Regular readers of New Mandala will know that I sometimes like to produce graphs, partly to display my statistical sophistication! These two are my modest contribution to recent discussion on New Mandala about the underlying economic drivers of political conflict. They both relate to the productivity of labour (expressed in terms of GDP per worker) in the agricultural and industrial sectors. All data are taken from the World Bank’s World Development Indicators.
The first graph starkly illustrates the productivity gap between agriculture and industry in Thailand. This gap widened notably during the rapid economic growth of the 1980s and 1990s, but narrowed after the economic crisis of 1997. (Units are $US)
The second graph sets out the ratio between GDP per work in industry and GDP per worker in agriculture for Thailand, Indonesia, Malaysia and the Philippines. Thailand has the highest ratio for the entire period (1980 to 2007) though it comes close to Indonesia at the beginning and the end. Interestingly the ratio in Thailand declines steadily from 2000 to 2007, partly due to an significant increase in agricultural productivity (from about US$600 per worker to about US$1600 per worker). Is this increase in agricultural productivity (and the narrowing of the gap between agricultural and industrial productivity) a product of Thaksin-era policies? Has the expansion of contract farming increased agricultural productivity?
I would greatly appreciate any comments that New Mandala readers (who are more economically literate than I) have on these graphs.
[Methods. Sectoral GDP is based on World Development Indicators on total GDP (current US$) and the percentage GDP share of different sectors. Sectoral workforce is based on the total workforce and the percentage workforce share of different sectors.]
Yes. I think it would be instructive to see the data for 2005 to 2010 because I suspect that would suggest an underlying cause of the current widespread discontent.
In my travels in the Issan, I regularly hear complaints that the price of rice to the farmer has gone through the floor (recently went down again I understand), and the re-sale value of a cow has similarly declined disastrously for the farmer.
The perception is that the ultimate market price has not changed very much, and that the friends of the coup and the current democrat government are filling their pockets very nicely thank you at the direct expense of the farmers. They feel that Thaksin looked after them rather better.
It is a commonly held perception that the coup was a direct ans simple response to the fear among the aristocracy that Thaksin would end up being more popular than the King. That appears to be what this is really all about.
Quality comment or not?
0 
1
In fact the graphs go up to 2007 (not so clear – sorry). Not all indicators are available for 2008 and 2009, though the Thai agricultural GDP does show continued healthy growth in 2008.
Quality comment or not?
0 
1
I am not an economist, but I guess that the first graph has something to do with the tendency for income elasticity of demand to be higher for manufactured goods than for agricultural goods. Basically it means that when consumers’ income rises they will spend a higher proportion of their raised income on manufactured goods, while the quantity demanded of agricultural goods remain stable. Price elasticity of demand might also be influental. This may favour the industry.
The crisis then probably caused a lower productivity for manufactures since the demand was lowered due to the crisis being regional. Also the drop of value of the baht may have caused less income for their exports since it became cheap to import from Thailand. And ofcourse bankrupt industries may have had a major influence.
The raise of productivity in agriculture in the recent years might also be caused by the fact that food prices has been rising drastically for some years. But I’m not sure when the prices started to rise, so this need to be investigated further.
I’m not an expert on Thai economy or economy at all so someone with a clearer vision should probably try to give a better analysis.
Quality comment or not?
0 
1
I suggest you should compare workforce in Agriculture sector to industrial sector, since a change in labour force might reflect in increasing of income per worker.
It is a trend in developing country that worker migrate from Agriculture sector to Industrial sector . Ultimately, worker in Agriculture sector will close to 10% of total worker in developed country. Thailand is still far from that ratio we’ve got a long way to go compared to Malaysia.
Quality comment or not?
0 
1
Hi Prometheus – what you have suggested is exactly what I have done. The graphs are dealing with GDP per worker.
Quality comment or not?
0 
1
Like prometheus, I also feel that additional data regarding demographic changes in employment for the period would be helpful. If large numbers of agricultural workers have left the land to work in industry, there would be significant forces affecting productivity in both sectors. Perhaps fewer people were trying to scratch a living from the same area of land and were therefore more productive per worker, and higher proportion of people were employed in low skilled less productive industrial work and were therefore less so?
