The Political Economy of Productivity : Thai Agricultural Development, 1880-1975 [1 ed.] 9780774857765, 9780774801393

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THE POLITICAL ECONOMY OF PRODUCTIVITY

University of British Columbia Press Asian Studies Monographs The Political Economy of Productivity: Thai Agricultural Development, 1880-1975 is the third volume in a continuing series of studies in Asian history and society published by the University of British Columbia Press. Other volumes in the series are: 1. China's Intellectual Dilemma: Politics and University Enrolment, 1949-1978, by Robert Taylor. 2. Agrarian Class Conflict: The Political Mobilization of Agricultural Labourers in Kuttanad, South India, by Joseph Tharamangalam.

THE POLITICAL ECONOMY OF PRODUCTIVITY THAI AGRICULTURAL DEVELOPMENT, 1880-1975

David Feeny

UNIVERSITY OF BRITISH COLUMBIA PRESS VANCOUVER AND LONDON

THE POLITICAL ECONOMY OF PRODUCTIVITY Thai Agricultural Development, 1880-1975

© The University of British Columbia 1982 All rights reserved

This book has been published with the help of a grant from the Social Science Federation of Canada, using funds provided by the Social Sciences and Humanities Research Council of Canada. Canadian Cataloguing in Publication Data Feeny, David, 1948The political economy of productivity (Asian studies monographs; 3) 'An extensively revised version of a doctoral thesis submitted to the Department of Economics at the University of Wisconsin-Madison." Includes index. Bibliography: p. ISBN 0-7748-0139-5 1. Thailand — Economic conditions. 2. Agriculture — Economic aspects — Thailand — History. I. Title. II. Series. HC445.F43

330.9593

C81-091364-X

INTERNATIONAL STANDARD BOOK NUMBER 0-7748-0139-5 Printed in Canada

Contents

List of Tables

vi

Acknowledgements

x

1

1

Introduction

2 A Theory of Technical and Institutional Change

6

3 Economic Change in Thailand, 1880 to 1940

12

4 The Technology of Rice Production, 1880 to 1940

35

5

Institutional Change: Irrigation Policy

59

6

From Property Rights in Man to Property Rights in Land

85

7 Technical and Institutional Change in Thai Agriculture, 1880 to 1940 8

Post-World War II Thai Agricultural Development

99

108

Appendix 1 Economic Data

127

Appendix 2 A General Equilibrium Model with Two Goods and Three Factors

162

Appendix 3 Explanations of the Yield Decline in the Central Plain, 1920-21 to 1941

171

Notes

179

Selected Bibliography

195

Index

235

Tables

3-1

Indices of Rice Exports in Tons, Export Price, and Value, for Selected Years 3-2 Percentage of Total Exports Accounted for by Four Commodities 3-3 Indices of Total Value of Imports and Exports 3-4 Price Indices of Rice Exports, White Shirting Imports, Grey Shirting Imports, Exports, and Imports 3-5 Index of the Nominal Value of Cotton Manufactures Imports 3-6 Index of the Terms of Trade: Ratio of Rice Export Price to the Import Prices of White and Grey Shirting 3-7 Annual Rates of Change in the Terms of Trade for Various Sub-Periods 3-8 Nominal Daily Wages for Unskilled Workers in Bangkok and Three Indices of Real Wages 3-9 Average Annual Per Cent Rates of Change in Various Real Wage Series 3-10 Indices of Nominal and Real Land Prices 3-11 Total Population, Percentage Chinese, and Indices of Total Population 3-12 Population Growth Rates 3-13 Indices of Paddy Area, Output, and Yields for the Whole Kingdom, 1905-6 to 1941 3-14 Growth Rates of Paddy Area, Paddy Output, and Population, 1905 to 1941 3-15 Indices of the Number of Buffalo and the Export Price of Buffalo and Bullocks, 1896 to 1941 3-16 Predicted Impact of Changing Factor Endowments and Relative Output Prices on Relative Factor Prices and Outputs 3-17 Per Capita Rice Production and Exports in Kilograms, 1857 to 1960 3-18 Various Indicators Relating to Changes in the Standard of Living, 1860 to 1941 3-19 Annual Average Per Cent Rate of Change in Various Indicators of Thai Economic Performance, 1850 to 1950 ... 4-1 Fertilizer Imports, 1937-38 to 1941

13 14 14 15 16 17 17 18 19 20 21 22 23 24

26 27 30

31 32-33 40

List of Tables

1948 Farm Cost of Farm Implements in Baht and as a Percentage of the Value of Annual Paddy Output of the Average Bang Chan Farm 4-3 Land-Man Ratio, Whole Kingdom, 1905-6 to 1941 4_4 Average Annual Per Cent Rates of Change in the Paddy Area per Person and Major Crop Area per Person, Whole Kingdom, 1905-6 to 1941 4-5 Indices of Paddy Area, Yield, Paddy Output, and Buffalo Stock in Central Thailand, 1911-12 to 1941 4-6 Average Annual Per Cent Rates of Change in Population, Paddy Area, Paddy Output, Paddy Yields, and Buffalo Stock in Central Thailand, 1911-12 to 1941 5-1 Water Conditions in the Central Plain, 1831 to 1948 5-2 Estimates and Observations of the Wet Season Yield Increasing Effects of Irrigation for Paddy in Thailand 5-3 Observations of the Share of Total Labour Requirements Represented by Harvest Operations 5-4 Central Plain Paddy Yields, Damaged Area, and the Level of the Flood at Ayuthia, 1907-8 to 1941 5-5 Various Interest and Profit Rates, 1855 to 1950 5-6 Counterfactual Ex Post Benefit-Cost Estimates for Irrigation 5-7 Alternate Ex Post Benefit-Cost Estimates for Irrigation 5-8 Rates of Return on Irrigation Projects as Estimate in Project Proposals and Other Indicators 5-9 Ex Ante Benefit-Cost Estimates for Irrigation 5-10 Alternate Ex Ante Benefit-Cost Estimates for Irrigation 5-11 Public Investments in Railways and Irrigation, 1892-93 to 1941 5-12 Rate of Return on Investments in Railroads, 1897-98 to 1938-39 5-13 Ex Post Rate of Return Estimates for the Railroad 6-1 Nominal Wages, Real Wages, Nominal Land Prices, and Real Land Prices, 1864 to 1950 6-2 Real Land Prices and Rents and Index of Real Land Prices for Central Plain Paddy Land, 1864 to 1915 6-3 Number of Days of Labour Required to Earn Enough to Purchase One Rai of Central Plain Paddy Land, 1889 to 1941 6-4 Number of Holdings Cadastrally Surveyed and Number of Title Deeds on File, 1901-2 to 1941 7-1 Effects of Better Rice Varieties and Irrigation on Central Plain Paddy Yields

vii

4-2

41 45 46 47 47 60 65 66 68-69 70-71 72 73 74 75 76 78

78 79 88 89

91-92 96 102

viii

8-1 Al-1 A1-2 A1-3 A1-4 A1-5 A1-6 A1-7 A1-8 A1-9 A1-10 Al-11 A1-12 Al-13 Al-14 Al-15 A1-16 Al-17 Al-18 A1-19 A1-20

List of Tables

Paddy Area Harvested, Damaged Area, Production, and 109 Yield, 1942 to 1975 127-29 Quantity, Price, and Value of Rice Exports, 1857 to 194 Total Value of Imports, Exports, and Trade Surplus for Selected Years, 1850 to 1940 129 Nominal Value and Index of Value of Cotton Goods Imports, 1859 to 1940, and Import Prices and Indices for White and Grey Shirting, 1865 to 1940 130 Indices of the Terms of Trade, 1865-67 to 1940, Ratio of Rice Export to Import Price of White and Grey Shirting 131 Nominal Urban Unskilled and Rural Wages, 1820 to 1950 132-33 Three Real Wage Indices for Bangkok Dock Workers, 1850 to 1950 134 Nominal Land Prices and Rents, 1889 to 1948 135-37 Nominal Value of Paddy Land Mortgaged per Hectare and Index of the Nominal Value, .1915 to 1941 137 Whole Kingdom Paddy Area Planted, Major Crop Area Planted, and Per Cent of Paddy Area Planted that was Harvested, 1905-6 to 1941 138 Index of Paddy and Major Crop Area Planted, Whole Kingdom, 1905-6 to 1941 139 Whole Kingdom Paddy Output, Index of Paddy Output, Paddy Yields and Index of Paddy Yields, 1906-7 to 1941 140 Central Plain Paddy and Major Crop Area, Paddy Output, Yields, and Per Cent Area Harvested, 1911-12 to 1941 141 Indices of Central Plain Major Crop Area, Paddy Area, Paddy Yield, and Paddy Output, 1911-12 to 1941 142 Observations on Paddy Yields in kg/ha, 1892 to 1952 143-44 Observations on the Number of Rai per Holding or Family Farm in the Central Plain, 1884 to 1949 145-46 Comparisons of Various Population and Population Growth Rate Estimates, 1911 to 1970 147 Various Estimates of Crude Mortality and Fertility, 1910-11 to 1956 148 Various Estimates and Observations on the Annual Per Capita Consumption of Rice, 1855 to 1968 149-50 Various Observations and Estimates of the Use of Paddy Seed, 1909 to 1968 150 Rice Balance Sheet Paddy Crop Estimates in Metric Tons and as a Percentage of Official Production Estimates, 1902 to 1940 151-52

List of Tables

A1-21 Number of Buffalo and Bullocks, Whole Kingdom and Central Plain, 1917-18 to 1940 A1-22 Indices of the Number of Buffalo and Bullocks, Whole Kingdom and Central Plain, 1917-18 to 1940 A1-23 Nominal Buffalo Export Prices and Indices of Nominal and Real Buffalo Export Prices, 1896-97 to 1941 A1-24 Observations on Annual Rainfall in Bangkok, 1845 to 1955 . A1-25 Summary of Bangkok Rainfall Data, 1845 to 1955 A1-26 Various Estimates of the Population of Bangkok, 1840 to 1960, and Estimates of the Rural Population, 1857 to 1960 . A1-27 Household Income and Expenditure for Rural Families, 1930-31 to 1934-35 A1-28 Export Price, Import Price, and Terms of Trade Indices, 1900 to 1941 A1-29 Various Indicators of the Degree of Tenancy A2-1 Selected Ratios of Upcountry Paddy to Bangkok Rice Export Prices, 1888 to 1965 A2-2 Ratio of Village to Bangkok Price of Paddy, 1929 to 1930 .. A2-3 Impact of Changing Factor Endowments on Relative Factor Prices and Output A3-1 Trends in Paddy Area Harvested, 1920-21 to 1941 A3-2 High Estimates of the Effects of a Decrease in Land Quality on Central Plain Yields, 1920-21 to 1941 A3-3 Area, Output, and Yields by Monthon as a Percentage of the Total Central Plain Area, Output, and Yield, 1911-12 to 1941 A3-4 Hypothetical Central Plain Yield Based on Trends in Land Grading, 1905-6 to 1938-39 A3-5 Hypothetical Whole Kingdom Paddy Yield Based on Trends in Land Grading, 1905-6 to 1938-39

ix

153 154 155-56 156-57 157 158 159 160-61 161 165-66 166-67 170 174 175 175-76 176 177

Acknowledgements

This book is an extensively revised version of a doctoral thesis submitted to the Department of Economics at the University of Wisconsin-Madison. The staffs of the National Archives, National Library, Ministry of Finance Archives, Royal Irrigation Department Library, Kasetsart University Library, Thammasat University libraries, and the Siam Society Library in Bangkok all co-operated in making the research involved in this monograph possible and their help is deeply appreciated. Financial support in Bangkok was provided by the Fulbright-Hays Doctoral Dissertation Abroad Fellowship Program. I would like to acknowledge the help of my adviser, Peter H. Lindert, and other committee members, Jeffrey G. Williamson and Robert E. Baldwin. Ammar Siamwalla, Ralph Andreano, William Lee Baldwin. Nathan Rosenberg, Laurence D. Stifel, and Delane Welsch contributed to the research on the dissertation. Syed Ahmad, Trent Bertrand, Heath B. Chamberlain, Carmel Chiswick, Edward Fallon, Peter George, Yujiro Hayami, Jeffrey Race, George Rosen and Vernon W. Ruttan have read and commented upon parts of the manuscript. Peter Bell, Carmel Chiswick, Randall A. Hoffman, Oey Meesook, Dan Usher, Delane Welsch, and Pan A. Yotopoulos all co-operated by making materials available to the author. Finally, I am grateful to the Academic Press for granting the permission to reproduce parts of Chapter 5 and to the University of Ottawa Press for allowing me to reproduce parts of Chapter 8. Responsibility for errors remains with the author. The bulk of the typing duties were performed by Debbie Sanche and Rosalie Goodwin.

1

Introduction

The economic history of Thailand between the opening of trade in the 1850's and World War II offers a unique precedent to the postwar development experiences of Third World countries. The study of the economic history of an underdeveloped country can both enhance our understanding of economic history in institutional and technological settings that have not been frequently studied and increase our appreciation of the development process. Many economic history and development studies have concentrated upon explaining why certain countries have been successful in generating increases in productivity and per capita income. This study will instead examine a case in which an economy was not successful in its development. The Thai case is particularly interesting for several reasons. First, the Thai economy became integrated into the world economy during the period studied and underwent rapid commercialization and increasing specialization in rice exporting. Second, the major export, rice, was also the traditional subsistence crop. Third, although threatened by colonial powers, Thailand never became a colony. As a result, the interaction between the introduction of international trade and specialization and an indigenous political economic system can be more effectively examined in the Thai case than in the colonial primary product cases frequently investigated. THE ECONOMICS OF THAI

UNDERDEVELOPMENT

The broad issue that motivates this study is an explanation of underdevelopment. In the Thai case, the economy responded vigorously to the opportunities

2

The Policitical Economy of Productivity

which international trade created. In the period from 1857 to 1941 rice exports in metric tons increased more than twentyfold, and Thailand became a major rice exporter. Yet living standards advanced very little. Why did this considerable expansion in trade not lead to more impressive growth? In attempting to find the answer to this question several basic approaches suggest themselves. First, the relationships between trade and development may be examined. Second, a model of technical and institutional change may be employed to explain the magnitude and direction of technical change and its contribution to increased productivity. The role of institutional change in the development process will also be included. While each of these approaches will be considered, the emphasis will be on the development and application of an induced model of development. An analysis of Thai underdevelopment within these frameworks will contribute to an understanding of the interaction between trade, factor endowments, technical change, institutional change, and economic growth. THAILAND: isso TO 1975 Like many Asian countries during this period, Thailand was confronted by a colonial threat from the Western industrialized countries. This threat and the Thai response to it helped to shape many of the events which occurred. However, while an imperialist environment served to set the stage, most of the important actors in the play were Thai and they operated within their own indigenous system which created another set of constraints and opportunities. It would be difficult to understand the events of the period without reference to domestic political conditions and issues. Starting in the mid-nineteenth century Thai leaders (in particular King Mongkut and his son, King Chulalongkorn) became increasingly aware of the seriousness of the Western threat and sought to alter their system in order to deal successfully with it. The British victories in China and colonization of India, Burma, Singapore, and Malaya served to focus the attention of the Thai government on the problem of maintaining independence.1 French gains in Vietnam, Cambodia, and Laos provided an even more direct threat. With independence as their primary goal, Thai monarchs pursued policies designed to increase the power of the monarch relative to the rest of the government (see Neon and Kasem [1968] and Engel [1978]) just as many vigorous and successful Thai kings had throughout Thai history. The monarchs used their power to enhance their own political position and bring about reforms designed to maintain independence: the government became more centralized and local officials were increasingly brought under Bangkok's control; Bangkok officials were brought into a civil service which better responded to the policies of the King;

Introduction

3

legal and other reforms were made in order to bring Thailand into line with the prevailing Western systems of the period and thus enhance Thailand's status with the Western powers. Yet, while the Bangkok government increasingly extended its control into provincial and local affairs, relationships between the monarch and the nobles and bureaucracy underwent significant changes. This trend culminated in the 1932 coup and overthrow of the absolute monarch. Since that time most Thai regimes have been dominated by the military with occasional elections and democratic parliamentary experiments (see Wilson [1962]). Wars in Indochina and indigenous insurgency movements have continued to pose security problems for Bangkok regimes.

ECONOMIC CHANGE IN THAILAND*. 1850 TO 1975

Since colonial powers were interested in trade, Thailand was opened to essentially free trade by the Bowring Treaty of 1855.2 In the years that followed, Thailand specialized in the export of rice, teak, tin, and rubber while it imported textiles, medicines, petroleum products, gunny sacks, manufactured items, and capital goods. These imports served to displace domestic handicraft production, especially in the more heavily commercialized Central Plain. Thailand ran trade balance surpluses, accumulated reserves, maintained an excellent credit rating with little foreign debt, and in 1902 adopted the gold exchange standard.3 Conservative monetary and fiscal policies were pursued with budget surpluses in most years.4 Despite a dynamic response to the opening up of foreign trade and the opportunities which the expansion in world trade afforded during this period, Thailand did not generate large increases in per capita income or productivity. In fact, the expansion of rice cultivation and export was accompanied by a decline in total factor productivity in agriculture in the period from 1920-21 to 1940. Ingram has summarized the results of economic change in the period in the following way: Economic changes were in volume rather than in kind . . . . In the course of this study we have seen many changes in the economy of Thailand in the last hundred years, but not much "progress" in the sense of an increase in the per capita income, and not much "development" in the sense of the utilization of more capital, relative to labor, and of new techniques. The principal changes have been the spread of the use of money, increased specialization and exchange based chiefly on world markets, and the growth of a racial division of labor (1971, pp. 216-17). This study is devoted to explaining the reason why economic change was more a change "in volume rather than in kind."

4

The Political Economy of Productivity

Economic change in post-World War II Thailand has included a diversification of agricultural exports, significant growth in irrigation and highway infrastructure, and development of manufacturing sector based in part on import substitution. As in earlier periods, the expansion of the area under cultivation has played an important role in increasing output. However, unlike the earlier period, Thailand has received foreign loans and assistance in her development efforts.

OUTLINE OF THE STUDY

Chapter 2 develops an induced model of development which explicitly incorporates the supplies of and demands for technical and institutional change. The relationship between trade, development, technical change, and institutional change is also examined. This analysis develops a model in which technical and institutional change are treated endogenously. Chapter 3 establishes the quantitative record of Thai economic history. In particular it documents the time-path of trade flows, rice production, relative output and input prices, population, and productivity trends. The historic changes in these key indicators are interpreted with the help of a general-equilibrium trade model. The fourth chapter examines climate, the technology of rice production, and changes in that technology which occurred during the period. The reasons for the decline in productivity in rice production are examined in detail. Remedies for the decline in productivity and the decisions of the government not to provide these remedies are both discussed. Most of the important technological advances in rice production available during this period demanded water control as a complement. Thus irrigation investment, which is the focus of Chapter 5, is a very important issue. The costs and benefits of an irrigation system that was proposed in 1902 but not constructed are examined. The estimated rates of return are compared to the actual rates earned by the railroads. Since the rate of return on irrigation when estimated ex post or ex ante would have far exceeded that earned by the railroad, the policies of the government are then analyzed in order to explain why the government invested in railroads but not irrigation. The sixth chapter analyzes the relatively rapid change in the Thai property rights system from one in which human property rights played the primary role into one in which land property rights became more important. This institutional change, like the irrigation decision, is examined within the framework developed in Chapter 2. Chapter 7 draws conclusions on economic change from 1880 to 1950 which highlight the importance of understanding the role of the supply of institutional change, in particular the political economic factors which affect that supply. It is argued that even within the constraints that the imperialist environment imposed on Thailand, the Thai government could have acted more successfully to increase

Introduction

5

agricultural productivity and real income per capita. The problem was that in a number of significant cases, actions which would have benefited the society as a whole would not have also benefited the elite, who were the only ones who could have taken those actions. Thai underdevelopment persisted because the government was not able to make productivity-increasing investments. Two divergences account for those decisions: a divergence between the goals of economic development and national security, and a divergence between the interests of the elite and the interests of the society as a whole. Finally, Chapter 8 briefly examines the post-World War II period and argues that these two divergences continue to retard Thai agricultural development. Policy recommendations based on this analysis are then suggested, and the relevance of the Thai experience for other less developed countries is discussed.

