'Trust needed for long-term growth'

The paper titled “Culture, Institutions and Long-run Growth” is one of six to be presented at an annual BOT Symposium on September 19 and 20.

In theory, long-term growth can be supported by proximate causes (labour, capital and technology) and fundamental causes (geographical and cultural backgrounds and institutions that participate in collective action). Geographical differentiation is the most important fundamental cause, as this determines weather conditions as well as logistics costs. But cultural conditions and political institutions play a more vital role in reaping the best benefits from the geographical condition, the paper suggests.

The paper says cultural conditions can promote cooperation from the general public and lead to trust. Cooperation will then enhance the efficiency in the governance of public organisations. Trust will pave the way for inclusive political institutions, ensuring equal treatment for all. Trust will give birth to good institutions and good institutions will bolster trust. This supports long-term growth.

However, a study shows an absence of correlation between trust and sound institutions in Thai society. 

Provinces with high economic growth boast strong institutions but low trust, while provinces with slow growth have weak institutions but high trust. As the high level of trust in some provinces cannot strengthen the quality of their institutions and cannot lead to collective action, this could be an obstacle for long-term growth, the paper says.  

Individual efforts will then alone drive long-term growth, though collective actions could pave the way for a more solid development.

Thailand, which is striving to escape the middle-income trap, is thus ranked in the middle in terms of public trust and political institutions, reflected in the perception of corruption as well as medium-level per capita income.