Quality comment or not?
0 
1
“The raise of productivity in agriculture in the recent years might also be caused by the fact that food prices has been rising drastically for some years.”
This is a useful statement, but we must be cautious in assuming that rising food prices results in increased income for farmers. It does however, result in increased income for marketers. Nonetheless, FAO Asia Pacific, actually based in Bangkok, claims that food prices only began to raise in May 2007.
Check out this similar post on the BP to see how incomes actually increased under Taksin: http://asiancorrespondent.com/bangkok-pundit-blog/did-thaksin-close-the-gap-between-rich-and-poor
Taksin may be convicted, but one doesn’t have to look far to see why he has left such an impact. Adding that the current democratic government has cut budgets for Subdistrict Authority Organisations (SAO) and further centralised power to Bangkok, it becomes even easier to understand. I recently visited an SAO in Chiang Rai which has seen its budget cut by about 20% under the new government.
Quality comment or not?
0 
1
The second graph clearly shows that the industrial development in the Philippines has been hopelessly stalled for a while, and the massive numbers of Philippino maids in Singapore and Hong Kong is the ample proof of it.
But Malaysia? One possible explanation is that the rate of agricultural development is same as the rate of industrial development as in the success of SMR (Standard Malaysia Rubber) and palm oil?
Indonesia and Thailand both appear to be on the same path of unbalanced growth of development, but more prominent in Thailand because of more rapid development in the Thai manufacturing sector. But Indonesia seems to be catching up recently due to the political stability there under the current regime.
Thanks for the graphs, Andrew. They made me understand more about these four countries. It will be clearly demonstrative if you can add Australia as a reference line for the example of balanced development.
Quality comment or not?
0 
1
It needs to be remembered that there are issues of seasonality involved in what it being regarded here as the agricultural sector. What this data probably does not capture is the non-farm income from other employment by people identified as agriculturalists, and thus can’t be taken as an absolute indicator of plight or surplus of farm families in general.
This is not to be taken as an apology for the predatory behavior of the middle men who buy from the farmers at prices that in no way correspond to the value of the finished goods exported or sold domestically.
Quality comment or not?
0 
1
The problem with this, and all other productivity calculations over the last fifteen or so years, is that the source statistics take no account of illegal or semi-legalized immigrant labour. There may be 3 million Burmese and other migrant workers not counted in the statistics used to make these calculations. That’s around 10 percent of the workforce. We don’t know exactly how many, we don’t know the industry/agriculture distribution, we don’t know the fluctuation from year to year.
Even so, I suspect that Andrew’s 2nd graph is probably roughly right. During Thaksin, agriculture benefited first from the general upswing of 2001-4, and then from Thaksin’s price subsidies, perhaps his single cleverest ‘populist’ policy, widely overlooked, absolutely right in terms of strategy, very badly implemented in detail (unacceptably high levels of rent).
I’ve no idea what to do about the impact of the migrant labour on Andrew’s statistics. Ignoring it will lay him open to challenge. Perhaps some kind of caveat is needed.
The decline of the Thai line in graph 2 looks great. But the end-point is still 8 times. Divide your income by eight and see if you want to live on that.
Quality comment or not?
0 
1
“The decline of the Thai line in graph 2 looks great. But the end-point is still 8 times. Divide your income by eight and see if you want to live on that”
Most of this disparity ends up in the pockets of the capitalists doesn’t it? And not to the workers as real wages.
Quality comment or not?
0 
1
Another enormous problem with the per capita figures is how you treat the large population (mostly registered outside bkk) engaged in 2 or 3 sectors. In a rural economy in which pluriactivity is the rule, the definition of the agricultural workforce has a huge impact on per capita figures. Nothing new here, I know.
On a related subject:
The structural causes of the conflict explored here are a common features of economies undergoing their “agrarian transition” or structural changes. Yet, open and violent political conflicts do not emerge systematically.