2 A Theory of Technical and Institutional Change

In recent years scholars interested in the process of economic growth and development in both its contemporary and historical dimensions in both developed and underdeveloped nations have increasingly focused their attention on the behaviour of technical and institutional change. Various studies have pointed to the importance of technological change in economic growth; the work of Solow, Griliches, Habakkuk, Temin, Rosenberg, and Schmookler provide examples.1

A SUPPLY AND DEMAND MODEL OF TECHNOLOGICAL CHANGE

The approach followed in the development of the technical change model here is patterned after that taken by Rosenberg, who has analyzed technical change within a supply and demand framework. He looks at inventive activity in the same way that economists generally approach any other economic activity: Inventive activity may be visualized as a pursuit which receives its changing direction over time from the changing perceptions of future profits (profit expectations) which are attached to the solution of specific technical problems. Since the activity is rooted in the perception of future profit possibilities, it will be influenced by any forces which (1) alter the revenue flows which the use of the invention is expected to generate or which, (2) alter the expected cost of making the invention (19720, pp. 37-39). The demand for an innovation is a function of its profitability in use. Following Hicks (1963) and Hayami and Ruttan (1971), the trends in relative factor returns are

A Theory of Technical and Institutional Change

7

the main force in determining the demand for innovations.2 Just as a change in relative factor prices in a static framework will induce the substitution of one factor for another, it will also stimulate the development of a new technology which will permit the substitution of cheap (abundant) factors for expensive (scarce) ones.3 The demand for an innovation is also affected by all the factors that affect the demand for the final product with which it is associated.4 The size of population, its age composition, tastes, total income, and the income distribution which affect product demand and its composition, will therefore affect the demand for innovation.5 Schmookler found evidence indicating that innovation in the railroad industry followed the trends in gross capital formation in railroads.6 His results point to the importance of demand factors in determining the direction of the search for new technologies. In general, trends in relative factor and product prices will determine the direction of the changes in the demands for technical change. The supply of technical change will depend upon the expected profits to be made from supplying the innovation. Those profits will depend on the size of the market for the innovation and the costs of innovation. Those costs will in turn depend upon the factor returns for the factors used in innovating, the stock of knowledge possessed by the society, the production function for innovation, and information costs. The stock of knowledge will in part be determined by the production, consumption, investment, and trade experience of the society.7 Institutional arrangements have an impact on information costs, property rights in innovation and information, the stock of knowledge and extent of socialized research facilities, and factor returns for the factors used in innovating.8 The supply and demand for technical change interact in dynamic sequences. A disequilibrium in the system, perhaps caused by a change in relative factor prices, gains the attention of innovators; an innovation creates a new "equilibrium" which may in turn create new imbalances which call for futher innovations.9 A SUPPLY AND DEMAND MODEL OF INSTITUTIONAL CHANGE

Institutional change may be analyzed using an analogous supply and demand framework. This approach extends the induced institutional change models of Hayami and Ruttan, North and Thomas, and Davis and North.10 North and Thomas outline an induced theory of institutional change in this way: As in the more familiar case of the introduction of a new product or process, economic institutions are innovated because it appears profitable for individuals or groups in society to undertake the costs of bringing about such changes. The purpose is to capture for the innovator some profits unattainable under the old arrangements. The essential requirement for initiating an institution (or a product) is that the discounted expected gains exceed the expected costs of the undertaking (1970, p. 5).

8

The Political Economy of Productivity

North and Thomas (1970) and Davis and North (1970) indicate that the achievement of economies of scale, reduction of risk or transactions costs, or the handling of externalities and market failure have been (in the context of Western European and American development) the common sources of potential benefits that created the incentives for institutional changes. Among the exogenous factors which have frequently varied, thus creating a disequilibrium that induced institutional change, are long-run changes in relative product and factor prices, changes in the size of markets, and changes in the decision rules of government (North and Thomas [1970], p. 9). Davis and North define the institutional environment as "a set of fundamental political, social, and legal ground rules that govern economic and political activity" (1970, p. 133). Institutional arrangements govern the relations and interactions between economic units. The North and Thomas and Davis and North models are basically demandinduced models of institutional change that postulate that once a change in potential profits occurs, a change in institutions will follow, though not always immediately. They also often view institutional change as the result of voluntary agreement, assuming that the changes are socially beneficial. This approach for the most part neglects the monopoly positions held by the elite whereby it is possible that some changes in institutions which occur may be privately beneficial to the elite even if they are not socially beneficial. The work of Hayami and Ruttan (1971) also focuses on the demand-induced nature of technical and institutional change." They believe that the common element among successful cases of agricultural development is the ability to "generate an ecologically adapted and economically viable agricultural technology in each country or development region" (1971, p. 4). Hayami and Ruttan concentrate on the role of public and private research institutions, factor and product markets, and the linkages between farmers and researchers in inducing innovations which are defined to include "the entire range of processes resulting in the emergence of novelty in science, technology, industrial management, and economic organization" (ibid., p. 54). The supply and demand model of institutional change developed here draws on the seminal works of North and Thomas, Davis and North, and Hayami and Ruttan. Just as Rosenberg treated the role of the supply of technological change explicitly, this approach highlights the role of the supply of institutional change and in particular the political economic factors which affect that supply.12 The demand for institutional change will be determined by the trends in relative factor and product prices, changes in technology, attempts to handle externalities and market failure, and attempts to reduce risk and transactions costs or to achieve economies of scale.13 The supply of institutional change will depend upon the fundamental institutions which govern political decision making, income distribution, and the distribution of power within a society. Institutional changes will be made when they are profitable to those making the change. Thus, returns to the

A Theory of Technical and Institutional Change

9

innovator will affect the supply of change, as will the cost of such change. That cost will in part be determined by the factor returns to those factors used in innovating and the stock of knowledge. The stock of knowledge includes the knowledge possessed by a society on the design and operation of institutions and, like the stock of technical knowledge, is affected by experience. Thus, the institutions which govern social research on institutions and institutional arrangements will have an impact. While the demand for institutional change will respond to changes in the potential profits for economic units (such as farm producers) associated with some change in institutions or policy, the supply will respond to changes in the potential profits for the elite decision-makers. This difference represents a potential source of a divergence in the expected rate of return on a change for the economic units and the elite; in the Thai case this divergence was, in fact, quite important. As in the case of technical change, the supply and demand for institutional change will interact in dynamic sequences.14 Before proceeding with a brief discussion of the trade and development model approach to underdevelopment, some points on the economics of research which are incorporated in the supply and demand model should be highlighted.

THE ECONOMICS OF RESEARCH

For a number of reasons, research and development expenditures may need to be socially supported. Arrow (1962a) has argued that the production of knowledge is risky and that, since there are imperfect means for shifting risk, a free-enterprise economy may be expected to under-invest in invention and research.15 Because of property rights in any information which is produced, that information (when a price is charged for its use) will be under-utilized with respect to the optimal situation where information is available at the marginal cost of its transmission. Arrow's theory of learning-by-doing provides further justification for socially supported research. Arrow suggests that "learning is the product of experience" (19620, p. 155) and that learning associated with the same problem is subject to sharply diminishing returns. He therefore chooses cumulative gross investment as a suitable proxy for experience and shows that since the private rate of return (which determines the amount of investment) does not fully reflect the learning effect by which productivity increases with experience, there will be a divergence between the private and social rates of return. Subsidization of the acquisition of experience provides a possible solution to this divergence. In fact societies have devised a number of institutions (such as education and social research facilities) to speed the accumulation of experience (ibid., p. 172). While Arrow concentrates on investment as a proxy for the acquisition of experience, production, consumption, and trade also contribute to learning-by-doing and thus the stock of knowl-

10

The Political Economy of Productivity

edge possessed by a society which may contribute to its ability to generate technical and institutional innovations.l6 In the case of innovations for agricultural development, the role of socialized technical and institutional research facilities is particularly important. The small scale of farm operations and difficulty in appropriating the benefits of innovation help to justify public support for research on agriculture. A number of case studies have in fact indicated relatively high rates of return on agricultural research.17 The supply and demand model of technical and institutional change will be applied to the case of Thai underdevelopment. Since export-led growth has played a central role in economic change in Thailand in the period since 1850, models which consider the relationships between exports, export technology, and development should also be considered.18

MODELS OF TRADE AND DEVELOPMENT

Vent-for-surplus and staples models concentrate on the nature of the export product (the staple) and its development-inducing potential.19 In the vent-forsurplus model, trade serves to fully employ previously idle factors as export production is expanded with no change in technology (see Myint [1958]). The result of this process is to create an economy that remains underdeveloped. The staples approach focuses on the nature of the export product, its production function, its forward and backward linkages, its input demands, the economies of scale in the provision of inputs or processing of outputs, and its implications for income distribution and the structure of domestic demand. These factors help to determine the growth and productivity-increasing potential of the establishment and expansion of staples production. Hirschman (1977) has generalized the staples and linkage approach to include not only forward and backward linkages, but also consumption (the increase in the demand for locally produced goods resulting from staples production) and fiscal (the increases in government revenue generated by the staple and the manner in which they are invested) linkages. In short the vent-for-surplus and staples models stress the role of technological change and increases in productivity in the analysis of the effects of export growth on development. These models seek to delineate the situations under which export growth will lead to technological change, and the insights they provide complement the supply and demand model developed here.

A SUPPLY AND DEMAND MODEL OF TECHNICAL AND INSTITUTIONAL CHANGE! RECAPITULATION

The induced-development model acknowledges the powerful influences of

A Theory of Technical and Institutional Change

11

changes in relative factor and product prices in generating the demands for both technical and institutional change. Whether or not those demands are met depends crucially on the stock of technical and institutional knowledge (the innovation possibilities frontier) and on there being sufficient appropriable benefits for an innovator to recover his cost in undertaking the change. Given the characteristics of agricultural research and infrastructure with important indivisibilities and externalities, the behaviour of public agencies and influence of political factors will have a significant impact on the supplies of technical and institutional change. When changes are favourable to the political and economic interests of government officials, they will be undertaken; when changes are detrimental to the interests of these elite, they will not be forthcoming. The basic nature of the Thai political system and the particular circumstances that Thailand has faced in the last century have meant that, in too many cases, socially beneficial technical and institutional changes were not supplied, and underdevelopment has been the consequence.

3

Economic Change in Thailand, 1880 to 1940

The opening of the Thai economy to trade in the mid-nineteenth century led to a large expansion in the cultivation and export of rice.1 This was accompanied by a lowering of the production of handicrafts and. manufactures; expanded rice exports financed the import of the manufactures that had once been domestically produced, as well as new manufactured commodities. The empirical record of the Thai economy is far from complete: in general there have been few studies that have added to the official statistical series or the pioneering work of James Ingram. In addition to the problem of the dearth of data, there is a problem of reliability: some series are fairly accurate; others clearly are not. Yet even the official government records are far from exhausted in terms of their usefulness in establishing what the quantitative trends in the economy were. Here the data are used to show the trends and, as a result, reliability is not a serious issue as long as the errors are likely to be a fairly constant average percentage of the stated values.

TRENDS IN EXPORTS AND IMPORTS

Among the most important trends during this period was the growth of rice exports. Table 3-1 presents various measures of the expansion of rice exports from 1857 to 1940. The foreign trade data are likely to be relatively accurate since export and import taxes were collected. Prior to 1924-25 data were only collected for the Bangkok customs area, through which over 85 per cent of the value of the trade flowed (Statistical Year Book, No. 11 [1925-26]: 159). The lack of complete coverage for the earlier period is not likely to be very significant in the case of rice exports since Bangkok was the major port for overseas trade for central, north-

Economic Change in Thailand, 1880 to 1940

13

eastern, and northern Thailand, the regions that grew rice for export. Rice exports peaked at over two million metric tons in 1934-35. While there is considerable year to year variation in exports, the overall trend over the period is upwards, an average annual rate of growth for the quantity, export price, and value of 2.75,1.2, and 4.0 per cent, respectively for 1864 to 1941 (see Table Al-1).

TABLE 3-1: INDICES OF RICE EXPORTS IN TONS, EXPORT PRICE, AND VALUE FOR SELECTED YEARS (1864 - 100) Year

1857 1864 1870 1880 1890 1900-01 1910-11 1920-21 1930-31 1940

Quantity

37.5 100.0 107.5 143.8 337.1 290.4 732.9 196.3 712.9 840.0

Export Price 35.8(1850) 100.0 83.1 93.2 102.0 176.9 170.2 204.0 198.0 152.6

Value

— 100.0 89.3 134.0 343.7 513.7 1247.4 400.0 1411.9 1281.6

Sources: Rice Exports for 1857-1863 from van der Heide (1906a), 82; export price for 1850 from Pallegoix (1854), 1: 285; 1864 on from Ingram (1964), pp. 120-22; for more detail see Al, Table Al-1.

Rice had a dominant influence in the Thai economy over the period considered here: in addition to being the staple food of the population, it was also the chief crop and leading export commodity — Table 3-2 shows the role of rice in Thai exports. Unlike rice, rubber, tin, and teak production were regionally concentrated and were not as pervasive in their influence on the populace. Their production in many cases was carried on with immigrant labour (and foreign capital in the case of teak). Though rice export production was concentrated in the Central Plain, rice production was undertaken in all regions (van der Heide [19060]). An indication of the primacy of rice in the economy comes from the first national income estimates. Gould estimated that for 1938-39 paddy represented 63.5 per cent of the value added of all crops and 18.3 per cent of the gross domestic product (Gould [19520], pp. 22-26). His estimates were based on Ministry of Agriculture output estimates, which, as will be shown later, are probably too low and may be viewed as providing a lower bound on the importance of rice.2

14

The Political Economy of Productivity

TABLE 3-2: PERCENTAGE OF TOTAL EXPORTS ACCOUNTED FOR BY FOUR COMMODITIES Year

Rice

1867 1890 1903 1909-10 1920-24 1925-29 1935-39 1940-44

41.1 69.7 71.3 77.6 68.2 68.9 53.5 60.5

Rubber

Tin

Teak

15.6 11.1

5.5

6.4 7.8 8.6 9.0

0.8 2.3

18.6 11.6

12.9 12.1

All Four

56.7 86.4 88.2 91.9 82.1 83.9 89.2 85.9

10.4

6.4 4.5 3.7 4.2 1.6

Source: Ingram (1971), Table 8, p. 94.

With the rise of the rice trade, there was a general expansion of trade while imports displaced native handicrafts production (for models dealing with this see Hymer and Resnick [1969] and Resnick [1970]). Table 3-3 presents data on the expansion of total imports and exports for selected years. During this period the value of exports exceeded the value of imports in all but one year, 1920-21. The deficit on current account in that year resulted from a very poor rice crop and the imposition of a rice export prohibition. Of course, some of the apparent surplus in commodity trade was offset by net imports of shipping and other services. TABLE 3-3: INDICES OF TOTAL VALUE OF IMPORTS AND EXPORTS (1850 = 100) Year 1866 1870 1880 1890 1900 1910 1920 1930 1940

Imports 146.0 182.7 244.1 607.2 1002.1 1575.3 3687.8 3579.9 2869.5

Exports 132.4 197.7 289.3 574.2 930.2 1948.3 1618.8 2889.4 3324.5

Source: Ingram (1971), pp. 332-35. For more detail see Appendix 1, Table A1-2.

TRENDS IN PRODUCT PRICES

The trade data also provide information on export and import prices. Three such series are of particular importance: rice export prices, the import price of white cotton shirting, and the import price of grey cotton shirting. The choice of the rice price series is of clear significance: as the leading commodity in the

Economic Change in Thailand, 1880 to 1940

15

economy and chief staple in the diet, the price of rice is probably the single most important piece of economic data. Textiles have been the major import of Thailand since 1850 (Ingram [1971], p. 119). Textile import prices will be taken here as a proxy for the prices of all the handicrafts and domestic manufactures which for the most part experienced declines in their production over the period. The data are shown for selected years in Table 3-4 along with export and import price indices constructed by Birnberg and Resnick (1975). The trends in their price indices agree with those of the data presented for most years (see Table Al-28). The growth of the value of cotton manufactures imports is shown in Table 3-5.

TABLE 3-4: PRICE INDICES OF RICE EXPORTS, WHITE SHIRTING IMPORTS, GREY SHIRTING IMPORTS, EXPORTS, AND IMPORTS

Year 1850 1864 1865 1870 1880 1890

1900 1910-11 1919-20 1920-21 1929-30 1930-31 1934-35 1940

Rice Export White Shirting Grey Shirting Price, Import Price, Import Price, (1864 = 100) (1865 = 100) (1865 = 100) 35.8 — — 100.0 — 100.0 100.0 47.1 56.3 83.1 54.7 62.5 93.2 69.2 102.0 57.0 (1895) (1895) 91.3 60.9 176.9 93.6 170.2 101.6 349.5 267.2 546.1 204.0 351.4 259.7 242.5 157.2 115.9 198.0 129.2 87.3 96.0 66.2 67.3 152.6 91.3 70.6

Export* Prices, (1913 = 100)

Import* Prices, (1913 = 100)

103.1 99.8 248.3 126.9 133.7 107.4 65.5

113.9 94.7 183.3 178.3 110.1 94.1 68.1

* These indices are taken from Birnberg and Resnick (1975), 315. See also Table Al-28. Sources: See Table 3-1 for rice export price data sources; textile import prices are taken from Ingram (1964), p. 123, the Thai customs statistics, and the Statistical Year Book ofSiam, various issues. For more detail see Appendix 1, Tables Al-1, Al-3, and Al-28.

16

The Political Economy of Productivity

TABLE 3-5: INDEX OF THE NOMINAL VALUE OF COTTON MANUFACTURERS IMPORTS (1864 = 100) Year

Index

1859 1864 1870 1880 1892 1895 1900 1910 1920 1930 1940

90.4 100.0 92.2 166.3 216.9 300.0

351.3 711.3

1949.0 1130.4 1062.9

Sources: Data taken from Ingram (1971), p. 120 and the sources listed for textile prices in Table 3-4. For more detail see Appendix 1, Table Al-3.

Trends in the terms of trade are an important measure of the incentives with which the Thai economy was presented over this period. In Table 3-6 the ratio of the average rice export price for 1865-67 to the import prices for those same years for white and grey shirting is presented in index form. The result is a very important one and will be discussed more fully below. From 1865-67 to 1939 the terms of trade grew in favour of rice by 0.465 or 0.85 per cent per year relative to white and grey shirting respectively. The growth rates are 1.516 and 1.945 per cent per year for the period from 1865-67 to 1940 (as a result of World War Il-induced inflation). The rate of change of the terms of trade was uneven across the period, and Table 3-7 shows the rates of change for various sub-periods. Over most of the period from the opening of Siam to trade until 1900, there was a clear and growing incentive to specialize in the production of rice and take resources out of the production of textiles and most domestic handicrafts. After 1900 and until 1925 the terms of trade ran against agriculture; during World War I and into the mid-1920's agriculture suffered a particularly adverse change in the terms of trade. Its position deteriorated somewhat during the first few years of the depression but quickly recovered, and by 1940 the terms of trade were more favourable to agriculture than in any previous period. From 1925 to 1939 the overall trend in the terms of trade favoured the agricultural sector; such favourable trends in relative output prices from the 1860's to 1900 and from 1925 to 1940 led to the expansion of rice cultivation and export. TRENDS IN FACTOR PRICES

The discussion in Chapter 2 pointed to the importance of trends in relative factor prices in determining the incentives for technical and institutional change.

