The Non-Farm Rate of Profit and the Thai Economic Development: 1970-2010

(ProQuest: ... denotes formulae omitted.)1. IntroductionThe year 1971 could be marked as the year of Thailand's first step to the process of industrialization, since it was the year in which the third five-year National Economic and Social Development plan encouraging diversifications of domestic production was officially issued. One of the early apparent consequences of the plan was that the Thai economy, which used to be an agrarian economy, had intensive diversifications of domestic production, and so the industrial sector led by laborintensive industries, such as textile and garment industries, was rapidly developed (Doner 2009, 102). Due to increasing demand for labor, self-employed farmers migrated from villages to become workers in the city. In the middle of the 1980s, after the devaluation of Thai baht, which raised Thai industries' competitiveness of exports, the export-oriented strategy was fully implemented and exports became a main engine of economic growth (Akarasanee, Dapice, and Flatters 1991). The Thai economy then grew rapidly, and Thailand became the fifth Asian Tiger as a consequence of its economic miracle (Muscat 1994). Shortly after that, abrupt outflows of foreign capital, preceded by a loss of export competitiveness, turned the prosperity into a slump. Massive outflows of foreign capital led to a run on the foreign reserves of the Bank of Thailand due to its attempt to fix the value of the Thai baht to the US dollar. The decision to switch from the fixed to the flexible exchange rate system caused a collapse of the baht's value, and a severe balance of payments crisis erupted. The worst economic crisis hit the country in July of 1997, leading to the -11% economic growth rate in 1998. In spite of suffering from the crisis due to economic openness, the country has never shunted away from economic liberalism, but, instead, economic policies under the guideline of neoliberalism were installed with a higher degree of openness (Hewison 2003). For this, the restructuring process, as intended by the International Monetary Fund (IMF), the World Bank, and the Thai government, was to enhance intense economic competition via free markets in global capitalism (Hewison 2001). However, economic growth has never reached its peak rate prior to the crisis. In fact, the global crisis in 2009, leading to a negative economic growth rate, signaled that Thailand, as being more exposed to the world economy, still has to struggle in the fragile world of capitalism.For all studies of the Thai economic development, besides the real growth rate of gross domestic product (GDP), it is rare to see other alternative indicators evaluating economic performances of Thailand. In Marxian economics, the rate of profit is a key variable determining the health of an economy, technological changes, pace of capital accumulation, and income distribution (Dumenil and Levy 1993). Since industrialization has been an engine for modernization and economic prosperity in Thailand after 1970 and the proportion of farm profits out of total profits have been quite small (see section 3 for detailed discussion), the non-farm rate of profit is an appropriate variable to understand the different phases of economic development in Thailand. This article, hence, aims at measuring the non-farm rate of profit in Thailand from 1970 to 2010 and emphasizing the role of the non-farm rate of profit on the Thai economic development.Heretofore, Glassman (2001; 2004, 174-88) is the only author who has ever measured the rate of profit in Thailand; his goal is to tell an alternative story of the crisis in 1997 by using the rate of profit and its determinants. However, perhaps due to the unavailability of the data for the net fixed capital stock, Glassman had to estimate his series of net fixed capital stock. In this article, I can take advantage from the current availability of the data of the net fixed capital stock provided by the National Economic and Social Development Board (NESDB) in order to obtain a better estimate of the non-farm profit rate in Thailand from 1970 to 2010. …