Transcript Document

Positioning Thailand for Recovery:
Towards a ‘New Economy’
Plaza Athenee Hotel, Bangkok, 21 August 2009
Dr Stephen Spratt
Director of the Centre for the Future Economy
nef(the new economics foundation)
About nef
 An independent UK think-and-do-tank (founded
1986).
 Inspired by 3 principles
– Sustainable Development
– Social and economic Justice
– People’s Well-being
 Our strap-line ‘economics as if people and the
planet mattered’ encapsulates our approach well
 The Centre for the Future Economy focuses on
policy change to further these three objectives.
What is an economy for?
 To maximise ‘public benefit’
 Or ‘utility’ or ‘welfare’ (neoclassical and welfare
economics)
 Or ‘capabilities’ (Amartya Sen)
 Or ‘social value’ (nef)
 Or human ‘well being’ (many + nef)
What is ‘social value’?
“Every day our actions and activities create and destroy
value; they change the world around us. Although the
value we create goes far beyond what can be captured
in financial terms, this is, for the most part, the only type
of value that is measured and accounted for. As a result,
things that can be bought and sold take on a greater
significance and many important things get left out.
Social value measures all forms of value as understood
by different stakeholders: it capture what they value.
seeks to reduce inequality and environmental
degradation and improve well being by incorporating
social, environmental and economic costs and benefits.”
(nef, 2008)
What is ‘well being?
“The quality of people’s experience of their own
lives” (nef, 2008)
“A state of complete physical, mental and social
well-being, and not merely an absence of
disease or infirmity” (World Health Organisation,
1949)
What determines
public benefit (1): individual?
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Sufficient income to provide a good standard of living
Sufficient leisure time to enjoy this
Good physical and mental health
Access to education and knowledge
Ability to undertake meaningful and productive work
Reasonable relative status
Close family and community ties
Ability to participate in civic and political life at different
levels of society
Stability and security
Autonomy to determine and to pursue one’s goals
Access to the natural environment
What determines
public benefit (2): social?
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Countries with high inequality also have:
Lower life expectancy (and worse physical health
outcomes in general)
Greater mental health problems
More violence/crime (particularly homicide)
Higher rates of imprisonment
More teenage births
More drug use
More obesity
Less trust
Worse educational performance of schoolchildren
Less concern with the natural environment
What can the crisis tell us of how
we can achieve public benefit?
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The global financial system is far more volatile than had
been commonly supposed
International trade is inextricably linked to the financial
system, and so too more unstable than assumed
The system has become highly interdependent such
that ‘decoupling’ was largely an illusion
Growth is fragile when overly reliant on the international
financial and trading system
Economic and financial liberalisation and integration
into the global economy is not a ‘one-way’ bet that
guarantees national economic development
How are the other drivers
of public benefit affected?
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Integration increases competitive pressure, lengthening
working hours and stress
Increased uncertainty and the instability of global
financial markets and supply chains is negative for
people’s need for security
This is corrosive for family and community relationships
Previous financial crises - notably the Asian crisis have directly reduced incomes and increased poverty
in many developing and emerging economies
Inequality is increased in both booms and busts
Climate change and ecosystem pressure are a function
of the continuing focus on income growth in developed
economies and an unbalanced global system
But it is not making developed
country citizens any happier…
GDP and mean Life Satisfaction in the UK, 1973 - 2002
200%
180%
GDP
160%
Life Satisfaction
140%
120%
100%
80%
60%
40%
20%
0%
1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001
The post-crisis landscape will
be different in important ways
 Macroeconomic imbalances shift as surplus countries
boost domestic demand and debt-laden deficit
economies adopt a more austere approach.
 Highly indebted developed country consumers won’t
have the same level of demand for imports
 But domestic demand will increase in middle-income
countries, particularly the larger emerging markets.
 Higher rates of developed country savings may lead to
increased international capital flows to emerging and
developed economies, particularly in Asia
 Over the longer term, the impacts of climate change will
demand a serious response, which is likely to impact
upon many aspects of the global economy.
How is the Thai economy
positioned today?
 Strong financial sector: well capitalized banks, low NPL
ratios and lack of exposure to complex subprime related
derivatives.
 Robust external financial sector: low level of short-term
debt, good export growth record, ability to attract capital
flows, reserves at more than 8 months of imports.
 Robust external trade sector: good export growth,
diversification of products and markets.
 Despite this, GDP to contract by almost 3% in 2009.
 Exports fell 8.9% in the last quarter of 2008; the World
Bank had predicted export growth of 3.0% - and the fall
in exports is better than in most other Asian economies
 Tourism inflows down by a quarter in Q4O8-Q109
2 stage government response
1. Short-term stabilisation: transfer payments and
subsidies to poor; SME financing support; exporters
support; tourist sector support
- delivered through Sufficiency Funds, SME Bank, EXIM
Bank and other agencies
2. Medium-term support: large increase in public
investment infrastructure (transport and water)
• If the external environment will be very different, how
should the long-term strategy take account of this?
