The dangers of decline
In 1960, GDP per capita in the Philippines was twice that of Thailand. (1) The Philippines was widely seen as among the top up and comers in the region. It was endowed with excellent natural resources and had among the highest literacy rates in Asia, ahead of Korea, Malaysia, and Thailand. (2)
By the end of 2012, GDP per capita in Thailand was twice that of the Philippines. During the 1980s and 1990s, the average growth rate in the Philippines was among the lowest in ASEAN, second only to Brunei.
Remittances grew from less than 2% in 1980 to over 10% in 2011. While the remittances have without a doubt been an important source of foreign exchange and income for the economy, the high level of remittances is also a symptom of a lack of opportunity in the Philippines which compelled workers to seek employment overseas. No one likes to leave their friends and family behind unless absolutely necessary.
It is not our intention to review the myriad causes for the underperformance of the Philippines.(3) But the differing trajectories of the Philippines and Thai economies give us several points worth considering regarding the dangers of decline.
Once you decline, it lasts quite a while. Decline isn’t a matter of just a few bad years. Decline reflects structural not cyclical problems. It manifests itself in a sustained, long-term sub-par growth rate. The divergence between Thailand and the Philippines really took place as recently as the mid-1980s. Thailand, along with other countries in the region, experienced an extended boom period during the 1980s when its growth averaged 7%, significantly higher than the 2% of the Philippines.
Once you decline, it doesn’t take that long to get left behind. GDP per capita in the Philippines in the 1960s exceeded those of Korea, Thailand, and China. But it has since been outpaced by all three. Even though both Korea and Thailand memorably and spectacularly crashed in the 1997 Asian crisis, the fact that the Philippines had missed out on such an extended growth spurt and had lagged behind for so long and so much meant that it was no longer able to catch up.
So is Thailand in decline? Is the 2010 decade going to be for Thailand what the 1980s were for the Philippines, an extended period of underperformance during which we gradually lose our position? The short answer is “it depends.” More precisely, it depends on us. On what we decide to do (or not to do!). There are already some worrisome and reasonably clear symptoms of decline. But if we are willing to honestly appraise, confront and deal with our problems rather than push them into the future then the decade could be a stellar one. But if we continue to do what is expedient in the present rather than what is needed for the future then we may look back upon 2010 as another “lost decade.”
(1) GDP per capita at constant 2005 USD
(2) UNESCO (1957), World Illiteracy at Mid-century ; a Statistical Study
(3) Nor is it our intention to single out the Philippines. There are numerous examples of countries with high expectations which underperformed from around the region, e.g., Myanmar and Sri Lanka.