This is the only good point mentioned in the recent editorial of The Nation [The Nation. (2010) Do they really know what's happening here? The Nation, (April 30).] In the editorial, the author suggests the key difference between Thailand and the ROWP&P (rest of the world past and present) is Thaksin, who is funding the protest. This is of course not a very serious causal analysis as it only addresses a tiny and non-essential portion of the causal chain. Perhaps a more meaningful difference between Thailand and non-violent cases lies in the fact that in Thailand, one camp (yellow/elites/Palace network/Sonthi and Anupong, etc.) has successfully destroyed the credibility of all institutions, in particular the judicial system, which could have helped pacify the situation. With the politicization of “neutral” institutions, the perception of deep injustice is great and trust between opposing groups disappears.
Again, there is a great need for a comparative analysis of the political repercussions of the agrarian transition in Thailand vs ROWP& P. I found the following an interesting starting point: Hayami Y. (2007) An Emerging Agricultural Problem in High-Performing Asian Economies. Washington: World Bank
Quality comment or not?
0 
1
My bad, what I want to says is that the productivity change might not cause by “expansion of contract farming” but instead worker who do farming migrate to factory. To judge weather productivity is increasing or not we should use the production per area instead of income per worker.
Rice productivity of Thailand in 2001 is 2.62 t/ha and it is 2.69 t/ha, not much change during those 7 years.
Quality comment or not?
0 
1
What are we seeing at here? That the boys and girls who go into the factories are more productive than those that stay in the countryside? Well that’s been the story ever since the industrial revolution in the UK when thousands left the land to earn cash in those satanic mills. Maybe it’s that food/farm prices have not gone up that fast? Certainly our cost of living here is fairly low by Western standards. That Thai industry has become more productive? Well that must be true by the modernization of industry I see wherever I visit.
If I were a Thai industrial worker I would look at my pay packet of six to ten thousand Baht a month, $180 to $300 US a month, and say I need a good union and maybe a political party that would represent the factory workers.
Quality comment or not?
0 
1
yes we made rices and bought Tuksin phones…and others computers, internet, cars and new techs.
Quality comment or not?
0 
1
I am just as ignorant of economics as Andrew and while I might suggest a professional economist does a paper which addresses all the threads above, that profession has a great knack of ignoring practicalities of people’s lives.
Recently I talked with an agricultural researcher in Chiang Mai who showed figures of the fairly steady growth in rice productivity per hectare, thanks to the patient work of plant breeders. He had figures for Thailand and our neighbors and the growth in Vietnam was handsomely outstripping Thailand.
Here is an example of just one of a number of factors which are needed in a thorough analysis.
Quality comment or not?
0 
1
Paddy rice yield (t/ha)
Year World Thailand Vietnam China
1981 2.83 1.95 2.20 4.33
1991 3.54 2.25 3.11 5.62
2001 3.94 2.62 4.29 6.15
2002 3.85 2.61 4.59 6.19
2003 3.94 2.65 4.64 6.06
2004 4.03 2.86 4.86 6.31
2005 4.08 2.96 4.88 6.25
2006 4.12 2.91 4.89 6.25
2007 4.15 2.69 4.87 6.35
Quality comment or not?
0 
1
For those of you interested in productivity of land (yield) see this previous post: http://asiapacific.anu.edu.au/newmandala/2009/09/10/more-on-thailands-low-agricultural-productivity/
Quality comment or not?
0 
0
The comparative yield statistics (post #17) are interesting but it hides the most important fact, the quality of rice. I don’t really know why and how, the good quality rice always has much lower yield than bad quality rice per acre while I was growing up in the Delta of Burma.
Back in Burma during the Ne Win’s Socialist era the Burmese farmers were even forced to grow only bad rice just to raise the yield and look good in the statistics.
I think it explains the reason for the extremely low yield of Thai rice compared to the Chinese rice. Most Asians living here in Australia will never eat rice from China as long as they have Khao-hou-mali (Jasmine rice) from Thailand. Even the Chinese restaurants in Sydney use more expensive Thai jasmine rice which now cost more than $2 per kilo retail here.
