products in the country. Surin has had at least double (and most years more than triple) the number of five star ranked products compared to that of neighboring Si-Saket. Additionally, OTOP producers in Surin have been successful in selling their goods overseas. By contrast, the bulk of Si-Saket’s OTOP revenue comes from the top four or five producers, with a much larger portion of producers earning very little and achieving only one or two stars (Community Development Department, n.d.). In Surin, by comparison, the top five producers generated 32 percent of total revenue while the median producer generated 384,000 Baht. Thus, OTOP in Si-Saket seems to follow some of the patterns observed for the program more generally, in that a few already established producers benefited greatly while the groups of small producers that were the original targets of the program largely floundered.



Despite the many similarities between Surin and Si-Saket, for a variety of historical reasons, the two provinces have followed divergent paths of institutional development at the local and provincial levels.



(3) Rural-Based Tourism – Rural based tourism is another area in which Surin excels in funneling a higher proportion of the benefits to the rural poor. Despite its potential to reduce poverty, the actual link between rural tourism and poverty reduction depends on the manner in which the industry is structured to include or exclude the participation of the poor (e.g., Tisdell, 2001). Surin province has been quite effective in developing attractions and events that bring in Thai and international tourists. Moreover, much is done to ensure that these visitors’ consumption patterns benefit the rural residents of Surin and strengthen local communities. Si-Saket also boasts many visitors, but these are mainly tourists headed through the province to get to the popular Angkor Wat temple across the border in Cambodia’s Siem Reap province, or the Preah Vihear Temple on the Thai-Cambodian border. Si-Saket’s tourism, though boasting a higher GDP and growth rate in hotels and restaurants, is not structured to benefit local residents to the same extent as Surin’s. Most visitors do not stay long in the province, and those that do stay spend less. In terms of the industry’s structure, moreover, Si-Saket’s industry is less beneficial for local residents.

Thus, the greater success that Surin’s farmers had with organic agriculture, the OTOP program and rural tourism helped to increase the incomes of low-income farmers in the province. Why was Surin province more successful than not only its neighbors in Isan, but also nearly every other province in Thailand? Despite the many similarities between Surin and Si-Saket, for a variety of historical reasons, the two provinces have followed divergent paths of institutional development at the local and provincial levels. Surin’s vibrant civil society is one key factor. Over the last twenty years, Surin has developed a vibrant civil society that interacted dynamically with the provincial government to help micro-developmental initiatives succeed by facilitating collective action among farmers and entrepreneurs. For a variety of fascinating historical reasons, the area became a hub for local and international NGOs, causing some local experts to dub Surin as “NGO capital of Isan” (Interview 14). By contrast, Si-Saket reveals much by omission. The scant information points to programs pursued in earnest by the local government but without the cooperation of a dense network of community organizations. NGO networks in Si-Saket are simply not as robust as their counterparts in neighboring Surin.

Supporting civil society is Surin’s remarkably active provincial governor. While Si-Saket’s governors changed frequently over this period, Surin enjoyed sustained leadership under Governor Kasemsak Sanpote, who served between 1999 and 2005. Kasemsak was unusually committed to promoting organic agriculture and other initiatives that helped poor farmers increase their income. Because he enjoyed an especially long tenure as governor and because he was able to work with such a dense network of committed partners in civil society, he was able to implement innovative approaches. Thus, both civil society and local government support seem necessary: the provincial leadership would likely have been insufficient without the strong local capacity, and the network of farmers and NGOs would likely have garnered much less success without a stable, invested partner in the provincial capital.

In sum, Surin’s local leadership, national policies, and strong civil society appear to have combined to ensure that organic rice, OTOP, and tourism increased farm and nonfarm income sufficient to reduce poverty greatly. In this way, the province provides an example of poverty reduction that allows us to transcend the question of whether economic growth is inevitably good for the poor. Growth certainly contributed — but growth of what kind will benefit poor farmers the most? To reduce poverty, social and political forces are needed to shift policies in ways that generate economic opportunities of the kind that poor people can take advantage of — not high-tech, large-scale industry, but rather small-scale low-tech ones like those delineated here. This approach contrasts markedly from the prescriptions of those who advocate “growth at all costs,” or promote development through scaling up production and promoting high-tech industries. In Surin and in other examples around the world, small-scale and low-tech production appears to have created the conditions under which the poor can reduce the poverty that has plagued them for decades. Social organizations and local political support, our evidence suggests, strengthened the structures needed for low-income residents to take advantage of opportunities provided by the local environment, changing social interests, and central government policies. The resulting bottom-up, rather than trickle-down, growth could have contributed to a virtuous cycle that focused the benefits of economic growth on the poor.

(This article is based on a forthcoming article in the journal World Development.)

References

Baker, C., & Phongpaichit, P. (2014). A History of Thailand. Cambridge: Cambridge University Press.

Community Development Department. (n.d.) OTOP producers for 2055. Thai Ministry of the Interior. Retrieved from http://www.cdd.go.th/download/560313.xls

Ellis, W., Panyakul, V., Vildozo, D., & Kasterine, A. (2006). Strengthening the Export Capacity of Thailand’s Organic Agriculture. Geneva: International Trade Centre.

Kanbur, R. (2001). Economic policy, distribution and poverty: The nature of disagreements. World Development, 29(6), 1083–1094.

Menkhoff, L., & Rungruxsirivorn, O. (2011). Do village funds improve access to finance? Evidence from Thailand. World Development, 39(1), 110–122. doi:10.1016/j.worlddev.2010.09.002.

NESDB. (n.d. – a). Gross Regional and Provincial Product. National Economic and Social Development Board of Thailand. Retrieved from http://eng.nesdb.go.th/Default.aspx?tabid=96

NESDB. (n.d. – b). Proportion of the population living in poverty (by expenditures) by province between 2543-2554. National Economic and Social Development Board of Thailand. Retrieved from http://social.nesdb.go.th/SocialStat/StatSubDefault_Final.aspx?catid=13

Raynolds, L. T. (2004) The globalization of organic agro-food networks. World Development, (32)5, 725–743. doi:10.1016/j.worlddev.2003.11.008.

Tisdell, C. A. (Ed.). (2001). Tourism Economics, the Environment and Development: Analysis and Policy. Cleltenham: Edward Elgar Publishers.

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