Economic Change in Thailand, 1880 to 1940

17

The empirical record of these trends will now be examined, even though the data series are not as extensive as the series on trade. While there are some scattered earlier data on urban unskilled wages for Bangkok that can be spliced to official wage data for the twentieth century period, there is very little information on trends in the rates of return on capital and, for the most part, the land rent and price series are too fragmented to be relied upon. However, as will be discussed later, there is a series on the average baht per hectare of land being mortgaged. The trends in this series will act as a proxy for trends in land rents.

TABLE 3-6: INDEX OF THE TERMS OF TRADE: RATIO OF RICE EXPORT PRICE TO THE IMPORT PRICES OF WHITE AND GREY SHIRTING (1865-67 = 100) Year

Rice/White Shirting 100.0 161.7 156.3 133.7 177.1 166.7 53.2 140.4 140.3 304.5

1865-67 1870 1880 1895 1900 1910 1920 1930 1939 1940

Rice/Grey Shirting 100.0 143.0 144.4 171.4 281.1 162.3 76.1 219.6 185.5 416.0

Sources: Data taken from Tables in Appendix; for more detail see Table Al-4. See also Table Al-28.

TABLE 3-7: ANNUAL RATES OF CHANGE IN THE TERMS OF TRADE FOR VARIOUS SUB-PERIODS Period 1865-67 to 1939 1865-67 to 1940 1865-67 to 1900 1900 to 1939 1900 to 1925 1925 to 1939

Rice/White Shirting (%) 0.465 1.516 1.70 -0.60 -1.49 1.03

Sources: Based on data in Tables 3-6 and Appendix 1, Table Al-4.

Rice/Grey Shirting (%) 0.85 1.945 3.09 -1.06 -2.29 1.18

18

The Political Economy of Productivity

In Table 3-8 the nominal unskilled daily wage for Bangkok is presented for selected years. Three real wage series have been constructed.

TABLE 3-8: NOMINAL DAILY WAGES FOR UNSKILLED WORKERS IN BANGKOK AND THREE INDICES OF REAL WAGES

Year 1820 1860 1864 1865 1889 1890 1901 1912 1915 1920 1925 1930 1935 1938 1950

Nominal Wage (baht) 0.37 0.42 0.70 0.70 0.75 0.75 0.833 0.875 0.75

1.0 1.0 1.0

0.80 0.80 20.00

Wage/Rice Price (1864 = 100)

176.4 100.0 110.6 72.7 60.5 73.5 73.7 62.6 75.9 100.8 97.3 74.0

Wage/White Shirting Price (1865 = 100)

Wage/Grey Shirting Price (1865 = 100)

100.0 204.7

100.0 123.2

131.2 119.4 100.2 40.8 78.9 110.6 161.9 148.2

155.4 120.3 111.5 55.0 96.7 130.9 173.5 193.2

Sources: See Appendix 1, Tables Al-5 and Al-6.

The first is an index of the number of kilograms of rice that could be purchased with the daily wage. Since rice was the staple of the diet, this real wage series is the most representative.3 Indices in which the daily wage is compared to the import prices of white and grey shirting are also shown. As can be seen, real wages in terms of the ratio of the nominal wage to rice prices have had a tendency to decline over the period. The wage to textile price ratios have a mixed trend over the period from 1865 to 1930 and then tend to rise. The rates of change in all three series for various sub-periods are shown in Table 3-9. The overall conclusion that can be drawn from this data is that real wages declined over much of the period from 1864 (and especially 1890) to 1912 and then improved. For the real wage in terms of rice there was little overall trend from 1864 to 1938.

Economic Change in Thailand, 1880 to 1940

19

TABLE 3-9: AVERAGE ANNUAL PER CENT RATES OF CHANGE IN VARIOUS REAL WAGE SERIES Period 1850-1938 1864-1938 1864-1950 1864-1930 1865-1938 1865-1930 1930-38 1864^1901 1901-20 1920-38 1864-1912 1912-38

Wage/rice -0.67 -0.04 -0.35 -0.42 — — 3.15 -0.86 0.07 1.56 -1.04 1.84

Wage/white shirting — — — — 0.54 0.16 3.73 0.74 -5.96 7.43 3.70 0.83

Wage/grey shirting — — — — 0.91 0.42 4.99 1.20 -5.32 7.23 3.86 1.84

Source: Computed from Table 3-8.

The nominal and real wage series apply to urban unskilled and usually Chinese immigrant labour. Information on rural wages is also valuable. The limited information available indicates that the relationship between rural wages (usually a money payment for the rice growing season plus room and board and a standard size piece of cloth) and urban wages was relatively stable (see Table Al-5). Qualitative descriptions point to considerable labour mobility: Lao farmers from the northeast often migrated to the Central Plain to work on farms (especially after the railroad facilitated the migration (Pendleton [1943], pp. 24-25); furthermore, Chinese labour was often hired in order to carry out public works projects upcountry, as were Lao workers in some cases. This evidence points to a sufficient degree of labour mobility so that trends in urban wages are probably reasonably representative of trends for other wage series.4 The trends in land rents and land prices are also important. The scattered observations on prices and rents in various areas in the Central Plains over a sixty year period are summarized in Chapter 6 and Appendix 1. There seems to have been an upward trend in nominal land prices but, given the data, this conclusion cannot be definite. Fortunately consistent data are available for 1915 to 1941 on the area and value of new mortgages, area and value of redeemed mortgages, and area and value of foreclosed mortgages (for 1922-23 to 1941). The data are dominated by the mortgage transactions that took place in the Central Plain, the most extensively commercialized region, which accounted for most of the exported rice surplus. All three series show roughly the same trends and the average value of newly mortgaged land in baht per hectare was chosen as the proxy for land prices. The use of mortgage values as land price proxies assumes that the percentage of the

20

The Political Economy of Productivity

total value of the land that could be obtained with a mortgage loan remained the same over the period; it also assumes that the interest rate was relatively constant over the period. Unfortunately, there is no specific information to support or refute the first assumption. The information in Table 5-5 is sufficient to refute the hypothesis that the appreciation in land prices is the result of a depreciation in the interest rate. Therefore, it will be assumed that the trends in land rentals were roughly the same as the trends in land prices, which are further assumed to have followed the observed trends in the average baht per hectare of newly mortgaged land. Table 3-10 presents the index of the nominal land prices. Three "real" land price series have been constructed by dividing the nominal land prices by the rice export price, white shirting import price, and grey shirting import price respectively. TABLE 3-10: INDICES OF NOMINAL AND REAL LAND PRICES (1915 = 100)

Year 1915 1920 1925 1930 1935 1940

Index of Nominal Land Price 100 109.7 151.6 177.4 119.2 141.2

Index of Land/ Rice Price 100 82.5 96.9 137.4 153.3 142.0

Index of Land/ White Shirting Price 100 33.4 89.6 146.8 180.7 165.3

Index of Land/ Grey Shirting Price 100 40.6 98.6 195.1 173.9 192.1

Sources: Data on mortgaged area and values are taken from various volumes of the Statistical Year Book of the Kingdom of Siam\ the rice export and textile import prices are taken from the tables presented above. For more detail on the nominal land price series see Table Al-8.

Real land prices tended to decline from 1915 until 1920 and then rose, like the terms of trade index. The average annual rate of growth between 1919 and 1940 in the nominal, land/rice prices, land/white shirting prices, and land/grey shirting prices are 1.39, 1.41, 2.03, and 2.65 per cent respectively. While land prices changed by 1.87, -3.77, -19.69, and -16.50 per cent per year respectively from 1915 to 1920, they grew by 1.27, 2.75, 8.32, and 8.08 per cent per year respectively from 1920 to 1940. Therefore, it would appear, on the basis of th scattered land price information and these indices, that land values appreciated over most of the period from 1915 to 1940. Given the more favourable terms o trade for the land-intensive commodity, rice, in the earlier periods (prior to 1900) for which no land price indices are available, we might expect that land appreciated in value during earlier periods also. In fact, van der Heide observed in 190 that land values had indeed appreciated since 1855 when Thailand was opened to trade and increasingly specialized in rice production for export (19060, p. 85; see also Tanabe [1978] and r.5. k.s. 9.2/25,18 October 1899, which indicates that land values were rising and real wages falling). Land prices appear to have risen from

Economic Change in Thailand, 1880 to 1940

21

1855 to 1905, declined until 1920, and risen over the period from 1920 to 1940. Thus, while real wages showed no upward trend for the period from the mid-1850's to 1940, land prices and presumably rents show a definite upward trend (see also Table 6-2 and 6-3). This point will be considered again below. TRENDS IN LABOUR AND LAND

The growth of inputs and outputs in the economy is also of central interest. For years prior to 1938-39 there are no national income estimates for Thailand. Though the record is far from complete for the area under crops, for the labour force, and especially for the capital stock, there are some data which can shed some light on these important trends. There have been a number of demographic studies of Thailand which present population estimates based on census (the first census of the whole kingdom was taken in 1911) and other data. The series used here was constructed by Skinner (1957). Sternstein has disputed the gradual growth in population that Skinner's series shows (1965a), however, Caldwell has concluded in his survey of the Thai demographic literature that the census data favour Skinner's projections (1967, p. 28). The Skinner and Bourgeois-Pichat (1959) estimates of the rates of growth of population are nearly identical, except for the 1929-37 period (see Table A1-16), and since the Skinner series has the advantage of covering the entire period from 1825 to the 1950's and since the trends appear to be reliable, the Skinner series was utilized. Table 3-11 presents Skinner's estimates of the population of Thailand (modern boundaries). TABLE 3-11: TOTAL POPULATION, PERCENTAGE CHINESE, AND INDICES OF TOTAL POPULATION Year

Population in thousands

1825 1850 1860 1870 1880 1890 1900 1910 1917 1922 1927 1932 1937 1942

4750 5200 5450 5775 6200 6670 7320 8305 9232 10202 11419 13087 14721 16066

Chinese

4.8 5.8 6.2 6.6 7.0 7.5 8.3 9.5 9.8

10.5 11.7 12.2 11.8 11.7

Index, 1860 = 100 87.2 95.4 100.0 106.0 113.8 122.4 134.3 152.4 169.4 187.2 209.5 240.1 270.1 294.8

Index, 1911 = 100

Sources: Skinner (1957), pp. 79 and 183. See also Tables Al-16, Al-17, and Al-26.

98.5 109.5 121.0 135.4 155.2 174.6 190.5

22

The Political Economy of Productivity

The rising percentage of the total population that was Chinese points to the importance of immigration in population growth in Thailand.5 For 1900 to 1930 Caldwell has indicated that one-third of the population growth was the direct result of immigration, and with the inclusion of locally born children, as much as 40 per cent of the growth in that period would be attributable to immigration (1967, p. 32). For the second half of the nineteenth century, immigration provided about half of the population growth (ibid., p. 40). Of course, immigration had a more pronounced effect on urban than rural areas. For the period prior to World War II, Caldwell sees a decline in mortality rates as well as a possible increase in fertility in response to the new economic opportunities as accounting for the remainder of the population growth (1967, pp. 28-29). Since the end of World War II, immigration has not been an important contributor to population growth, which has mainly responded to further declines in mortality and more recently to declines in fertility (see Cochrane [1979]). Population growth rates for selected periods are presented in Table 3-12. TABLE 3-12: POPULATION GROWTH RATES Period 1825-50 1850-1940 1850-60 1860-70 1870-80 1880-90 1890-1900 1900-1910 1910-17 1917-22 1922-27 1927-32 1932-37 1937-42 1911-41

Average Annual Per Cent Rate of Growth 0.36 1.22 0.47 0.58 0.71 0.73 0.93 1.27 1.52 2.02 2.28 2.76 2.38 1.76 2.11

Source: See Table 3-11.

Only scanty records on the size or occupational distribution of the labour force exist. The 1929, 1937, and 1947 censuses do provide some information: the percentage of the labour force engaged in agriculture and animal husbandry was 83.1 in 1929, 87.7 in 1936, and 84.1 in \941Statistical Yearbook of the Kingdom of Siam, Nos. 15 [1929-30], 20, [1938-39], and 22 [1945-55]). The 1937 census estimated the labour force at 6,823,556 persons or 47.2 per cent of the population.

Economic Change in Thailand, 1880 to 1940

23

In addition to the 87.7 per cent of the labour force engaged in agriculture or animal husbandry, 4.4 per cent were engaged in trade and commerce, 0.8 per cent were in transportation and communication, and 1.6 per cent in manufacturing (0.2 per cent in textiles, 0.7 per cent in manufacturing industries which were not based on agricultural or natural resource commodity processing such as rice-milling and sawmilling) (Statistical Year Book of Thailand (21) [1929^0 to 1944]: 80-83). In lieu of data on the growth in the labour force, population data will be used. Given the importance of immigration and the fact that most immigrants (especially prior to 1911) were drawn directly into the labour force, it is possible that the population growth figures will underestimate the growth in the labour force for periods during which immigration was rapid. However, the increasing population growth (that part which is not the result of immigration) should have increased the proportion of the population which was too young to be in the labour force. The proxies for labour force growth rates are shown in Table 3-12. While data on the area of land brought under cultivation are not available for the nineteenth century, all the contemporary descriptions point to a rapid expansion of rice cultivation. Table 3-13 presents the data on the paddy land under cultivation for the whole kingdom for 1905-1906 to 1941. The series on the paddy land in central Siam, or all crops in central Siam, or the whole kingdom all crop land under cultivation, show essentially the same trends. TABLE 3-13: INDICES OF PADDY AREA, OUTPUT, AND YIELDS FOR THE WHOLE KINGDOM, 1905-6 TO 1941 (1911-12 = 100) Year 1905 1906 1911 1915 1920 1925 1930 1935 1940 1941

Index of Paddy Area 81.5 88.3 100.0 131.8 155.7 174.1 202.3 214.9 242.2 252.5

Index of Paddy Output

Index of Paddy Yields

90.0 100.0 104.9 148.5 144.4 166.2 162.8 169.6 176.3

101.9 100.0 79.6 95.3 82.9 82.0 75.7 70.1 71.3

Sources: Statistical Year Books; for more detail see Appendix 1, Tables Al-9, Al-10, and Al-11.

24

The Political Economy of Productivity

TRENDS IN AGRICULTURAL PRODUCTIVITY AND AN ASSESSMENT OF THE RELIABILITY OF THE DATA

In Table 3-14 the growth rates in the paddy land under cultivation and the paddy outputs are shown. The area under cultivation grew faster than output and faster than the population. Between 1911 and 1941 the paddy area grew by 3.14 per cen per year, while the population grew by 2.11 per cent and the paddy output grew by 1.91 per cent. Yields declined by 1.12 per cent per year. This yield decline als occurred in the Central Plain. The yield index for Central Siam goes from 100 in 1920-21 to 82.2 in 1941 (see Table Al-13). Paddy output per capita declined b 0.06 per cent per year from 1906 to 1941 and 1.36 per cent per year from 1921 1941 (see Table 3-17). TABLE 3-14: GROWTH RATES OF PADDY AREA, PADDY OUTPUT, AND POPULATION, 1905 TO 1941 Period 1905-41 1911-41 1911-20 1920-30 1930-40

Rate of Growth in Paddy Area 3.19 3.14 5.04 2.65 1.82

Rate of Growth in Paddy Output

1.91 4.49 1.13 0.20

Rate of Growth of Population 1.98 2.11 1.69 2.34 2.27

Sources: See Tables 3-11 and 3-13.

This decline in paddy output per capita in spite of a rising land/man ratio is very important. There are several possible explanations. First the percentage of total labour input allocated to paddy production could have declined dramatically. However, the quantitative information already cited suggests that the percentage of total labour input allocated to agricultural production was probably quite stable during the period. Given the pervasiveness of paddy production, it is unlikely that the percentage of the labour force engaged in paddy production declined significantly over this period. Qualitative information corroborates this conclusion. Second, the decline in paddy output per capita could be caused by a decline in the ratio of non-labour inputs to the area under cultivation. The information available, however, contradicts this hypothesis. For instance, the number of buffalo and bullocks appears to have grown more rapidly than the area under cultivation (se Tables 3-15, 4-6, Al-21, and Al-22). Third, the decline in output per capita could be caused by a decline in total factor productivity in the rice sector (see Chapter 4). Fourth, the decline in per capita output revealed by the data may be a statistical anomaly. Therefore, an examination of the accuracy of the output and

Economic Change in Thailand, 1880 to 1940

25

area data is in order. The area data come from the Ministry of Agriculture estimates, and although there is little specific information on how the data were collected, it appears that estimates of the area and output were made by local officials and were then forwarded to Bangkok. Even for the post-World War II period, this method has led to under-reporting of both the area and output. Given the continuing problem of the reliability of the agricultural statistics today (see Silcock [1970], Ingram [1971], pp. 240-43, and Behrman [1968], pp. 200-210), the statistics for the earlier period should be carefully examined, bearing in mind that most investigators of the post-World War II period have concluded that "the estimates generally are much better indicators of trends than of absolute levels" (Behrman [1968], p. 208). In order to assess the reliability of the paddy area and output estimates a simple rice balance sheet has been constructed. Crop estimates were made by estimating seed use, domestic consumption (at 170 kg of rice per person per year), feed and losses, and exports. The estimates, presented in Appendix 1, are consistently higher than the official output estimates. However, there is no substantial trend in the percentage discrepancy, and therefore the official data probably do accurately reflect the trends in agricultural output and the area under cultivation.6 The yield estimates implied by the official output and area data appear to be reasonable, if a bit low, but yield observations collected for various areas in Thailand from contemporary observers reveal little bias in the official yield estimates (see Table Al-11, Al-12, and Al-13). Therefore, the bulk of the under-reporting would appear to be the result of areas which were not included in the area or output data. Since government administration was probably most complete in the areas of settled cultivation, the areas not included may be the newer ones.

TRENDS IN CAPITAL STOCK

Information on trends in the capital stock is particularly scarce. One fragment of information available is data on the registration of buffalo and bullocks. The stock of buffalo grew by 4.41 per cent per year from 1917 to 1940. However, the registration statistics for livestock are far from accurate, so great reliance cannot be placed on the rapid growth in the number of head. During this period the price of buffalo fell relative to the price of rice. The export data providing a series on the average export price per head for buffalo and bullocks are presented in Table 3-15. It should be pointed out that livestock represented a major capital good for Thai rice farmers (see Yai Suphan Sanitwongse [1911]). During this period there was some addition to the capital stock in agriculture through the investment in canals and irrigation.

26

The Political Economy of Productivity

TABLE 3-15: INDICES OF THE NUMBER OF BUFFALO AND THE EXPORT PRICE OF BUFFALO AND BULLOCKS, 1896 TO 1941

Year

1896 1900-1901 1911-12 1917-18 1920-21 1925-26 1930-31 1935-36 1940 1941

Index of the Number of Buffalo (1917-18 = 100)

Index of the Export Price of Buffalo and Bullocks (1911-12 = 100)

Index of the Real* Export Price of Buffalo and Bullocks (1911-12 = 100)

100.0 109.9 184.7 207.6 228.8 269.8 145.0

37.3 64.9 100.0 75.5 82.0 80.2 80.2 58.3 49.6 57.8

52.3 75.2 100.0 90.3 82.6 68.5 83.2 100.3 66.7 47.0

* The real export price equals the nominal price divided by the export price of rice. Sources: Statistical Year Books and Customs data; for more details see Appendix 1, Tables Al-21, Al-22, and Al-23.

