Rethink of growth policy needed to address inequality
A HIGH RANKING official from the Finance Ministry was quoted last week saying that despite the recent brighter overall outlook of the Thai economy, most benefits from the current recovery are still concentrated on just a few big cities. Moreover, those gains from a recent rise in export revenues are only coming from a few large enterprises, with very little increase coming from smaller firms.
These facts clearly make the point that Thailand needs to develop towards a more inclusive growth economy. The real challenge is to understand how growth can also work to bar less privileged people from accessing their fair share of Thailand 4.0’s development gains.
All around the world, inequality harms not only the most vulnerable in developing economies; an inequality gap is growing even in highly advanced economies. The Brexit outcome, the rise of American populism and the rise of AfD ultra-nationalists in Germany are recent, examples.
What, then, are the obvious flaws shared by these economies, regardless of their level of development?
The recent heated debate about rising inequality among advanced economies often lays blame at the foot of rapid advancement in modern information technology, computers, the Internet and mobile technology. These modern and often digital technologies assist the formation monopoly power among a few large world-class corporations. This monopoly power then gives rise to various forms of barriers to entry into a wide range of industrial and service sectors, ranging from finance and banking, health insurance and pharmaceutical industries, retail and wholesale trades and telecom and commercial services.
These barriers encourage increased market concentration and excessive profits enjoyed by those few large firms. As a result, inequality rises across both individuals and firms. This development path of non-inclusive growth cannot be sustained. It tends toward inefficient use of physical or/and human capital, and may give rise to social conflict and political turmoil as people are shut out of sharing in the fruits of growth.
Hence, the first major shift toward having a more inclusive process of economic and social policy formation in today’s Thailand is to ask that business, labour unions, academia and |all political parties directly engage in insightful analysis and debate of the Thailand 4.0 initiative. |This full engagement by all major social players would be a good starting point for building a |social consensus about where |we are heading and, at the |same time, removing political gridlock.
Next, government and other related public organisations should be more publicly concerned about the increasing trend toward market concentration among many major industries and economic sectors. We need to place an appropriate and timely priority on the need to design new institutions, fiscal policies and related regulations to ensure a sufficient degree of market competition.
Professor ARAYAH PREECHAMETTA, is a lecturer in the Faculty of Economics, Thammasat University.