• What might a ‘new economy’ that seeks to maximise
public benefit as described, look like in this context?
The key features of a
‘new economy’…
Are easy to imagine and to describe. It would be one that:
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Generates sufficient income growth to eradicate poverty
as rapidly as possible
Distributes the proceeds of this growth as equally as
possible across the population
Creates the conditions where human well-being can
flourish and all have an equal opportunity to lead fulfilling
and meaningful lives
Achieves these outcomes in a way that is compatible with
long-term environmental sustainability and achieves a
lasting balance between these objectives.
But far from easy to achieve…
External refocus
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Over-reliance on the external sector creates
fragile development due to its instability
Lower demand in ‘big 3’ will induce change
Exports could be reoriented towards final
consumer in China, ASEAN and other emerging
markets
Requires more value-added production
Which requires better and more equally
distributed education and appropriate skills
A concerted investment in education and skill is a
‘win-win’ - it would also reduce inequality and
boost domestic demand
And internal integration
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For demand not to just suck in imports more production
for the domestic economy needed
Focus on supporting SMEs key, but could be
strengthened by linking to an ambitious education and
skills development strategy
Domestic supply could be strategically developed to meet
domestic demand, and to further develop the supply
chain for the export sector
The SME Bank is ideally placed to take the lead, building
a human capital development strategy along its strategic
support for SMEs at the local level.
But development for social value and human well
being is not only about growing economic activity…
And community-development
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Being able to actively participate in a vibrant community
builds social value and well being
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The autonomy to determine and pursue one’s own goals
is equally important
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The Sufficiency Funds established at village level are the
ideal institutions to combine these goals and to fund and
facilitate community-led investment that leads to equitable
and environmentally sustainable outcomes
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But can we measure, monitor and drive up ‘social
returns’ in the same way we do with financial
returns?
Building local ‘social value’
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The social return on investment (SROI) methodology
developed by nef measures social value from the
perspective of key stakeholders
Value is related to desired outcomes and a monetary
value is ascribed to this creating a social return ‘ratio’
SROI is about value not money, but monetisation creates
a common unit of account, allowing different options to be
compared for their ability to create social value.
It can be used to assess prospective projects before
(predictive) or afterwards (evaluative)
SROI is a powerful tool for developing and improving
interventions that maximise social value - crucially value
is based on what matters to people and communities
National well being
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Academics have studied the measurement of what is
often called ‘life satisfaction’ or ‘happiness’ since the early
1970s: every year since 1976, levels of happiness in
Europe have been measured.
It is only recently that the science of well-being has
developed to the point where rigorous, thorough
assessments of people’s well-being can be attempted
These separate out different aspects of well-being, and
that allow policy makers to begin to consider how their
policy areas impact on well-being as a whole.
In 2007, nef constructed the first National Accounts of
Well-Being use this data to explore the pattern of wellbeing in 22 European countries.
Interpreting the results
Personal
Denmark
Switzerland
Austria
Norway
Finland
Ireland
Sweden
Netherlands
Cyprus
Belgium
Germany
Spain
UK
Slovenia
France
Poland
Estonia
Portugal
Slovakia
Hungary
Bulgaria
Ukraine
5.96
5.80
5.61
5.61
5.52
5.50
5.45
5.33
5.30
5.16
5.14
5.12
5.07
5.04
4.97
4.79
4.71
4.52
4.50
4.41
4.30
4.30
Social
Denmark
Norway
Spain
Switzerland
Sweden
Ireland
Portugal
Netherlands
Finland
Austria
Hungary
Cyprus
Belgium
Bulgaria
UK
Estonia
Germany
Poland
France
Slovenia
Slovakia
Ukraine
5.89
5.77
5.58
5.52
5.44
5.37
5.31
5.30
5.26
5.13
5.10
4.93
4.92
4.91
4.90
4.90
4.88
4.83
4.80
4.78
4.64
4.61
 Measures can be generated
and analysed at each level of
the hierarchy
 This allows comparisons
between countries as well as
within countries (e.g. between
different age groups or income
groups).
 The table shows an example
of this, by looking at the ranked
scores of countries for the two
top-level indicators (personal
well-being and social wellbeing).
 Studying these patterns can
help policy makers identify
where to focus their efforts.
Conclusions
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Thailand is uniquely positioned to build a new economy that
meximises social value and human well being for five reasons:
The focus on balance has long been a feature of Thai culture
An interest in different forms of value beyond the straight financial
also has deep roots
The desire to live good and fulfilling lives that enhance well-being
at the local level is at the heart of the philosophy of Sufficiency
Economics as developed by His Majesty the King.
Also, Thailand has long been a country that is relatively open to the
world, ensuring that balance could be maintained between
domestic social and economic development and international
engagement
Finally, respect for the natural environment is a thread that runs
through Thai history and culture, creating the possibility of a truly
new economy, one which genuinely balances economic social and
environmental goals.