Although paddy output grew during the period, population, land stock, and agricultural capital stock grew at a more rapid rate. This implies that there may have been some decline in total factor productivity over the period. While the land/ man ratio rose, per capita agricultural output fell. At first glance it would seem paradoxical that while the land/man ratio rose, real wages fell and real land rents appreciated. To establish and interpret the trends in relative factor prices (both because of their intrinsic interest and because of their effects on the demand for technical and institutional change), it is necessary to analyze them in more detail. THE TERMS OF TRADE AND TRENDS IN RELATIVE FACTOR PRICES

General equilibrium trade models are an efficient analytical tool with which to examine the relationships between the trends in output prices, input stocks, and relative factor prices. Appendix 2 develops a simple Jones-type model with two goods (rice and textiles), and three factors (land [specific to agriculture], labour, and capital). This model is a reasonable description of the Thai economy in the period under review. It allows us to make efficient use of our knowledge of the trends in inputs, outputs, and their prices in making inferences about trends for which there is more fragmentary evidence. The model and a discussion of the plausibility of the necessary assumptions are formally presented in Appendix 2. The terms of trade are assumed to be exogenous. Even though Thailand was one of the three leading rice exporters in Asia and accounted for approximately 15

27

Economic Change in Thailand, 1880 to 1940

per cent of world rice exports, Thai production represented less than 6 per cent of total world paddy output.7 Thai textile imports also represent a small part of the world trade in textiles. Therefore, the small country assumption for the period under review is quite reasonable. Table 3-16 shows the effects of changes in factor endowments on factor returns. The case where the share of the total labour force employed in agriculture (over 83 per cent) is greater than the share of the capital stock employed in agriculture was chosen. The income share of labour in agriculture is assumed to be greater than the income share of labour in manufacturing. Kamol's study provides the most useful empirical estimates on the income shares in agriculture for our purposes. Kamol studied the Central Plain village of Bang Chan in the early 1950's and measured the returns to the factors of capital, land, and labour in rice farming. His estimates included imputed rents and family labour. He found that the share of labour in rice farming was 51 per cent, the share of land was 22 per cent, and the share of capital was 27 per cent (1955, p. 140).8 While there may have been some technological and productivity changes in agriculture over the years, the techniques and capital goods being used were much the same in the early 1950's as they had been over much of the period under review. TABLE 3-16: PREDICTED IMPACT OF CHANGING FACTOR ENDOWMENTS AND RELATIVE OUTPUT PRICES ON RELATIVE FACTOR PRICES AND OUTPUTS Endowment Change L*>0 N*>0 K*>0 (Pa*-P*)>0

R* L

R* N

R* K

R*-R* L K

R*-R* L N

_ + _

+ +

_ + -

_ + +

_ + -f

+

A*-M* (where *K.,L °M)

+ +

-

-1-

Note: Where L is land, N is labor, K is capital, * denotes relative change in that variable, the R's denote the factor returns for the subscripted factors, A denotes the output of the agricultural commodity, M denotes the output of the manufactured commodity, 14%

19,352 1.60

13,489 1.45

8,842 1.31

5,151 1.19

2,216 1.09

-120

44,083 2.03 >12%

9,933 1.31

5,505 1.18

2,034 1.07

-685

36,536 1.85 >11%

6,280 1.20

2,409 1.08

-605

34,153 1.80 >11%

5,127 1.16

1,431 1.05

-1,439

* Present value of net benefits in thousands of 1904-5 baht. Note: Estimate 1 computes the value of the benefits using the average export price for the period from 1894-95 to 1903-4. Estimate 2 uses the average export price for the period from 1884-85 to 1903-4, estimate 3 uses the average price for 1874-75 to 1903-4, and estimate 4 uses the average for 1864 to 1903-4.

TABLE 5-10: ALTERNATE Ex ANTE BENEFIT-COST ESTIMATES FOR IRRIGATION

Estimate 1 Net Benefits* Benefit/Cost Ratio Internal Rate of Return Estimate 2 Net Benefits* Benefit/Cost Ratio Internal Rate of Return Estimate 3 Net Benefits* Benefit/Cost Ratio Internal Rate of Return Estimate 4 Net Benefits* Benefit/Cost Ratio Internal Rate of Return

Discount Rate 14% 15%

16%

17%

18%

7,506 1.30

4,461 1.19

2,007 1.09

27 1.00

-1,571 0.92

4,331 1.16

1,509 1.06

-734 0.97

4,739 1.17

632 1.06

-817 0.97

3,745 1.13

781 1.03

-1,552 0.94

5%

10%

12%

13%

108,365 3.33 >17%

29,263 1.91

16,002 1.56

11,290 1 .42

80,034 2.72 >14%

18,031 1.56

7,886 1.28

69,049 2.48 >13%

13,676 1.43

65,580 2.41 >13%

12,301 1.38

* Present values of net benefits in thousands of 1904-5 baht. Note: Estimate 1 computes the value of the benefits using the average export price for the period from 1894-95 to 1903-4. Estimate 2 uses the average export price for the period from 1884-85 to 1903-4, estimate 3 uses the average export price for 1874-75 to 1903-4, and estimate 4 uses the average for 1864 to 1903-4. These alternate ex ante estimates correspond to the alternate ex post ones presented in Table 5-7 and employ the same methods for estimation except that historical prices were used to value the additional output.

Institutional Change: Irrigation Policy

77

The estimates of the net benefits of the irrigation scheme and other indicators of the high productivity of irrigation investments are more meaningful when compared with the net benefits and rates of return on other public investments. The major public investment made by the Thai government in the period from the 1890's through World War II was the construction of a railway network. Table 5-11 compares the capital invested by the Thai government in railroads to that invested in irrigation for the period from 1892-93 to 1941. During this period, railway investment accounted for the largest share of government investment in almost all years and railroads and irrigation together accounted for nearly all non-military public investments. While most of the proceeds of foreign loans made to Thailand were spent on railroads, practically none of these funds were used for irrigation projects.15

THE RATE OF RETURN ON GOVERNMENT RAILWAY INVESTMENTS, 1892-1941

Given the revealed preference of the government for investments in railroads, it is important to get some idea of the rate of return realized on such investments. Table 5-12 presents data on the rate of return earned by the railway. The rates presented tend to overestimate the commercial rate of return on railway investment. In a memorandum dated 6 August 1926, the Financial Adviser, Edward M. Cook, pointed out that no interest was charged on the over 52 million baht of government revenue surpluses which were invested in the railway. He suggested that a rate of 5 per cent would be reasonable to charge on the government's capital investment made from budget surpluses, in which case the railroads would show a commercial loss for 1924-25 (see Files of the Financial Adviser, Section 16, #8,6 August 1926). The government pursued policies which would tend to enhance the commercial profitability of the railroad by limiting highway development so that highways would not compete with railways but instead act as feeder roads (see The Administration of the Department of Ways, Memorandum Concerning the Policy and Programme of Highways, B.E. 2468 [Bangkok, 28 April 1927]; Holm [1977], p. 180; and Thompson [1967], pp. 497-506). It was also railway policy to charge whatever the traffic would bear whenever it did not face significant competition from water transport (see Holm [1977], pp. 235-40). The commercial rate of return on the railway system (which is an overestimate) does not compare favourably with the estimated rates of return on irrigation investments. In fact, from the point of view of officials at the time, and according to the information available to them, the railroad paid about the same rate of return (or less) in increased government revenue as irrigation projects would have.

The Political Economy of Productivity

TABLE 5-11: PUBLIC INVESTMENTS IN RAILWAYS AND IRRIGATION, 1892-93 TO 1941

Period 1892-93 to 1910-11 1911-12 to 1920-21 192 1-22 to 1930-31 1931-32 to 1941 total

Number of kilometres of railway opened in the period

Railway Investment (baht x 1000)

Irrigation Investment (baht x 1000)

Irrigation Investment as a Percentage of Railway Investment

928

66,999

6,296

9

1287

75,964

4,625

6

647 268 3130

50,925 22,610 216,498

11,376 12,235 34,532

22 54 16

Sources: Data on the number of kilometres of rail opened to traffic in each period are taken from Rimmer (1971), p. 31. Data on the railway and irrigation investment in each period are taken from Reports of the Financial Adviser, 1903-4 and 1904-5, and Statistical Year Book of Siam, No. 11 (1925-26), No. 1 (1916), No. 20 (1938-39), and No. 21 (1939-40 to 1944).

TABLE 5-12: RATE OF RETURN ON INVESTMENTS IN RAILROADS, 1897-98 TO 1938-39

Year 1897-98 1898-99 1899-1900 1900-1 1901-2 1902-3 1903-4 1904-5 1905-6 1906-7 1907-8 1908-9 1909-10 1910-11 1911-12 1912-13 1913-14 1914-15 1915-16 1916-17 1917-18

Net Receipts as a Percentage of Capital Outlay 0.91 1.79 2.05 2.25 2.80 3.62 3.58 4.45 5.13 5.70 5.85 4.31 4.05 4.11 4.26 3.89 4.20 3.72 3.78 3.46 3.15

Year 1918-19 1919-20 1920-21 1921-22 1922-23 1923-24 1924-25 1925-26 1926-27 1927-28 1928-29 1929-30 1930-31 1931-32 1932-33 1933-34 1934-35 1935-36 1936-37 1937-38 1938-39

Net Receipts as a Percentage of Capital Outlay 3.13 4.11 3.22 3.68 3.52 4.03 4.78 5.62 5.74 6.40 6.14 5.61 3.51 1.30 1.89 1.93 2.93 2.99 3.48 2.84 3.45

Note: Net receipts are defined as gross receipts less working expenses less depreciation. Working expenses include the interest charges on foreign loans but do not include interest charges on the

Institutional Change: Irrigation Policy

79

over 52 million baht of government funds invested in the railroads. Capital here is the total capital outlay on all lines in operation by the end of the year, so capital on lines not yet opened to traffic is not included in the rate of return calculation. The data are taken from the Statistical Year Book ofSiam, No. 18 (1933-35), and No. 20 (1938-39). The simple average rate of return is 3.75 per cent.

Internal rate of return and net benefit estimates based on the information in the commercial railway accounts have also been constructed. Capital costs and working expenses (omitting the allocation to the renovation fund) were compared to gross receipts. Table 5-13 presents the estimates. When the costs and revenues are discounted, the railway is shown to barely pay for itself. Furthermore, these estimates represent overestimates of the net receipts of the railway. Thus, the economic rate of return to the government on railway investments was quite low. TABLE 5-13: Ex POST RATE OF RETURN ESTIMATES FOR THE RAILROAD Period

1892-93 to 1939-40 1892-93 to 1939-40* 1892-93 to 1932-33

Net Receipts in 1904-5 (baht} Discount Rate 0% 3,453,682 15,925,682 -43,952,453

1% -15 ,799,560 -6 ,812,389

* This estimate was obtained by taking gross receipts and working expenses for the entire period from 1892 to 1940, while charging capital costs for the period from 1892 to 1932-33 only. However, this procedure is not really valid since the accounts only show capital costs for the lines in operation. Sources: Data were taken from the railway and government expenditure accounts reported in the Statistical Year Book of the Kingdom ofSiam, various issues.

The railway did not have a large positive effect on Thai agriculture. In the Central Plain, paddy shipments were made primarily by water transport. For 1905 van der Heide estimated that paddy deliveries made to Bangkok by rail accounted for only about 2 per cent of rice exports (19060, p. 90). For 1929-30 and 1930-31, 86 per cent of the paddy deliveries in Bangkok came via the river system and 14 per cent came via rail (see r.7. ph. 8.1/1). Rail service also did little to lower the costs of transportation for other Thai exports. Teak logs were floated down river, and tin was often transported by boat. In the south, however, rubber shipments were often made by rail. The railway did open up areas in the northeast and north to commercial development and rice exporting but also to more effective foreign competition with domestic industries. In general, the railway did not impart a great stimulus to Thai development, and in particular, it did little to lower transportation costs for Thai exports (see also Holm [1977]). Of course passengers were able to reduce their travel time. There would seem to be few economic external benefits from railway construction. In fact, in the Central Plain the railway disrupted drainage and imposed

80

The Political Economy of Productivity

an external cost on farmers (see Pendleton [1947] and r.6. k.5. k/6, 1911). The lowering of transport costs for traded goods does not seem to have been spectacular, and benefits from this should be partially reflected in the commercial rates of return.16 The railway did extend the sphere of the market, but the most heavily commercialized area, the Central Plain, was already served by water transport. The input demands of railway construction and operation do not appear to have had strategic backward linkages: European manufacturing firms supplied the rails and rolling stock, Chinese and Lao labourers were used for construction. Some skills were acquired by the Thai personnel who operated the rail system, but there do not appear to have been significant external benefits from this learning. In short, no strong reason to suppose that there were significant external economic benefits from the railroads which were not at least in part captured in the actual rates of return.l7 These rates do not compare favourably with the estimated rates of return on irrigation.18 This conclusion is consistent with a number of contemporary observations. W. A. Graham, a long-time civil servant in Thailand, observed in 1903 that with railway investments the government had to spend a great deal to obtain very little in return, while investments in irrigation and a water works for Bangkok would have resulted in lower costs and higher returns (see r.5. k.s. 1/7,18 March 1903). Van der Heide argued that since the area of Thailand which accounted for most of the foreign trade (80 per cent of export revenue, 80 per cent of government revenue, 40 per cent of the population) was already well served by water transport (and would be even better served by the installation of a major irrigation project), railway projects would work primarily to the benefit of "those who sell railway material" (see van der Heide [1907], 18). For regions with poor resource endowments such as the northeast and the south, van der Heide argued that the effects of railroads would be negative because imported goods would ruin domestic industry while there would be little induced export development.19 He argued too that concentration on development of the Central Plain would augment the national wealth at a more rapid pace, thus enhancing the ability of Thailand to maintain its independence, a goal which he accepted as paramount.

WHY THE GOVERNMENT DECIDED AGAINST IRRIGATION

Given the apparent superiority of irrigation investments, the decision to invest in the railroads and not in irrigation needs to be examined in more detail. The basic motivation in investing in railways was strategic. The existence of railroads helped the government in its effort to administer the country closely in order to prevent abuses and local problems from providing excuses for foreign intervention and colonization. Railroads allowed the government to make better use of its limited military power, and enhanced Bangkok's control over provincial and local govern-

Institutional Change: Irrigation Policy

81

ment (see Neon and Kasem [1968], Holm [1977], Engel [1978], Yano [1978], and Brown [1975,1978]). The first line to be opened connected the Central Plain with the northeast, an area which was threatened by the French in Vietnam, Cambodia, and Laos. This line from Bangkok to Khorat was opened in November 1900 (Report of the Financial Adviser, 1901 -2, p. 16). Lines were extended in the north, northeast, and south in subsequent years, especially in the period from 1910 to 1930. The railway provided security and public administration benefits to the elite and the nation and served as an important symbol of modernity. The difficulties that the Bangkok government experienced in suppressing rebellions in 1902 in the north, northeast and south served to underscore the strategic importance of railroads. Railroads also gave the government and its officials a strong monopolistic position in a significant part of the transportation sector. The decision not to invest in irrigation also deserves a more detailed examination. A number of factors were important in determining the decision of the government. First, as just noted, irrigation would have provided primarily economic benefits, whereas the railway served national security goals.20 Second, there were critics of the cost and potential benefits of investments in irrigation. Third, the government faced severe limitations in the amount of capital it could raise and invest. Fourth, there was opposition from landowners at Rangsit who would probably have lost their tenants if new irrigation projects had been opened. Finally, the government and its officials had only limited means by which they could appropriate some of the gains from public investments in irrigation. The van der Heide proposals resulted in some policy debates, which are unfortunately not well documented. Complaints were made about the extensive length of van der Heide's report and about his generous salary (see r.5. k.s. 9/5). Some observers questioned his expertise, his desire to learn about conditions in Thailand, and his ability to get along within the Thai system, although they did admit that his report was useful (see r.6. k.s. 4/2, 13 January 1913, memorandum written by the Minister of Agriculture, Prince Rabi). Others, however, praised his work and stated that his practice of making field investigations and visits made him popular with officials (see Phonrok [1941], pp. 159-61). The British financial advisers who served in the Ministry of Finance generally agreed with the priority given to railway investments that served strategic and administrative goals and favoured railway investments. During the 1903 debate on the first van der Heide proposal, the Financial Adviser, Rivett-Carnac, argued as follows: Before we can think of a great Irrigation scheme, we must provide funds for the strategic Railways which are essential if the outlying Provinces are to be properly governed. Those railways must be constructed out of borrowed capital and I am altogether averse to borrowing money for Irrigation at present, in addition to money for Railway construction. Such a course would be rash in the extreme. (Memorandum by the Financial Adviser upon Cash

82

The Political Economy of Productivity

Balances of the Government, 25 November 1903, Files of the Financial Adviser Section 30, #6, as quoted in Brown [1975], pp. 137-38). W. J. F. Williamson, another British fiscal specialist, also favoured railways. (British interests were, after all, at stake: a significant portion of the rails and rolling stock came from Britain, consulting services were purchased from the U.K., and furthermore, increased rice productivity in Thailand might have provided more effective competition with Burma, a British colony and major rice exporter.) In 1908 in responding to proposals to irrigate the west bank of the Chao Phya river, Williamson commented in this way: To my mind it has not yet been satisfactorily shown that new irrigation works are required in Siam, except as feeders to already existing systems, owing to the want of sufficiently dense population, and I have consequently always been opposed to the Government committing itself to any of Mr. van der Heide's ambitious projects ("Memorandum: Further Proposed Schemes of Irrigation Department," 14 August 1908, see Files of the Financial Adviser, Section 18, #4). Later when Ward, a British irrigation adviser, made proposals Williamson was more interested. However, he recommended that the Pasak project be pursued since it would benefit areas already under cultivation and would avoid the problem of migration out of the Rangsit area (see Files of the Financial Adviser, Section 18, #6, 18 January 1916, and Williamson as quoted in R.I.D. [1929], p. 11-14). Much of the policy debate was devoted to the issue of whether or not to seek a foreign loan for development expenditures and the issue of railways versus irrigation (see Brown [1975]). Railway construction out of current government revenues was proceeding slowly and in the early 1900's the advisability of seeking a foreign loan was hotly debated. The Minister of Finance, Prince Mahit, argued in 1903 that since the railway was only generating a 4 per cent rate of return and a loan would probably cost in excess of 6 per cent, van der Heide's estimated 10 per cent return out of land sales, land taxes, and water charges on irrigation investments made irrigation a more attractive investment (see Brown [1975], pp. 119-60). Mahit felt that irrigation could subsidize railway construction through its expected 4 per cent net rate of return. The Foreign Minister, Prince Devawongse, was sceptical about the returns from land sales and water charges and impressed with the high cost of the van der Heide project. Within the cabinet Mahit appears to have been the sole supporter of irrigation investments, and the 1903 decision favoured the railways and postponed seeking a foreign loan. Railways and the military continued to receive budgetary allocations at the expense of the irrigation department from 1903 to 1909. Finally when in order to meet interest payments on the 1905 and 1907 loans #700,000 was cut from the #1 million Royal Irrigation