Quality comment or not?
0 
0
Andrew:
Your graphs appear to show worker productivity in industry v. agriculture but it appears many of your commenters are reading it as worker income in the two industries. Do you have graphs of worker real incomes in the two industries? I suspect they will tell the same stories but just to be sure since everyone seems to assume that worker productivity equals worker incomes.
As to whether the Thai agricultural sector improved productivity during the Thaksin years, I suspect that it did. Thaksin pumped lots of government money into the rural areas. Everyone remembers stories of Thaksin’s cheap (read: heavily subsidized) healthcare for the rural poor. It stands to reason that a healthier worker is a more productive worker. That program and others rural-targetted programs under Thaksin probably did increase the productivity of Thailand’s agricultural sector. HOWEVER, the question was and still is at what costs? Were those types of government subsidies sustainable? Could that money have been better spent elsewhere, in more productive sectors of the economy? Are there more rational and less expensive programs to increase productivity of the agricultural sector than what Thaksin pursued?
I’m pretty certain Thaksin pursued his rural/populist agenda not merely for the benefit of the rural poor. He’s a pretty savvy politician who’s not above using the people for his own purposes.
Quality comment or not?
0 
0
Thailand’s basic economic problem is not difficult to detect at all. It stems from the neglect by the Bangkok ruling class of the underprivileged upcountry. It has long been a tradition in Thailand that if the masses outside Bangkok do not cry out, then everything must be all right, and the leaders in Bangkok can go on enjoying themselves with life’s frivolities. There are no long-range plans, no vision about anything in life. Everything comes about on the spur of a moment. As an American friend of mine once remarked: “I keep wondering how Thailand can remain a country at all.” And I cannot but agree.
Quality comment or not?
0 
0
Without risking offending the higher authorities we can’t discuss locally, am I correct in thinking there’s a _________-sanctioned plan in Th to maintain an agriculturally based society? I was wondering if such a plan was in any way behind the large numbers of people still working the land or if the reasons why the country seems not serious about shifting people to cities/industry lie primarily elsewhere. The ongoing uptick in industrial output seems to contradict this idea, so I was curious if 1) there really was a concerted effort to keep people on the land, 2) if this effort was the reason gov officials are reportedly ‘astonished’ by the numbers of people leaving the land anyway (even while these numbers are substantially lower than they need to be on the way to a developed society) and 3) why, according to the supporters of such a plan, this isn’t tantamount to condemning a class of people to poverty.
Apologies in advance if this isn’t something allowable, but I’m asking more for information as this isn’t something I know much about.
Quality comment or not?
0 
0
Looking again I notice graph 1 shows GDP/worker figures in both categories rising to 1997 – the year of the crash and then eventually rising again as the economy recovers.
The percentage growth in the agricultural sector is much greater than the industrial sector to apparently 5 times what it was 20 years ago.
Does this mean anything? Let’s go back 200 years and a bit more before the industrial revolution. A visiting US lecturer at Payap University showed GDP figures from C18th where Germany and China had roughly the same per capita GDP. GDP’s which, in a fashion fed, housed and clothed the people of the countries concerned.
I would say that by and large Thais today and 20 years ago are better fed, housed and clothed than the Germans and Chinese of old. They own their own houses in the countryside and mostly have a TV, mobile phone & motor bike at least. What is more their children are not deprived of holiday amusement because the Red Shirts are blocking access to the malls, unlike the wretched children of Bangkok.
So I suggest this discussion about GDP per worker is about the extent to which we are part of the World economy of over production, waste and environmental destruction.
Being kept down on the farm means there is somebody to look after the land, if and when people decide that is desirable and that when the economies of the World tumble because the price of oil soars or we decide not to destroy all by burning fossil fuels, Thailand may be more resilient than most.
Remember the song “U ban nok … mai dong ha ngan…” ?
Quality comment or not?
0 
0