How did we get here? A 20-year retrospective (continued)
Governance: the critical missing piece
In the short-run, how the economy does is largely a function of demand. This is where we—governments, private sector, academics, media—have spent the vast majority of our attention. The policy debate quickly gets bogged down around the usual nonsense: what policies should we use to stimulate demand and the economy: lower interest rates, quick disbursing spending, easy credit schemes?
We pay much, much less attention to supply. But we cannot consume our way to prosperity. What matters for our standard of living in the long run is our productivity. This depends on our investment in physical, human, and technological capital. But the quantity and quality of this investment ultimately depends on broader issues of governance. As a speaker at one of our recent seminars on innovation memorably noted, why would people invest in R&D when the return on investing in corruption is higher and less risky?
The World Bank Governance Indicators are composite indicators based on 31 data sources grouped into6 aggregate indicators: voice and accountability; political stability; government effectiveness; regulatory quality; rule of law; and control of corruption. Thailand’s ranking has dropped across all 6 areas, with declines particularly marked in the areas of control of corruption, voice and accountability, and political stability. We discuss each area in turn with reference to other data sources and indicators.
On corruption, we rank 88th out of 176 countries in the Corruption Perception Index and in the bottom 44th percentile for control of corruption in the World Bank Governance Indicators. Despite the huge amount of newspaper column inches devoted to stories about corruption, successful high-level prosecutions are few and far between. Accountability is limited.
On voice, voter turnout in general elections has steadily increased, from 60% 1992 to 75% in 2011 (23) . Encouragingly, people are more engaged. Hopefully, they will also be more informed by a freer and fairer press. Freedom house, an organization that conducts research and advocacy on democracy, political freedom, and human rights, generally gave Thailand reasonable marks for freedom of the press (rated either “free” or partly free”) between 1995-2005, but have rated it “not free” in recent years.
On political stability, national politics in Thailand has been in the spotlight for quite some time. But the security problems in the South have tended to be underreported, especially by the international media, even though Thailand ranked 8th in Global Terrorism Index which combines factors such as number of bombs, injured & dead persons and losses in properties. (24)
Because we tend to think of political stability in terms of whether the government changes or not, we often do not pay sufficient attention to the lack of stability at the ministerial and civil servant level. Even without any change in government, we have had 4 ministers of education over the space of just 2 years. The average tenure for a cabinet minister currently stands at only 11 months and governors among our 20 largest provinces only 17 months.
(23) Office of the Election Commission of Thailand
(24) Global Terrorism Index, Institute for Economics and Peace