Institutional Change: Irrigation Policy

83

Department budget for 1909 (see Holm [1977], p. 149), van der Heide resigned and the department was virtually disbanded. An additional glimpse into the decision-making process by which the government decided not to invest in irrigation is provided by Brown's analysis of the role of the British financial advisers in policy formulation. Brown (1978) argues that British financial advisers had limited influence on policy and were important primarily for their Western financial expertise and general contributions to discussions concerning financial policy.21 He cites evidence indicating that the van der Heide proposal was opposed by Thai officials before the opinions of the advisers were articulated. Thai opposition to the irrigation project was based on its large scale and the fact that it competed with the railway for funds. Brown further argues that the decision to reject the van der Heide proposal was an indigenous one. He also indicates that the railway and currency reserve investments were made in order to insure the sovereignty of Thailand in the face of the Western colonial threat. Because Thailand did not have fiscal autonomy until 1926, the government did not have the flexibility to raise taxes effectively to capture a great deal of the gains from irrigation investment. This lack of fiscal autonomy also limited the funds available for government investment and repaying foreign loans. Furthermore, the government, in following the rules of the international financial system, accumulated reserves which were held in Europe instead of being invested in Thailand. In particular, the government was not totally free to vary the land tax rates to capture some of the benefits of irrigation. The specific tax as well as land tax rates stipulated in the 1856 treaty had declined in real terms. In 1898 the Ministry of Finance began to negotiate treaty revisions with the British and in September 1900 the Thai government was given the right to raise its land taxes as long as the rates did not exceed those charged in lower Burma (Brown [1975], pp. 154-60). Rates were finally raised in 1905 but much of the new revenue was earmarked to replace revenues lost through the closure of provincial gambling dens. Landowners at Rangsit feared that new, properly irrigated areas would draw tenants away from their land. The government's decision in 1915 to invest in the Pasak scheme, which benefited the Rangsit area, was taken because landowners there, many of whom were powerful Bangkok officials, would be able to retain their tenants and profit from the resulting appreciation in land values. According to data on land prices in the Pasak projet area taken by the irrigation department, land values appreciated by about 84 per cent after the project was completed (R.I.D. [1929], statement 11A). Irrigation officials later commented on the Pasak project decision: The Government took the above course probably because it was considered inadvisable to disturb existing arrangements of landlords and tenants in the Rangsit area and elsewhere, which the opening up of big areas of land in

84

The Political Economy of Productivity

Subhan, free for all, must have done (R.I.D. [1927], p. 6; see also R.I.D. [1922]). In 1936 the Financial Adviser, W. A. M. Doll, argued that by not investing more in irrigation, Thailand became "the victim of her own Government's improvidence" (see Files of the Financial Adviser, Section 18, #18, 19 December 1936). The government only invested in irrigation where powerful factions could appropriate some of the gains; if the van der Heide scheme had been constructed, it would probably not have been possible for the elite to capture a substantial portion of the gains and ownership of most of the land in the Central Plain would have been difficult to arrange. By 1903 elite who had speculated heavily in land at Rangsit were probably not in a financial position to attempt to extend their control over a much larger area. Railways provided more in national security, political development, and public administration benefits than irrigation, and because the capital budget of the government was particularly limited little was left over after military and public administration projects were pursued. The interests of the landlords at Rangsit and the Bangkok elite favoured railway over irrigation investments, despite the fact that irrigation investments were more beneficial than railways to the society as a whole.22 The divergence between the rate of return to the society and the rate of return to the policy makers as well as the divergence between the economic rate of return and the over-riding goal of maintaining national independence explain a great deal about the failure of Thailand to develop through rice exporting.23

6

From Property Rights in Man to Property Rights in Land

In Chapter 5 it was argued that the decision of the government not to provide irrigation facilities for the Central Plain was the key to the lack of productivity growth in Thai agriculture. It was further argued that the divergence between the rate of return to the elite and to the society as well as the divergence between economic and national security rates of return helped to explain why the government did not invest in irrigation. This chapter examines the decisions made by the government in changing the system of property rights within which the economy operated. In contrast to the irrigation case, here the government was relatively responsive. Explaining that responsiveness will add to an understanding of policy formulation and its effect upon development.

CHANGES IN PROPERTY RIGHTS: A MODEL

The general approach to the analysis of institutional change, in this case in the system of property rights, was outlined in Chapter 2. The demand for institutional change responds to trends in factor and product prices. The supply of institutional change will depend upon the net returns to those making the change. This will be affected by the returns to the decision-maker and costs of changing institutions. These costs will be affected by the stock of knowledge on institutions derived from research and experience and the factor payments for those factors associated with investigating and initiating institutional change. The supply and demand model of institutional change focuses on both the incentives to create property rights in a factor of production experiencing a rise in its relative price and the net gains for the suppliers and enforcers of the new form of

86

The Political Economy of Productivity

property rights. Domar (1970) focuses on the role of relative factor prices in creating the incentive to capture the rent owing to a scarce factor of production. Pryor (1972, 1977) examines how the benefits and costs of various kinds of markets and property rights systems change over the development process. He finds that the emergence of a labour market is positively related to the level of economic development while there is weak evidence in his sample of one hundred historical and contemporary primitive societies that reciprocal labour exchange and the level of economic development are inversely related. Land rights and enforcement instruments such as deeds emerge as the level of development and population density rise. Slavery is more common in agricultural societies than in hunting and gathering societies and emerges sooner when the source of slaves is extratribal rather than intratribal, reflecting the lower costs of enforcement of servitude and acquisition of slaves. In general, there appears to be an evolution of markets from the emergence of markets for goods at low levels of development, to the emergence of labour and credit markets, and finally to the creation of land and land rental markets. Ault and Rutman (1979) similarly suggest that in Africa population growth induced the introduction of individual property rights in land. They also suggest that the interests of the elite sometimes delayed the introduction of these rights. These studies provide empirical support for induced institutional change hypotheses whereby changes in property rights systems and the general development of institutions do respond to economic forces. They also acknowledge that the supply of institutional change is not always readily forthcoming. In his study of rural change in Vietnam, Popkin (1979) also stresses the role of the political entrepreneur who organizes parties with common interests and co-ordinates their activities in bringing about change. The approach here will look more carefully at the mechanisms by which the latent demand for a change in the property rights system may or may not be translated into an institutional innovation. In particular the payoffs to the elite will be examined. Since the model highlights the importance of trends in factor prices in determining the demand for change, this chapter will briefly review those trends before presenting a description of the mid-nineteenth century property rights system and providing a narrative and interpretation of the changes in that system. TRENDS IN RELATIVE FACTOR PRICES

Nominal and real wage data are presented in Table 6-1. In the period from the mid-nineteenth century to 1912, real wages tended to decline, especially after 1890. Between 1864 and 1912 real wages (in rice) declined by 1.04 per cent per year. This trend is corroborated by the comments of a Thai official in 1899 who indicated that rice prices were rising faster than wages (r.5. k.s. 9.2/25,18 October 1899). In the period from 1912 to 1938, real wages increased by 1.84 per cent per

From Property Rights in Man to Property Rights on Land

87

year.1 As was pointed out in Chapter 3, given the decline in the real wage in rice and the importance of rice in the consumption bundle, there is evidence suggesting that the wage earner's standard of living declined in the period from the midnineteenth century until the 1920's. For the period prior to 1915 there is only scattered information on land prices. The land price trends are used as a proxy for the trends in land rents. Table 6-2 presents some of the scattered information on land prices and rents (see also Table Al-7). The impression that emerges is that land prices and rents in both nominal and real terms appreciated during the period from the 1860's to 1905 (see also r.5. k.s. 9.2/25). Table 6-1 presents data on nominal and real land prices for the period from 1915 to World War II. Real land prices declined from 1915 to 1920 and then rose until 1940. This pattern follows the trend in the terms of trade for that same period (see Table 3-7). When the terms of trade moved in favour of agriculture, land prices appreciated, and when the terms of trade moved against agriculture, land prices declined. Given the sensitivity of the trends in land prices to the trends in the terms of trade and the fact that the terms of trade were favourable to agriculture in the period from 1865 to 1900, one would expect land prices to have appreciated during that period. The scattered evidence presented in Tables 6-2 and Al-7 corroborates that prediction. Furthermore, since there is no evidence pointing to a decline in agricultural productivity throughout those years confidence can be placed in the inference that land prices appreciated during this period. This conclusion is supported by van der Heide who indicated in 1906 that during the previous half century land prices had appreciated while wages declined (see van der Heide [19060] and r.5. k.s. 9.2/25).

88

The Political Economy of Productivity

TABLE 6-1: NOMINAL WAGES, REAL WAGES, NOMINAL LAND PRICES, AND REAL LAND PRICES, 1864 TO 1950

Year 1850 1864 1889 1890 1896 1898 1901 1905 1912 1915 1920 1925 1930 1935 1938 1940 1950 a

Nominal Wages per Day (baht) 0.42 0.70 0.75 0.75 0.50 0.50 0.83 0.50 0.88 0.75 1.00 1.00 1.00 0.80 0.80

Real Wages3 176.4 100.0 121.0 110.6 51.4 45.4 72.7 40.0 60.5 73.5 73.7 62.6 75.9 100.8 97.3

20.00

74.0

Indices of Nominal Land Prices"

Real Land Prices0

100.0 109.7 151.6 177.4 119.2 113.2 141.2

100.0 82.5 96.9 137.4 153.3 140.5 142.0

Real wage index with a base year in 1864; real wage as the number of kilograms of rice per daily nominal wage for Bankok unskilled labour. b Index of nominal land prices with a base year in 1915. c Index of real land prices with a base year in 1915, where the real land price equals the nominal land price divided by the rice export price. Sources: See Tables 3-8, 3-10, and Al-6.

From Property Rights in Man to Property Rights on Land

89

TABLE 6-2: REAL LAND PRICES AND RENTS AND INDEX OF REAL LAND PRICES FOR CENTRAL PLAIN PADDY LAND, 1864 TO 1915

Year 1864-74

1889 1890 1891 1894 1897 1900 1901 1903

1904 1905

1906 1907 1908 1911 1915

3

Real Land Price in Tons of Rice per Rai

Index of Real Land Price (1915 = 100)

0.107 0.024 0.020 0.038 0.076-0.152 0.225-0.562 0.150 0.262 0.157 0.105 0.839 0.2~10-0.525 0.105-0.210 0.265 0.423 0.211

50.7 11.4

18.0 36.0- 72.0 106.6-266.4 71.1 124.2 74.4 49.8 397.6 99.5-248.8 49.8- 99.5 125.6 200.5 100.0

0.357 0.213-0.320 0.085 0.374-0.428 0.846

169.2 100.9-151.7 40.3 177.3-202.8 400.9

0.211 0.136 0.123 0.117 0.207-0.415

100.0 64.5 58.3 55.5 98.1-196.7

9.5

Real Land Rent in Tons of Rice per Rai per Year 0.00180.00367"

Location and Comments

Central Plain Bangkok Area Bangchan, Central Plain Bangkok Area Prathumthani Rangsit Rangsit Ayuthia land sale 0.042 Nakorn Chaisi, good land Nakorn Chaisi, medium land 0.016 Nakorn Chaisi, poor land 0.094-0.015 Rangsit, lowland Rangsit, average land Rangsit, highland Rangsit Ayuthia Rangsit, low quality 0.042 Ratburi 0.021 Bangkhuad, Bangkok area Central Plain, good land 0.043 Rangsit Central Plain Ratburi Sen Saeb canal, Central Plain 0.128b r.6. k.s. 1/12, good land 0.064b r.6. k.s. 1/12, poor land from Table A 1-8 Ayuthia Saraburi Thanyaburi Pasak Area

The rent for 1864-74 was calculated by taking the cost to the homesteader of acquiring rights to the land. In that period, land was tax free during its first year of cultivation and taxed at reduced rates during the second and third year of cultivation (forfang loi land it was taxed at a reduced rate during the fourth year). From the fourth or fifth year on, land was taxed at the full rate. The cost was computed by taking the total tax paid during the first three years and dividing that sum by the average rice export price for 1864 to 1874 (data taken from Table Al-1) and then dividing that result by three to get the average cost per year. This method sets a floor on the rental cost of land during this period. b The rent on the good land was reported to be 40 per cent of the crop and the rent on the poor land was 12 to 16 per cent of the crop. Using 2000 kg/ha as a good yield and 1000 kg/ha as a typical yield on poor land, the rent in metric tons per rai per year was imputed. Note: The real land prices and real land rents per rai per year were computed by taking observations on nominal land prices and rents from Table A1-7 and dividing them by the rice export price in baht per metric ton taken from Table Al-1. For the information on trends in real land prices after 1915 see Tables 6-1 and Al-8.

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The period from the mid-nineteenth century until 1900 was one in which land prices appreciated and real wages declined. Table 6-3 further documents the fact that land prices were gaining with respect to wages by presenting an index of the number of days of work necessary to earn enough to purchase one rai of paddy land. Again it appears that land values appreciated with respect to wages in the period from the late 1880's to 1905 when the trend was reversed for approximately a decade. Given these trends in factor prices, an appreciation of land prices and decline in real wages, the institutional change model predicts that there would have been a growing demand for the establishment of full property rights in land. The decline in wages would mean that there would be less interest in human property rights than there had been in an earlier period during which labour was relatively more valuable.

PROPERTY RIGHTS IN MAN IN THE MID-NINETEENTH CENTURY

The following narrative describes the mid-nineteenth century Thai property rights system and the subsequent changes in that system. Before Thailand was opened to extensive international trade, the Thai economy was characterized by a high land/man ratio. Real wages were high, and the control of manpower formed the basis of economic, political, and social power through a series of patron-client relationships. Commoners were classified as phrai luang, phrai som, phrai suai, and slaves: phrai luang were required to provide three months per year of corvee labour to the king or pay a fee of #18 (Lasker [1950], p. 190); phrai som owed the corvee labour to their patron; phrai suai made payments in kind (such as forest products) in lieu of providing services. Each of these categories of phrai were under the control of their nai, an official. In practice, the nai who acted as patrons to the phrai, were able to use the phrai for personal projects (Akin [1969] p. 73). During the nineteenth century phrai increasingly paid money in lieu of services, and the government hired Chinese labour for public projects (see Vella [1957]; Ingram [1971]; and Wilson [1970]).2 After 1897-98 the fee for exemption from corvee was reduced to #6 (Files of the Financial Adviser, Section 5, #1, 10 June 1899).

From Property Rights in Man to Property Rights on Land

TABLE 6-3: NUMBER OF DAYS OF LABOUR REQUIRED TO EARN ENOUGH TO PURCHASE ONE RAI OF CENTRAL PADDY LAND, 1889 TO 1941

Year 1889 1890 1891 1894 1897 1900 1901 1903

1904 1905 1906 1907 1908 1915

1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937

Number of Days of Labour at the Urban Unskilled Wage Necessary to Earn Enough to Purchase One Rai 6.7 1.7a 1.3a 4.0b 10-20b 24-60c 15.6 91.4d 22.9-57. l d 11.4-22.9d 28.6d 17. l d 11. 4d 50* 80 40 67.6-60* 40 16e 70-80* 144e 21.3-42.7 14 12.7 12 27.76f 14.1 11.5 13.2 16.7 17.9 18.0 20.4 19.9 18.3 24.7 24.4 24.8 27.9 28.2 28.9 32.3 28.5 23.4 21.5 24.3 22.8 23.7

Index of the Number of Days (1915 = 100) 20.7 7.7 6.1 18.4 46-92 110.3-275.7 71.7 420.0 105.2-262.4 52.4-105.2 131.4 78.6 52.4 229.8 367.8 183.8 310.7 183.8-275.7 73.5 321.7-367.6 661.8 97.9-196.2 64.3 58.4 55.1 100.0 64.8 52.8 60.7 76.7 82.3 82.7 93.8 91.4 84.1 113.5 112.1 113.9 128.2 129.6 132.8 148.4 131.0 107.5 98.8 111.7 104.8 108.9

91

92

Year 1938 1939 1940 1941

The Political Economy of Productivity

Number of Days of Labour at the Urban Unskilled Wage Necessary to Earn Enough to Purchase One Rai 23.1 29.6g 28.8* 27.4*

Index of the Number of Days (1915 = 100) 106.2 136.0 132.4 125.9

a

Used the wage for 1889-90. Used the wage for 1896-98. Used the 1901 wage. d Used the 1902 wage. e Used the 1905 wage. f This figure was used for the construction of the 1915 = 100 index of the number of days' wages needed to purchase one rai. It was calculated by dividing the price per rai (from Table Al-8) by the 1915 wage for unskilled Bangkok labour. 8 Used the wage for 1938-39. Sources: The nominal wage data come from Table Al-5. The nominal land prices for 1889 through 1915 come from Table Al-7. The land price data for 1915 through 1941 come from Table Al-8. One rai = 0.16 hectares. b c

Slavery, an important institution in mid-nineteenth century Thailand, should also be seen within the patron-client framework (see Akin [1969] and Cruikshank [1975]). Pkllegoix estimated that slaves comprised at least 25 per cent of the total population (Pkllegoix [1969], 1: 235).3 The law recognized seven types: 1. slaves in which the owner had full title; 2. children born of slaves in the master's household; 3. slaves received as gifts from their parents or inherited; 4. slaves received as gifts; 5. slaves rescued from peril or legal penalties; 6. slaves supported in times of famine; 7. slaves acquired through capture in war.4 These categories imply two basic ones: debt slaves and war captives (Cruikshank [1975], p. 316). The patron acquired some degree of property rights in the slave by providing him with protection, money, or assistance, in return for which the slave owed the patron-master most or part of his labour services. Debt slaves retained varying degrees of freedom depending upon whether or not they had been sold for the full price, where the prices had been fixed by law at $180 for female adults and #219 for adult males (see Wales [1934] and Akin [1969], pp. 106-8). Slaves who were sold for the full price or more became property of the master. Slaves sold for less than the fixed price were "redeemable," which meant that they could purchase their freedom by paying off the debt. Finally, another group of debt slaves were sold into slavery for security on loans, paying interest to their masters while pursuing their own lives subject to little control by the master. Most slaves either fell into the latter category of interest-bearing slaves or were redeemable. There is little evidence of a slave market or active trading in slaves (Akin [1969], p.

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93

109); slavery served more as a form of property rights for security on loans than as a means of defining full property rights in people. Since the phrai som had advantages over phrai luang and could change their nai more readily, there was a natural tendency for the monarch to lose the services of men as they shifted from phrai luang status to become phrai som. The monarchs used a number of devices to limit this movement and restrict the growth of power by potential opposition groups. During the Bangkok dynasty, phrai luang and slaves were tattooed so that they could not readily change their status (Akin [1969], 88). Measures were also adoped which eroded the advantages of shifting status (Akin [1969], p. 58).

PROPERTY RIGHTS IN LAND, 1850-1892

Property rights in land in the mid-nineteenth century do not appear to have been well defined. However, the payment of taxes on a piece of land as well as the act of clearing and developing land gave the cultivator the right to retain the land, sell it, or pass it on to his heirs (Low [1847], pp. 336-37). Rights to an area were lost if the area was not used for three consecutive years, and the ability to use the land as collateral on a loan was limited. The general appreciation of land prices (see Tables 6-2 and 6-3 and van der Heide [19060]) led to the establishment in 1867-68 of titles on rice land for which the tax would be based on the harvested area (see r. 5. k. s. 4.1/3, 30 October, 1892). In 1882-83 titles for rice lands for which the land tax was based on the area owned rather than the cropped area were established for Krungthep, Suphanburi, Lopburi, and Angthong — the major Central Plain rice producing areas (r.5. k.s. 4.1/3). Owners without these documents could obtain them and thus be able to exclude others from using the land by showing the official tax receipts for ten years. Farmers could also obtain a document to prevent others from using a piece of land for three years, during which time the farmer was required to bring the land under cultivation or lose his rights to it. The system of property rights in land established in the 1860's, 1870's, and 1880's was still not satisfactory. The lack of a central place for land records meant that several sets of documents could be issued for the same piece of land. Land disputes continued to occur (see Tomosugi [1980] and Tanabe [1978]). In the 1880's the government sought to standardize the forms used for land documents; then in 1892 the government passed a more comprehensive land classification law. It created nine types of land, including land held by religious institutions, royal land, residential land, agricultural land, land used for mining, forest and jungle land, and waterway land (see r.5. 4.1/3, 3Q October, 1892). Each of these broad classifications was further subdivided. For agricultural land the categories included three types of orchards and gardens, upland land, two types of paddy land,

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The Political Economy of Productivity

and garden lands. There were provisions for transferable titles which would serve to exclude others from using the land. These titles could be used as collateral for loans, and there were documents for the registration of such transactions. While the Ministry of Agriculture was given the primary responsibility for issuing these documents and administering the system, several other ministries were responsible for the administration of parts of the law. Provision was also made for the conversion of older documents that had been issued into their equivalents under the new law. Land reserved had to be brought under cultivation within one year, and if it was not cultivated for three consecutive years, the rights would be lost unless taxes had been paid on the land for ten consecutive years. In general this law replaced a rather ad hoc system with a more comprehensive system of property rights in land.

CHANGES IN PROPERTY RIGHTS IN MAN, 1850-1905

While the government was creating a more elaborate and secure property rights system for land, it was gradually dismantling the property rights system in man. As was pointed out earlier, monarchs during the nineteenth century took actions to restrict the movement of phrai from those who owed royal corvee to those controlled by princes and nobles. Increasing monetization led to the substitution of cash payments for labour as the form of tax payment. The government turned to the increasingly available immigrant wage labourers for public works projects. The existence of more fully developed commodity and factor markets meant that rulers no longer needed to collect taxes in the form of the direct provision of labour services. Commoners could now sell goods to pay taxes in money to a government that could in turn hire labour services on factor markets.5 During this same period a number of changes were made in the legal status of slaves. In 1868 King Mongkut modified the regulations so that wives had to give their written consent before they could be sold into slavery by their husbands (Lingat [1931], p. 96). In a very important edict in 1874, King Chulalongkorn set the prices of the children of slaves born after 1 October 1868 so that the price of the slave would decline until the age of 21 at which time he would be automatically freed (see Lingat [1931], pp. 265-69; Smith [1880], pp. 57-64; Lasker [1950], p. 56). The law provided that the grandchildren of slaves be free at birth. (The king had hoped that the freed children would then work to purchase the freedom of their parents.) The law also stated that no one born after 1 October 1868 could sell himself into slavery after he had reached the age of 21. Because the law did not affect the status of some redeemable slaves, a law was passed in 1890 making the children of redeemable slaves free at age 21 (Lasker [1950], p. 57). In 1897 coverage of the act was expanded and enforcement enhanced by stating that no one born after 16 December 1897 could sell himself or be sold into slavery (Ingram

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95

[1971, p. 62). In 1905 the king moved to abolish slavery completely by forbidding the sale of slaves and reducing the price of slaves by J#4 per month until they were freed (Lingat [1931], p. 272). In 1900, 1911-12, and 1913 previous legislation on the abolition of slavery was extended to all parts of the kingdom (see Lingat [1931], pp. 271-91; Prachoom Chomchai [1965], p. 58). By 1915 trading in slaves had ceased in virtually all areas. Another important edict was the abolition of corvee in 1899 and its replacement by a head tax (Prachoom Choimchai [973], p. 4).6 The proclamation of 1874 made clear King Chualongkorn's intention to abolish slavery. The method was carefully chosen to avoid burdening the state with the cost of paying the masters for their slaves. The abolition was sufficiently gradual that opposition from powerful nobles and princes who owned slaves could be overcome. Furthermore, slavery was abolished during a period in which the real wage was declining, and thus the value of the asset was also declining. Freed slaves were able to participate in the expansion of cultivation, and their former masters were able to purchase land, an asset whose value was appreciating with respect to labour.7 The trends in the relative factor prices made it easier for the king to abolish slavery and corvee. His motivation, in addition to providing the basis for a greater degree of labour mobility to stimulate the growth of exports, was to consolidate his power against the powerful opposition princes and nobles by decreasing their control of manpower, the traditional source of wealth and power.8 Institutional change was undertaken when it was to the advantage of the decisionmaker; the political motives and morals of the monarch favoured institutional change. The change in the property rights system was incidentally beneficial to society because it facilitated specialization in an activity for which Thailand had a comparative advantage, land-intensive rice cultivation.

PROPERTY RIGHTS IN LAND, 1890-1940

The expansion of cultivation in the 1880's led to the 1892 land law which significantly improved the security of land rights and helped to make procedures and documents more uniform. However, there was still no provision for a centralized system of maintaining land records and no means of unambiguouly identifying the land which corresponded to the title. These problems became abundantly clear during the rapid expansion of the 1890's, particularly in the Rangsit area. The treatment of previous occupants and homesteaders in that area and the speculative land boom led to a great number of bitter disputes.9 This failure of the existing system led the government to change both its administrative practices and land laws. After having concentrated on mapping work in the period from 1880 to 1896, the Royal Survey Department turned to cadastral surveys in 1896, starting primarily in the Rangsit area (Giblin [1908], pp. 121-27; R.I.D. [19156], 3: 57-66).

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The Political Economy of Productivity

In 1901 the government decided to adopt the Torrens system of land titling whic provided for cadastral surveys and central land record offices. Work was begun in the Ayuthia area in that year and continued over the next eight years. The work of the department was concentrated in the Central Plain. After the surveys were made and title deeds issued, land records offices were established to ensure that all land transfers and transactions were registered. From 1901 to 1909, eleven land recor offices were established, including offices in Krungthep, Ayuthia, Chonburi, Nakorn Chaisi, Chachengsao, Prachinburi, Phichai, Pitsanulok, Suphanburi, Lopburi, and Angthong (Phonrok [1941], pp. 91-106). Data on the number of holdings and title deeds issued are provided in Table 6-4. After 1909 the department was less active in doing cadastral surveys. TABLE 6-4: NUMBER OF HOLDINGS CADASTRALLY SURVEYED AND NUMBER OF TITLE DEEDS ON FILE, 1901-2 TO 1941

Year 1901-2 1904-5 1905-6 1908-9 1909-10 1915-16 1920-21 1925-26 1930-31 1935-36 1941

Number of Title Deeds on File

123,533 238,761 459,673 519,473 558,151 590,715 613,094 643,400

Number of Holdings, Whole Kingdom3 81,570 327,313 397,658 618,642 637,001

Number of Holdings, Central Plain8 294,806 365,151 574,710 593,069

Area in survey Area in survey under cultiunder cultivation, Whole vation, Central Kingdom6 Plain" (ha x 1000) (ha x 1000)

178

1046 1262 1648 1671

987 1203 1582 1605

a

Refers to the number of holdings cadastrally surveyed to date. Refers to the number of hectares under cultivation in the area cadastrally surveyed to date. Sources: The data on the number of holdings, area, and number of title deeds on file (for 1905-6 and 1908-9) come from the Royal Survey Department, Siam: General Report on the Operations of the Royal Survey Department, 1900-1901, 1901-2, 1902-3, 1903-4, 1904-5, 1905-6, 1906-7, 1907-8, 1908-9, and 1909-10. The data on the number of title deeds on file for 1915-16 to 1941 come from Statistical Year Book of the Kingdom of Siam, Nos. 1 (1916), 6 (1921), 11 (1925-26), 17 (1931-33), 19 (1935-37), and 21 (1939-40 to 1944).

b

The new system was a definite improvement over the previous one. The possession of title deeds allowed more farmers to use their land as collateral.10 However, the failure to administer the system diligently and to keep the records complete and up-to-date did depreciate its benefits (R.I.D. [915&], 3: 71-74). After the adoption of the Torrens system of land titling in 1901, a number of minor changes were made. In 1908-9 a law was passed altering some of the administrative procedures and establishing a new schedule of fees for land registration and

From Property Rights in Man to Property Rights on Land

97

transfers (r.5. k.s. 4.1/8), and minor revisions were made again in 1916 and 1919 (r.5. k.s. 2/6). In 1929 restrictions were placed on the sale of public lands in order to curb speculation (Files of the Financial Adviser, Section 32, #7), and finally, in 1938-39, a new schedule of land taxes for agricultural land was enacted (Files of the Financial Adviser, Section 2, #16). However, basically the system established in 1901 remains in force up to the present.11 Some observers criticized the system because it was poorly understood and because it drew too little on Thai legal traditions (r.6. k.s. 7/4, 10 May 1912). Others criticized the poor implementation of the system that left some farmers with full title and others with documents designed to reserve the land for their use, even though many of the farmers in this latter category should have been issued titles (r.7. k.s. 2/17,1930). Ingram reports the results of a recent survey in which out of a total of 9.79 million hectares of land, 1.2 million (12 per cent) had titles, 0.4 million (4 per cent) had reserve licenses, 1.79 million (18 per cent) had exploitation testimonials (a document which the farmer receives when he has brought at least 75 per cent of the land he reserved under cultivation), and 6.40 million (65 per cent) had no documents (see Ingram [1971], p. 366; see also Johnson [1969], Hooker [1975], Engel [1978], Kemp [1981], and Gisselquist [1976]). Most of the titled area is found in the Central Plain. The land titling system therefore has not been successfully applied to all areas, but has been more successful in the area where it was first applied — the Central Plain. The creation of secure property rights in land in Thailand is an on-going process.12

CONCLUSIONS Having briefly described the changes in the property rights system in Thailand during the period from the mid-nineteenth century to World War II, an interpretation of these events is now needed. Changes in relative factor prices did create demands for changes in the property rights system. The appreciation of land prices led to increased interest in land holding, which, given the existing system of land law and its administration, resulted in disputes. The government responded with a series of administrative and legal changes which evolved in a trial and error fashion into a system based on cadastral surveys and transferable title deeds. This system, adapted from Australian experience, was initially implemented with the assistance of European officials, and the resulting changes made land rights more secure and made land a more reliable form of collateral. The elite themselves participated actively in the acquisition of land; they too benefited from the establishment of a better system of property rights in land. The appreciation of land prices had led to demands for a more secure property rights system and the supply of that system was forthcoming because the elite shared in the gains. Movements in the private rate of return to the elite for making the change and the

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The Political Economy of Productivity

rate for the society as a whole did not diverge, and as a result the changes were made. The decline of property rights in man was associated with the decline in real wages which made ownership less attractive. Thus, declining real wages lessened opposition to the abolition of slavery and corvee, actions which were in the interests of the monarch, who had a clear political incentive in seeking to abolish the control of manpower by his potential opposition. The political interests of the monarch in shifting the power base away from nobles and towards himself provided the motivation for the supply of institutional change, the abolition of slavery. The demand for property rights in man declined because of the development of commodity and factor markets — part of the general trends of commercialization and monetization which occurred over the period. The increased availability of wage labour (in part the result of immigration) and development of a labour market made slavery less attractive financially. The development of property rights in land created an asset that could be issued to secure loans. Betterdeveloped commodity markets facilitated the payment of taxes in money, thus making corvee less attractive. Thus, the general development of markets and decline of real wages lessened the demand for property rights in man, while the political motives of the monarch in attempting to shift power away from nobles and toward himself provided the supply of the institutional change, the abolition of slavery and corvee." In the case of irrigation and the provision of research and development and extension services for agriculture, the Thai government in this period was unresponsive. For the property rights case, the government was quite responsive in changing without violence the whole system of property rights within the relatively short period of roughly forty years. Socially beneficial change was made in this case only because the interests of society and the elite coincided.

7

Technical and Institutional Change in Thai Agriculture, 1880 to 1940

The first six chapters have investigated the reasons for the lack of development in the Thai economy in the period from the mid-nineteenth century until World War II. Our ultimate interest is explaining the trends in real per capita income and the standard of living. For the period from 1860 to 1900 there is some evidence of a rise in the rural standard of living. Rice exports per capita and the terms of trade (the export price of rice divided by the import price of cloth) were both increasing over the period. While the rural standard of living appears to have been increasing, the standard for urban workers appears to have fallen, especially after 1890. In the period from 1900 to 1921 rural living standards continued to increase while urban standards fell. These trends were reversed in the period from 1921 to 1941. While urban real wages increased, the decline in per capita paddy production was sufficient to reduce rural incomes even though the terms of trade moved in favour of agriculture during this period. Urban and rural living standards appear to be inversely related, and the decline in agricultural incomes in the face of favourable movements in the terms of trade is striking. In the period from 1850 to 1940 Thailand specialized in rice exporting. However the expansion of cultivation and production was accompanied by a decline in productivity in the rice sector. Given the importance of rice in the Thai economy and the decline in rural incomes in the period from 1921 to 1941, this decline in productivity was very serious. The expansion of cultivation into less fertile and more damage prone areas does account for some of the decline in yields, but there is a substantial residual which cannot be explained by the Ricardian hypothesis. Yields appear to have declined through soil exhaustion and

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The Political Economy of Productivity

perhaps through a decline in the yield potential of the seed used. Officials were aware of the decline in yields and a number of relevant programmes were proposed. Two were examined in detail in earlier chapters: research and development and extension for rice cultivation, and irrigation. It is important to estimate what effect these programmes might have had on paddy yields in the Central Plain if they had been implemented.

COUNTERFACTUAL PRODUCTIVITY TRENDS IN THAI AGRICULTURE

The development of higher-yielding rice varieties during this period was a relevant possibility. A number of Thai officials advocated such research programmes, and in some cases work was started on selecting and distributing the best native varieties. During this same period, high-yielding Ponlai rice varieties were being developed in Taiwan. In actual field conditions these varieties obtained yields which were at least 15 per cent greater than those of the older varieties (see Carr and Myers [1973], p. 37). Grist has indicated that better seed selection in Thailand could have raised yields by 15 per cent (see Grist [1965], p. 122). Improved varieties today yield 15 to 100 per cent more than traditional varieties (Jackson, Worawit, and Sermsak [1969], 83), and improved varieties based on pure line selection released in Thailand in the early 1950's increased yields by 15 per cent (Cleaver [1975], p. 301). Regional testing and selection done in the early 1950's also produced varieties that increased yields by 10 to 20 per cent (see Rarthasarathy [1972], p. 25). Therefore, it is reasonable to conclude that if the Thai government had invested in developing better rice varieties for the Central Plain, those varieties would have had yields which were 15 per cent greater than the yield of traditional varieties; however, those higher-yielding varieties required water control. Irrigation, which would have raised wet seasons yields in the Central Plain by at least 20 per cent, would have also reduced flood and drought damage. It is now possible to conservatively estimate the yields that would have occurred if the government had invested in research and development for rice varieties and the complementary input, irrigation. Estimates presented in Table 7-1 indicate that irrigation alone would have served to arrest the decline in Central Plain paddy yields and that irrigation with better seed would have resulted in a moderate increase in yields over the period. Therefore, had the policies discussed during the period been pursued, they would probably have served to arrest the productivity decline. Table 7-1 also provides estimates of the yields that would have occurred if the government had invested in seed development and irrigation under the yield increasing assumptions made for the alternative ex post benefit-cost estimates discussed in Chapter 5. There it was argued that a more realistic measure of the increased yields due to irrigation was 350 kilograms of paddy per hectare. Using

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101

that estimate of the effects of irrigation, irrigation alone would have provided for an increase in yields, and irrigation and seed development together would have provided for a significant growth in yields over the period. Thus, it again appears as if the productivity decline could have been reversed. In Chapter 5 ex post benefit-cost estimates were made on the 1902 van der Heide irrigation proposal. The estimated internal rate of return was over 19 per cent. This rate compares very favourably with the rates of return on government railway and other private and public investments in Thailand during the period; it is also of the same order of magnitude as rates earned on successful infrastructure investments made in the same period.1 Counterfactual ex ante estimates also favoured irrigation over the railroads. Furthermore, contemporary observers were aware of the benefits of irrigation and its relatively high potential payoff. Even though investments in agriculture appear to have been more attractive than other public investments, these investments in raising agricultural productivity were not made. CONTEMPORARY ASIAN SUCCESSES! TAIWAN AND THE PUNJAB

The relevance of the counterfactual yield estimates presented in Table 7-1 is highlighted by the considerable success of investments in irrigation and improved seed in both Taiwan and the Punjab in India in the inter-war period. In each of these cases self-interested colonial governments undertook successful investments in increasing agricultural productivity. In Taiwan, Japanese officials concerned with rice shortages in Japan after World War I decided to develop higher-yielding fertilizer responsive varieties based on crosses of native and Japanese varieties (see Hayami and Ruttan [1971]). The resulting Ponlai varieties, when combined with increased use of fertilizer and an extensive irrigation system, generated a substantial increase in yields and productivity. While paddy yields in Taiwan in 1920 were below the yields in the Central Plain in Thailand (1425 kg/ha versus 1594), by 1941 they surpassed the Thai yields (1873 versus 1310).2 Instead of a decline of 0.93 per cent per yield in paddy yields as in the Central Plain in Thailand from 1920 to 1941, yields in Taiwan grew by 1.31 per cent per year.

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The Political Economy of Productivity

TABLE 7-1: EFFECTS OF BETTER RICE VARIETIES AND IRRIGATION ON CENTRAL PLAIN PADDY YIELDS

Year 1920-21 1941

1594 1310 52 262 1624 197

1821 350 1712 257

1969

Yield in kg/ha actual yield actual yield additional yield through the reduction of the area damaged by 4% from 9% to 5% of the area planted additional yield through irrigation, a 20% increase total yield in 1941 if the irrigation system had been constructed additional yield through better seed varieties, a 15% increase total yield in 1941 with better varieties and irrigation alternate estimate of the additional yield through irrigation alternate estimate of the total yield in 1941 if the irrigation system had been constructed additional yield through better seed varieties, a 15% increase alternate estimate of the total yield in 1941 with better varieties and irrigation

Percentage Change per Year, 1920-21 to 1941

-0.93

0.09

0.64 0.34

1.01

Note: The information on actual yields and area damaged comes from Table A-12. The information on the yield increasing effects of irrigation comes from Chapter 5. The information on the effects of better seed varieties comes from Chapters 4 and 7.

These increases in yield based on new varieties, increased fertilizer use, and irrigation are reflected in the substantial increases in total factor productivity experienced in Taiwan's agricultural sector. Lee and Chen (1979) estimate that total factor productivity increased by 1.7 per cent per year from 1923 to 1937, 1.0 per cent per year from 1913 to 1937, and 1.7 per cent per year from 1946 to 1970.3 For the corresponding periods productivity increases accounted for 41 percent, 28 per cent, and 30 per cent of the increases in output respectively. Estimates based on growth rates in gross value added rather than in total output reveal the same basic trends. Thus, in a country that undertook investments in improved rice seed and irrigation in the same period as Thailand did not, there was a substantial gain in productivity instead of a decline.4 In the Punjab, agricultural officials responded to fears of famine in India and to the pressures of the cotton textile industry and began research on improved varieties of wheat and cotton in 1901 (see Pray [1978]). The British government also willingly invested in irrigation where some of the returns could be captured through land taxation. Irrigation, improved varieties, and changing cropping patterns contributed significantly to increases in production: improved varieties of cotton had both higher yields and higher quality long fibers; new wheat varieties

Technical and Institutional Change in Thai Agriculture, 1880 to 1940

103

increased yields by 9.4 to 22 per cent. In general the new varieties diffused rapidly. Pray (1978) estimates that the internal rate of return on research and development expenditures in the pre-independence Punjab ranged from 34 to 49 per cent, reflecting an underinvestment that has continued in the post-independence period. Holding irrigation, cropping patterns, and acreage constant the increase in yields owing to technical change accounts for 10 to 15 per cent of the output growth in the British period (see Pray [1978], pp. 345-46). Irrigation accounted for another 30 per cent of the increase in output. Again, it appears that substantial gains were possible in the inter-war period and could be obtained through investments in irrigation and improved seed. In the Punjab and Taiwan the colonial governments responded to demands made upon them and their own self-interest and undertook investments to increase agricultural productivity. In India wheat exporters wanted increases in output, cotton exporters wanted higher quality cotton, and the government wanted more food security. In the case of Taiwan, Japan wanted increased supplies of rice to keep its domestic rice prices down. It was in the interests of these colonial governments to supply technical and institutional changes to their agricultural sectors, changes which generated dynamic sequences of increases in productivity.

WHY THE THAI GOVERNMENT DID NOT INVEST IN INCREASING AGRICULTURAL PRODUCTIVITY

There are two major factors that explain why the Thai government did not invest in raising agricultural productivity. First, given the imperialist threat and political needs of the elite in Bangkok, particularly of the monarchs, there was a divergence between the economic and political rates of return in a number of important cases. The decision to invest in railroads instead of irrigation is an excellent example. Military and public administration benefits made the railway, an important symbol of modernity, more attractive than irrigation, which would have provided primarily economic benefits. The imperialistic environment also helped to limit the funds available for infrastructure investments. There was a conflict between national security and economic development goals, and the Thai elite regularly sacrificed economic development goals.5 The other major factor in tl^e lack of investments to raise agricultural productivity was the question of who would receive the benefits. In the case of the railway, the elite in Bangkok gained monopoly control over a significant portion of the transportation sector and were able to exert their authority more effectively up country. While the society gained through better public administration and avoided being colonized, the elite gained in relative political power within their own system. In the property rights case, the change in the system of property rights contributed to the ability of the economy to specialize in an activity in which it had

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a comparative advantage. The new system also allowed the political elite to define rights in land and capitalize on the appreciation of land values. The change also allowed the monarch to gradually attack the traditional power bases of some of his domestic opposition. Irrigation and better seed would not have presented the elite with such a significant portion of the benefits. An irrigation system for the whole Central Plain would have benefited a large number of cultivators and land owners, but would have also meant that landlords at Rangsit, many of whom were powerful officials in Bangkok, would have lost their tenants. As a result, the elite would probably have suffered losses if the van der Heide project had been built; they certainly would not have gained. Since Thailand did not have fiscal autonomy until 1926, the government was not in a position to capture some of the gains by raising tax rates. The van der Heide proposal and a number of other irrigation proposals were turned down because the elite were unable to capture the benefits. Large investments in developing higher-yielding rice varieties would have made sense only if irrigation investments had been made. But with seed development, like irrigation, the main beneficiaries would have been a large number of farmers who had little political power, not the elite who were not in a position to capture many of the gains, and not the government whose fiscal system was too inflexible to realize these profits. However, the government did invest in irrigation and a government rice experimental farm in the Rangsit area where the Bangkok officials would be among the beneficiaries. The appreciation in land prices that followed from the Pasak project was 84 per cent (see Table 5-7). The gains were substantial, proving again that when the decision-makers and those who had influence within the government stood to gain, the government was able to invest in agriculture. In both the case of irrigation and seed development, private enterprise was not a relevant alternative to public investment. The van der Heide project was indivisible and required central direction. In the case of agricultural research, there are significant external benefits that cause social benefits to exceed private benefits. Seed development and an irrigation system for the Central Plain could only be provided through public investment, and since the decision-makers could not appropriate much of the economic gains and since there were few military and public administration gains, these projects were not pursued. As a result, the Thai government did not arrest or reverse the decline in productivity in the rice sector, even though the social rate of return for such investments would have been relatively high. The decision of the government not to invest in raising agricultural productivity goes a long way in explaining underdevelopment in the Thai case.6 The failure of rice exporting to provide a basis for development was not caused by the lack of productivity-increasing potential in rice cultivation or adverse movements in the terms of trade. The growth of Thai agriculture could have contributed more to development if the government had invested in strengthening the com-

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parative advantage of the Thai economy.7 The constraints on the supplies of technical and institutional change appear to have been crucial. There is a disturbing parallel between the productivity decline in rice cultivation in the 1920's and 1930's and the early twentieth century declines in agricultural product per worker (and stagnation or decline in yields per hectare) in Egypt, India, Burma, French Indochina, and Java.8 The Thai-Egyptian analogy also extends to the role of government investment decisions, even though Thailand had retained her independence and Egypt had not. The Thai government, like British administrators in Egypt, rejected expert opinion and underinvested in water control for reasons related to politics and military strategy. This analogy at least suggests that political and economic analysis must be combined to understand the low agricultural productivity of these countries at the middle of the twentieth century. CONCLUSIONS These conclusions on the Thai case were reached through the use of a simple supply and demand framework for the explanation of both technical and institutional change. In the Thai case the trends in factor prices did create demands for technical and institutional change which in the Hayami and Ruttan model would have induced change. The relative appreciation of land rents and depreciation of real wages led to demands for a better property rights system in land and yieldincreasing technical and institutional changes such as irrigation and seed development. Thai officials and foreign advisers were aware of these demands and of the means by which these demands could be met. The adoption of an Anglo-Saxon land titling and cadastral survey system served to establish property rights in land for many of the important areas of the Central Plain. The technical plans, costs, and benefits of irrigation projects that would have served to increase yields were known to policy makers. Officials were also aware of the potential benefits of seed development and extension work as well as seed development projects that were being pursued in other countries. For all three cases (property rights in land, irrigation, and seed development) the constraint was not that officials were ignorant of the necessary technical and institutional knowledge or of the potential benefits; rather, the constraint was the potential gain which would accrue to the elite who made the decisions. In the land titling case, society and the elite gained both economically and politically. In the irrigation and seed development cases, the elite would not have shared very much in the gains, so they instead invested in projects such as the railroad where they could capture a share of the political and economic gains. The supply of institutional change and of technical change depends in part upon the gains of those who will supply such change. In the Thai case, important productivity-increasing changes were not undertaken because the suppliers of

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such change would not gain enough to make their effort worthwhile. Thus the Hayami and Ruttan model needs to be extended to include the factors that influence the supply of change, in particular the political and economic factors. This role of the supply of institutional and of technical change is particularly important where there are large indivisible infrastructure investments or external benefits. In these cases, public investment is generally needed since the market cannot be expected to supply the socially desirable level of investment. These cases are also particularly common for agriculture where productivity increases may in many cases require infrastructure investments and the social provision of research in an industry dominated by small scale producers. Thus we would expect a higher level of public investment in agriculture and greater increases in agriculture productivity in those situations in which the government and/or its officials would gain if such investments were made. In Thailand, and undoubtedly in many other countries, the elite stood to gain little from making such investments, and as a result development in the agricultural sector was retarded.9 In those cases studied by Hayami and Ruttan, governments were in a position to gain from investing in agriculture and agricultural development was more successful. The development of higher-yielding varieties in Taiwan and Korea was undertaken because the Japanese government wanted to secure low cost rice imports when it appeared as if domestic production in Japan would no longer be able to keep up with the growth in demand. The study of the supply and demand for technical and institutional change and the interactions of technical and institutional change has proved to be valuable in understanding the nature of underdevelopment in Thailand. This approach assumes that the generation and diffusion of productivity-increasing technical and institutional change are necessary if economic development is to occur. These changes provide the basis for increases in real income. An examination of the broad set of political and economic variables that determine the supply of and demand for technical and institutional change and their interaction provides rich interpretations of economic history in which technical and institutional change are endogenous. The framework is general enough so that the results of the analysis can be applied in other cases. However, the explicit treatment of institutions requires that the framework be applied to specific historical situations, and consequently the results add to both our general understanding of economic change and to our knowledge of the case history being examined. In this case the conclusions add to the understanding of underdevelopment in general and Thai economic history in particular. The economic history of Thailand in the period from the mid-nineteenth century to World War II is dominated by the story of the development of an export economy. Thailand specialized in the export of natural resources and agricultural

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commodities; yet in the important case of rice, the expansion in production and export was accompanied by a decline in productivity. The technical and institutional change model, unlike the staples approach, explains why the remedies for that productivity decline were not provided.

8

Post-World War II Thai Agricultural Development

The explanation for Thailand's historical underdevelopment in Chapters 1 to 7 has highlighted the divergence between the goals of national security and economic development and between the private interests of the elite and the social interest. These divergent factors continue to influence Thai agricultural underdevelopment profoundly. However, some important changes have occurred in the relationships between the Thai government and foreign governments and international agencies which have facilitated the investments in agriculture which were foregone in the earlier period.

TRENDS IN POST-WORLD WAR II THAI AGRICULTURE

The agricultural sector has retained its position as the largest sector in the Thai economy, even though its relative importance has declined from roughly 50 per cent of gross domestic product in the early 1950's to 30 per cent in the 1970's. From 1950 to 1975 the planted area in major crops grew by 2.95 per cent per year and from 1950 to 1976 agricultural output in constant prices grew by 3.99 per cent per year (Damrongsak [1978], pp. 34 and 146). There has been an impressive growth in the importance of the cultivation and export of maize, cassava, and kenaf while rice production has increased moderately (Ingram [1971], Silcock [19670,1970]). Increases in the area under paddy cultivation and increases in yields associated with the expansion of irrigation and new seed varieties account in part for the increase in rice production (see Table 8-1). From 1949 to 1976 the area of paddy harvested grew by 2.11 per cent, paddy yields grew by 1.09 per cent, and paddy output grew by 3.21 per cent per year (see Damrongsak [1978]). Even though there

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TABLE 8-1: PADDY AREA HARVESTED, DAMAGED AREA, PRODUCTION, AND YIELD, 1942-1975

Year 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975

Paddy Area Harvested (ha x 1000) 2876 3813 3813 2847 3509 4304 4930 4963 5295 5736 5130 5931 4524 5376 5762 4287 5169 5263 5643 5656 5191 6354 5971 5960 6878 5601 6259 7246 7215 7614 6648 7771 7333 8017

Damaged Area as Per Cent of Planted Area 34.3 8.1 6.1 24.3 11.9 10.8 5.4 5.8 4.4 3.7 4.4 3.9 18.6 6.8 4.3 15.5 10.2 13.2 4.7 8.5 7.0 3.7 8.7 9.1 5.9 12.6 12.4 5.1 8.6 6.0 8.0 7.1 8.1 5.9

Output (metric tons) 3854 5536 4928 3572 4442 5506 6835 6684 6782 7325 6602 8239 5709 7334 8297 5570 7053 6770 7835 8177 9279 10029 9559 9199 11846 9595 10771 13346 13401 14201 11669 14898 13380 14091

Paddy Yield (metric tons/ha harvested) .34 .45 .29 .26 .27 .28 .39 .34 .28 .28 1.29 1.39 1.26 1.36 1.44 .30 .34 .29 .39 .47 .50 .58 .60 .54 .73 .71 .72 .84 .86 .87 .76 .92 .82 .76

Sources: Data for 1942-69 were taken from Welsch and Sopin (1973), pp. 130-31; data for 1970-75 were taken from Yotopoulos and Kamphol (1977), p. 9.

has been significant growth in the manufacturing and other sectors, agricultural exports still account for the largest share of foreign exchange earnings and agriculture continues to play the major role in Thai economy. Recent agricultural developments have included the introduction and expansion of new crops, increased use of new seeds and fertilizers, and increased use of both small and large tractors. From 1950 to 1975 the area under maize and cassava grew by 15.4 a 13.6 per cent per year respectively and the area under kenaf grew by 16.3 per cent per year from 1952 to 1975 (Damrongsak [1978], p. 146). The use of chemic

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fertilizers increased by 22.7 per cent per year from 1950 to 1970 (Yotopoulos and Kamphol [1977], p. 15) and 9.51 per cent per year from 1970 to 1973 (Chesada [1978], p. 142). The area planted to high-yielding varieties of rice went from 3000 ha in 1969 to 450,000 ha in 1974 (Chesada [1978], p. 133). This modest diffusion of modern varieties meant that the percentage of the rice area devoted to new varieties grew by 0.2 per cent per year from 1968 to 1970 and 1.52 per cent per year from 1970 to 1974 (Herdt, Te, and Barker [1977-78], p. 188). Annual tractor imports increased by 16.4 per cent per year from 1950 to 1967-69 (Ingram [1971], p. 272), and in 1975 it was estimated that there were 35,000 tractors in use in Thailand of which 26,000 were locally produced by over 26 manufacturers (Chesada [1978], p. 116). Irrigation facilities, especially in the Central Plain, and rice research expanded rapidly in the post-World War II period.2 Royal Irrigation Department data indicate an increase in irrigated area in the whole kingdom from 608,000 ha in 1947 to 2,224,000 ha in 1969 (an increase of 6.11 per cent per year) (Ingram [1971], p. 276). The amount of irrigated land devoted to paddy grew by 0.85 per cent per year from 1965 to 1970 and 0.62 per cent per year from 1970 to 1974 (Herdt, Te, and Barker [1977-78], p. 188). Intensive rice breeding began in 1950; work concentrated on identifying superior varieties, quality improvement, and pure line selection. The establishment of a separate Rice Department in 1954 and the initiation of hybridization and mutation breeding stimulated further work. Work was also conducted on tungro, blast disease, leaf blight, gall midge, and other diseases and pests. Varietal selection stressed the ability to increase yields without additional fertilizer usage. The 1960's brought active co-operation with the International Rice Research Institute and a revived interest in the development of hybrids. Crosses of Thai varieties with IRRI varieties in 1964 and 1966 resulted in the release of two fertilizer responsive non-photoperiod sensitive non-glutinous varieties in 1969, RD-1 and RD-3. A high-yielding glutinous variety, RD-2, was also developed. RD-5, which has been released more recently, is 50 per cent taller than RD-1 and RD-3. REM, RI>-2, and RD-3 obtain yields which are 15 to 100 per cent greater than the yields of traditional varieties (Jackson, Worawit, and Awakul [1969]). Efforts are also being devoted to pest and disease resistance. The development of improved varieties in Thailand has faced several problems. Thai traditional varieties possess desirable quality, milling, and flavour characteristics, and the acceptance of modern varieties has required that these characteristics be incorporated into the new varieties. Because lack of effective water control in many areas has limited the wet season use of the short-straw improved varieties, research on deep-water improved varieties is being conducted with the co-operation of the International Rice Research Institute. A breakthrough here would represent a real contribution to the diffusion of modern varieties in many Asian regions.

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The diffusion of improved varieties in Thailand has not been spectacular. Water control problems served as a constraint on the adoption of RD-1 and RD-3. The lack of dry season irrigation in many areas has limited multiple cropping. Water control appears to be a crucial variable in the rate of adoption of new varieties (see Jerachone, Kamphol, and Somporn [1975]).3 The high fertilizer to paddy price ratio (Thailand has one of the highest in Asia) has further reduced the incentives to adopt the new varieties. As a result of the price policies, Thailand's rate of fertilizer utilization is among the lowest in Asia (Yotopoulos and Kamphol [ 1977], p. 13; see also D. Gale Johnson [1978]). Government research has also contributed to the development of special outboard motors for use in shallow water, water pumps, soil puddling machines, and small tractors (Welsch and Sopin [1973], p. 141). Work is also being done on rice milling equipment, threshers, and harvesting equipment. Yet in spite of these favourable trends in agricultural production and technology, there do not appear to have been spectacular increases in real per capita rural incomes. Chiswick argues that while real per capita income grew by 25 percent in the period from 1962 to 1972, most of the increases occurred in urban areas (1977, p. 6). According to Chiswick real per capita rural income in 1972 appears to have remained at essentially the same level as in 1962. Incomes grew in the period from 1962 to 1968 and then declined from 1968 to 1972, reflecting the recession of that year.4 Chiswick also indicates that poverty is concentrated in the rural areas, especially in the northeast, north, and central regions (see also Oey [1976,1979]). Households in these areas did share in the high agricultural prices of the 1968 period but suffered losses in the 1972 recession. However, when the entire 1962 to 1976 period is examined, Oey (1979) concludes that real per capita rural incomes have risen and that rural-urban disparities have declined. Oey (1976, 1978, 1979) provides more detailed, rigorous, and up-to-date evidence on rural poverty. In 1968-69, 43 per cent of all village households were poor (where poverty is defined as per capita income of less than J0fl500 per equivalent adult), whereas only 4 per cent of town households fell below the poverty line (Oey [1976], p. 39). The incidence of poverty is higher for larger families with many children, those with little education, and those living in the northeast and north. Recent declines in poverty in rural areas reflect the rapid growth of agricultural output and improvements in the relative prices of agricultural products (Oey [1979]). However, these trends have been accompanied by increasing intra-rural disparities. In sum, even though rural Thailand has experienced some gains in per capita income as a result of the favourable trends within agriculture and impressive overall rate of growth in Thailand (real per capita gross national product grew by 3.5 per cent per year from 1951 to 1969 and 5.1 per cent per year from 1970 to 1977), poverty is still concentrated in rural areas. Thai agricultural development and demographic policy will now be examined in light of these trends and Thailand's underdevelopment experience.

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NATIONAL SECURITY VERSUS DEVELOPMENT

Throughout the period under review, Thailand has been faced with a significant problem of both external and internal security. Communist and anti-colonial movements in neighbouring countries have posed a security problem, especially for the elite. Insurgency among minorities in the north, northeast, and south as well as Thai insurgency in the northeast have created substantial rural insecurity in some areas. Rural grievances have contributed to the problem. Just as the colonial threat in the pre-World War II period was important in shaping government policy, the more recent security problems have also created biases in favour of public administration and military expenditures. Vested bureaucratic interests in the relevant departments have strengthened these biases. Strategic considerations have often dominated economic ones in transportation development allocations. The expansion of the highway network, especially in sensitive areas has helped to lower transport costs and extend commercial agriculture. However, the design of the network was oriented primarily towards security problems, and this bias contributed to the neglect of inland water transportation in spite of its importance (Caldwell [1974]). The Accelerated Rural Development Program, which represented a major portion of the total rural development effort, was geared to provinces with significant security problems (Caldwell [1974], Scoville and Dalton [1974]). Much of the allocation of aid from the U.S. government was oriented towards insurgency problems and was politically motivated. Caldwell has concluded that this political and security bias in the U.S. aid programme reduced its overall effectiveness (Caldwell [1974]). It could be argued that much of this aid would not have been available for other uses and therefore the opportunity cost to Thailand of accepting this aid was very low. While much of this argument is valid, it fails to take into account the fact that the Thai government, capable as it is, has limited administrative and planning resources, which are primarily engaged in activities related to security rather than development. Naturally much of the development of roads, communications, public health, education and other government services which has been addressed to the questions of security, has also been of considerable value to the rural sector. However, the point remains that the design and motivation have been strategic in orientation, as in the pre-World War II period. URBAN AND MANUFACTURING DEVELOPMENT VERSUS AGRICULTURAL DEVELOPMENT

Another feature of Thai development policy relevant to the persistence of rural underdevelopment is a bias in favour of urban-manufacturing industrial development. This bias is manifest in the high rates of effective protection for manufactur-

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ing activities and the heavy agricultural export taxes which in large part fall on the rural sector. Imperfect competition in some transport and agricultural processing markets further discriminates against the agricultural sector. Furthermore, the pattern of government taxation and expenditures is such that net transfers are made out of the rural sector. Narongchai (1973) has carefully constructed estimates of effective rates of protection for the Thai manufacturing sector. He concludes that high rates of protection have supported the growth of import-substitution industries with limited growth potential and high domestic resource costs as the expense of export industries with lower domestic resource costs. Narongchai and Atchana (1976) have shown that the rice sector has negative effective protection and that the structure of taxes has channeled production away from an area that is both privately and socially profitable. The rice export taxes and heavy protection for the manufacturing sector have discriminated against rice production, an area in which Narongchai and Atchana have shown that Thailand has a very strong comparative advantage. Manufacturing, banking, and commercial enterprises have frequently developed symbiotic relationships with leading government officials and members of the military elite. Important officials are commonly appointed to the boards of directors of firms in exchange for the protection such connections can afford (see Riggs [1966] and Silcock [1967&]). Government officials have as a result acquired an interest in maintaining and expanding the manufacturing and commercial sectors.

THE RICE PREMIUM AND RICE PRICE POLICY

A very important and controversial role in Thai development policy is played by the rice premium and the rice export tax. Since World War II the export of rice has been subject to controls, then multiple exchange rates, and finally in 1955 to a rice export tax and a rice premium tax (Siamwalla [19750]). The premium has provided a significant portion of government revenue (from 1.0 to 17 per cent in the period from 1955 to 1976) and has served to depress farm level and domestic rice prices.5 In much of the period since 1962 rice exporters have been required to surrender a portion of their exports to the government at prices below the market level.6 Usher (1967) estimates that the abolition of the rice premium would raise paddy prices at the farm level by 85 per cent. Lam (1977) indicates that the abolition of the premium would have raised paddy prices by 23 to 59 per cent over their actual annual levels from 1962 to 1972. Chesada (1978) simulates the abolition of the rice premium in her dynamic crop-choice model and estimates that the domestic price of rice would rise by 38 per cent, paddy output would increase,

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and overall farm income would increase by 30 per cent. There is general agreement that the rice premium has lowered domestic paddy prices. In his review of rice policy from 1945 to 1975, Siamwalla (1975a) finds that the government has generally favoured the interests of consumers (urban dwellers including government employees) over the interests of rice farmers. Sarun (1978) concludes his review of Thai rice policy in this way: Politically, the primary concern of the Thai government is to maintain an adequate amount of rice for domestic consumption at a reasonable price level. Only those amounts in excess of domestic consumption are allowed to be exported.7 With the exception of the 1969-71 period, the government has acted to keep rice prices down. Domestic price stability and government revenue have also been important goals in the determination of rice policy. A major unresolved issue in the analysis of the rice premium is the amount of the tax that is borne by foreign consumers. Many investigators have felt that the foreign demand for Thai rice is elastic, so that the tax is not substantially shifted to foreigners and is instead borne by Thai rice producers (for instance see Sarkar [1978], Sura [1967], Phairach [1967], Usher [1967, n.d.], and Bertrand [1977]). Bertrand quotes a Bank of Thailand study which estimates that a #800 to 31000 reduction in the rice premium would only result in a 040 (0.9 per cent) reduction in the export price. However, contradictory evidence is presented by Tsujii (1973). Simulations performed using his model of the international rice market indicate that a large reduction in the rice premium would result in only a small rise in the domestic price and thus production and export. The simulations yield a price elasticity of demand estimate of slightly less than one. In a careful study of the international rice market, Pichai (1979) also concludes that the foreign demand for Thai rice is inelastic. Tsujii further argues that for the 1950's and 1960's, given the degree of imperfect competition in the international rice market, the rice premium was an appropriate policy.8 While Tsujii's and Pichai's estimates indicate that the elasticity for Thai rice is low, Chung Ming Wong (1978) Sarun (1978), and Udom (1970) present estimates that indicate that the foreign demand for Thai rice is moderately elastic (-4.0, — 1.90, and —1.35 respectively).9 Chung Ming Wong argues that the premium (which was about one-third of the export price during the period from 1961 to 1970) probably exceeded the optimum export tax. He points out that, even though enough of the tax was borne by foreigners to provide static net welfare gains for Thailand, the dynamic costs in the reduction of incentives to increase rice productivity may outweigh those gains. The relevance of those dynamic costs is highlighted by Narongchai and Atchana (1976). These points are further documented by Bertrand (1977). He concludes that rice and rubber export taxes and the protection of the domestic fertilizer industry,

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which held domestic fertilizer prices some two-thirds above their world market level from 1968-73, have lowered private returns on rice and rubber production, thereby making social returns substantially higher. This discrimination against agriculture is only partially offset by the provision of water from irrigation projects at no charge to the farmer and the protection of domestic sugarcane and cotton production. He argues that the expansion of maize, cassava, and kenaf cultivation have occurred without the aid of government intervention, except for the stimulus for diversification provided by the heavy taxation of rice exports and the lowering of transportation costs through highway development. Government revenue collected from the rice premium and the transfer from rice producers to rice consumers caused by the rice premium represented almost 11 per cent of farm income from 1962 to 1972 (see Lam [1977]). Lam (1977) argues that the tax is regressive and that it is an inefficient way to raise funds for public capital formation since roughly two-thirds of the burden is represented by a transfer to rice consumers rather than revenue collection by the government. He is also critical of the effect of the rice premium on the incentives to increase productivity. On balance, the evidence indicates that government officials were wrong in their support of the price premium on the grounds that it was borne by domestic rice traders and encouraged agricultural diversification.10 The tax is shifted back to producers, and much of the area under paddy is not suitable for other crops." Furthermore, Thailand has a strong comparative advantage in rice production and the rice premium has misallocated resources to the extent that it has moved resources out of the rice sector and reduced incentives to increase productivity in the rice sector. Especially in periods of shortages, Thailand may have some market power in rice; however, the rice premium has not been varied with sufficient frequency to exploit any existing Thai market power (Chesada [1978], pp. 12-13). The rice premium also appears to have been set at too high a level for the optimal exploitation of Thai monopoly power in the rice market (Chung Ming Wong [1978]). Furthermore, the government has not acted to distribute the economic rents in such a way as to correct the effects of the price distortions caused by the rice premium. The rice premium has not been effectively used to exploit any market power which Thailand may possess; the revenue has not been used to increase productivity and correct distorted incentives; and the primary beneficiaries have been domestic rice consumers — persons engaged in the public administration, urban, manufacturing and commercial sectors. OTHER RURAL TO URBAN TRANSFERS

While Lam's estimates are constructed at the aggregate level, his conclusions are corroborated at the village level by those of Gisselquist (1976). His estimate for a single village helps to illustrate the effect of government policies in promoting

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resource flows out of the rural sector. He has demonstrated that the rice premium, import duties, sales taxes, and other tax and registration fees paid by villagers represent roughly one-half of the pre-tax income in a Central Plain rice village from 1965-75. The cost of educational, public administration, and irrigation services provided does not equal the taxes paid, so that on net the village transfers income to the government. Saeng's estimates for 1953 and 1963 for the whole country indicate that the net flow is from the agricultural sector to the nonagricultural sector. The next outflow represented 12.9 and 9.7 per cent of the value of agricultural production in 1953 and 1963 respectively (Saeng [1971]). Roughly 60 per cent of the outflow was accounted for by the effects of the rice premium. Again the pattern of government expenditures and taxes is such that income is transferred from the rural sector to the urban one. The allocation of government services does not reduce existing disparities in the distribution of public services across provinces or among rural and urban areas. Oey (1978) has found in a study of the relationship between the provision of government social services and per capita provincial income that there is a positive correlation between the level of services and the per capita level of income as well as between social services and the degree of urbanization. Oey (1979) also finds a bias in favour of the better-off regions and the better-off households within each region. She argues that the substantial economic and social disparities can only be reduced when the government starts to shift the focus of its attention and effort to the poorer areas. Recent changes in the funding of provincial governments by Bangkok indeed reflect this suggestion. While most agricultural product and factor markets in Thailand are considered to be basically competitive,12 institutionally related distortions have retarded agricultural development in some sectors. Caldwell (1974) argues that monopolistic elements in livestock processing have been a bottleneck in the development of the livestock industry and have diminished the effectiveness of foreign aid in this area. Another important distortion is the exclusive concession given to the Express Transit Organization on truck deliveries and pickups at railway stations and docks. The State Railway of Thailand also has a monopoly, even though it has faced increased competition from the trucking industry. In a series of simulations, Conley, Chamnong, and Heady (1978) have shown that a reduction in truck transportation costs (perhaps resulting from a reduction in monopoly power) would result in a significant increase in farm income derived from the production of rice in the poorest region, the northeast. Similar results were obtained for the north. Thus a removal of transport monopoly distortions could have a significant effect on rural incomes in the poorest regions. The monopoly elements in this market are a direct result of government policy, and the rents are captured by the government, its officials, and its supporters.

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URBAN BIASES IN DEVELOPMENT POLICY

This discussion points to numerous cases where government policy in Thailand discriminates against agriculture and the rural sector: rice prices are held down through the use of export taxes and quantitative export restrictions; urban consumers and government officials are largely insulated from high or rising rice prices; and the manufacturing sector is heavily protected while most agricultural activities receive negative rates of protection as a result of export taxes and the protection of the producers of inputs such as fertilizer.l3 Government officials have shared in the rents created by the protection of the manufacturing sector.14 Taxes and government expenditures serve to transfer resources from the rural sector to the urban one. In addition to the biases in favour of the urban elite, policy has also been affected by internal and external security issues. Many of the policies pursued by the Thai government appear to have been designed for the benefit of officials and the urban-industrial sector. Indeed, these policies are pursued both to benefit the officials involved and to preserve the position of the elite in the social structure. In a study of corruption in Thai provincial politics, Neher (1977) has found that the use of official position and patron-client relationships for personal gain is pervasive in Thailand. His surveys conducted among elites in a province also indicate that participants in the system believe that such corruption is normal and that their own success in the public bureaucracy depends heavily on their participation in such activities; in short, corruption (defined as the use of public office for personal gain) is an integral part of the system. The policies outlined above are another manifestation of the use of government power to benefit the ruling class and maintain its position in that system. Roth (1976) has characterized Thai rural development policy as being motivated primarily by elite power maintenance and wealth maximization. A similar point is raised by London (19770, 1977&) in his analysis of pro-Bangkok bias in government policy. He argues that central control and the disproportionate political power of Bangkok have served to discriminate against both rural areas and urban centres outside the capital. Only when insurgency and regional problems appeared to pose a threat to the stability and power maintenance of the Bangkok government did the government increase its rural development effort. For instance over 70 per cent of the kilometres of highways built since World War II was completed in the 1960 to 1969 period with 44 per cent of it located in the troubled northeast (London [1977a], p. 63). Again, political and strategic motivations and Bangkok's interests were paramount. Thus, post-World War II Thai development, like development in the earlier period, continues to be affected by situations where national security conflicts with economic development and the private interests of the elite decision-makers and their urban-industrial constituency conflict with the interests of the rural

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sector where the majority live and work. And yet, there are some notable exceptions. FOREIGN AID AND RECENT DEVELOPMENTS IN THAI POLICY

For the period from 1880 to 1940 it was argued that the underinvestment in water control and research and development of improved seeds and agricultural techniques accounted for the persistence of underdevelopment. Yet, in the postWorld War II period, the Thai government has pursued the very projects it rejected in the earlier period. If the arguments given above about the continuity of development policy are correct, how do we account for the investments in irrigation and agricultural research? The answer lies in the nature of the liaison between Thai technocrats and foreign aid agencies and the changing nature of the international climate in the post-World War II period. The pre-war Thai government faced colonial threats, and its ability to borrow funds on international markets was limited. In the most recent period, with the colonial threat largely eliminated, there have been new foreign national government and international sources of development loans and aid which the Thai government has been able to use effectively to enhance its position while investing in the infrastructure needed to increase agricultural productivity. Jacobs (1971) has characterized the Thai system as a patrimonial one based on patron-client relations. The goal of the decision-maker is to maximize his revenues and those of his clients while maintaining his own position. Jacobs argues that in such a system the elite will adopt change and modernization in an effort to increase the efficiency with which they can rule, but they will not adopt changes that would alter the qualitative nature of the society. In this context, Jacobs indicates that foreign aid has been used to enhance the position and power of the elite: development projects provide employment and rewards for clients and may also increase the productivity of the economy and thus the revenue base that supports the system. Jacobs further argues that projects are selected on the basis of their returns in increased security and benefits for the rulers and points to the strategic motivations in the development of highways mentioned above. While the government has a general interest in obtaining foreign aid funds that will serve their interests (and in many cases also serve the national interests), the interaction of Thai technocrats and foreign aid agencies has served to channel some of the aid toward socially beneficial projects and institutional reforms within the government. Stifel (1976) has traced the influence of senior Thai technocrats in the design and recommendations of the 1957 World Bank mission. That report (I.B.R.D. [1959]) embodied many of the reform programmes advocated by the Thai technocrats. Additional World Bank assistance made the recommendations for the establishment of the Budget Bureau and planning agency attractive. While

Post- World War II Thai Agricultural Development

119

Thailand was accumulating foreign exchange reserves, the Thai technocrats were able to use the World Bank loan procedures of feasibility studies, competitive bidding, and expenditure controls to limit waste and corruption (Stifel [1976]). The involvement of the outside agencies and their requirements were used by members of the Thai bureaucracy to enforce non-patrimonial behaviour on the government.15 The co-operation of high level technocrats in the Bank of Thailand, Budget Bureau, Ministry of Finance, and planning agency along with their effective mobilization of external organizations resulted in a new pattern of the allocation of expenditures which reflected plan priorities rather than traditional bureaucratic political power (Stifel [1976]). DEVELOPMENTS IN IRRIGATION AND AGRICULTURAL RESEARCH

One result of this trend has been the support by the World Bank and other donors for water control projects. In the 1950's and 1960's the van der Heide project of 1902 was finally implemented. The government finally started to invest in increasing agricultural productivity, and the evidence indicates that while some of the potentialbeoefits have not been realized, the irrigation projects and Chainat dam have contributed significantly to increases in agricultural incomes and productivity.16 Another important ramification of the co-operation of foreign aid donors and Thai technocrats has been the establishment of an indigenous research and development capacity for the agricultural sector. The achievements of agricultural research and its co-operation with the International Rice Research Institute were discussed above. American assistance was important in the introduction of highyielding varieties of maize in the 1950's (Muscat [1966], p. 84). This development, the expansion of highway development, and the growth in Japanese demand for maize all contributed to the rapid increases in maize production. American aid was also important in the rice breeding programmes of the 1950's and the overall growth of Thai agricultural research in the post-World War II period. New varieties, increases in water control, and the recent development of small farm tractors have contributed to increases in productivity (see Siamwalla [\915b] and Motooka [1978]). Damrongsak (1978) presents evidence that in the period from 1950 to 1976, 27 to 38 per cent of the increase in agricultural output was the result of productivity increases.17 Part of this estimated increase in productivity is caused by changes in the crop mix toward upland crops with higher prices. Irrigation, education, better quality inputs, and better management also play a significant role. Thus, there have been post-World War II advances in agricultural productivity based on investments in research and development and irrigation. Foreign agencies have been helpful in creating Thai institutions which are capable of generating

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technological change. Siamwalla (1915b) argues that the major bottleneck in rural development now is the creation of institutions to diffuse know-how to the rural sector. While the effort must be one made by Thais, he argues that foreign aid can help by "bribing" the urban sector to part with its resources in order to build effective rural extension and health service delivery networks. Some decentralization of the control of regional experimental farms would enhance the effectiveness of existing facilities. The gains from these investments in irrigation and research have not been as spectacular as they might have been. Part of the problem lies in the lack of local infrastructure to better utilize the irrigation systems. Rice and input price policies that have reduced incentives to paddy farmers also play a significant role. When the terms of trade generally favoured rice farmers, in the period from 1850 to 1940, the government did not invest in irrigation and seed development. Ironically, in the period since World War II, while the Thai government has held the price of rice well below its world market level, it finally did undertake investments in increasing agricultural productivity.

DEMOGRAPHIC POLICY

Another important example of the interaction of Thai technocrats and foreign assistance agencies is demographic policy. Rapid rural population growth (approximately 3 per cent per year from 1947 to 1966) has contributed to rural underdevelopment (Thomlinson [1972], p. 57). In response to the problem of rapid population growth and in spite of an official pronatalist policy, a number of Thai public health officials in the late 1950's and early 1960's established familyplanning programmes within existing health facilities (Thomlinson [1972], pp. 97-108). A number of foreign donors, in particular the Agency for International Development and the Population Council, facilitated these programmes by providing support. These pilot projects and surveys uncovered a large unmet demand for fertility control services, and official government policy gradually changed from the pronatalist policies in the 1950's to a tolerance of unpublicized family-plannin programmes in the 1960's. Finally official support for such programmes was announced in 1970 (Thomlinson [1972], pp. 97-108). Thomlinson traces the beginning of the change in official policy to the 1957 World Bank Mission. Th liaison between Thai public health professionals and foreign agencies helped in bringing about the policy change. The reluctance of the government to promote family-planning until recently has undoubtedly retarded attempts to reduce fertility levels. Thus the policies of the 1950's and 1960's are in part responsible for the continued high rates of increase of the rural population which made it more difficult to raise per capita real incomes in rural areas. Since the late 1960's,

Post- World War II Thai Agricultural Development

121

however, family-planning programmes appear to have significantly contributed to the sharp decline in fertility in Thailand (see Cochrane [1979]). CONCLUSIONS AND POLICY IMPLICATIONS

The divergences between the goals of national security and economic development and between the social interest and the private interests of the elite which explained Thai underdevelopment in the pre-World War II period persist in modern Thailand. External and internal security problems have biased government efforts and expenditures towards public administration and military endeavours. Government policy in protecting the urban sector through import and export taxes has consistently served the interests of the Bangkok elite and their clients and supporters. An important departure from the past is the alliance between Thai technocrats and external aid sources; among the ramifications of this alliance have been the development of an antinatalist population policy, the creation of an indigenous research capacity for agriculture, and the development of major irrigation projects, the latter two of which have already generated benefits in increased agricultural production, productivity, and incomes. If it is assumed that the goal in modern Thailand is to maximize social welfare18 and that the achievement of this goal will entail increasing agricultural productivity and incomes and reducing the differences between social and private rates of return, a number of tentative policy suggestions arise. It was argued that government policies have favoured the urban sector and taxed the rural sector heavily. An obvious policy implication is that government-created distortions be removed. The removal of taxes and policies which depress agricultural prices below world market levels and raise the price of inputs such as fertilizer above world market levels can be expected to have a beneficial effect on rural production and incomes (Bertrand [1977]). High effective rates of protection for manufacturing further distort resource allocation (Narongchai [1973]). The elimination of monopolistic privileges in animal slaughter and rail and truck transport would assist the agricultural sector. In addition to removing government interventions which have caused private rates of return on agricultural activity to understate social returns, the government should also increase the level of services in the area of the provision and protection of property rights and other areas where market failure is likely to occur. Ingram (1971, p. 306) has reported data indicating that the provision of cadastrally surveyed land titles which began over eighty years ago (see Chapter 6) is still very incomplete.19 The deficiencies in the land titling system and the practice by banks and cooperatives of taking the tax assessment as the value of the land have served to constrain the availability of credit to farmers (Gisselquist [1976]). Thus farmers who have title to their land are not able to use it for its full value as collateral, and farmers without title are unable to use land as collateral. Reforms in the capital

/22

The Political Economy of Productivity

markets could improve the situation (see McKinnon [1973]). Legal reforms, such as the provision of land titles, patent protection, and enforcement of grading standards for agricultural inputs, represent another set of important actions which would serve rural development.20 Thai farmers purchase fertilizer in a market where they cannot be certain that the fertilizer contains the ingredients on the label in the amounts indicated. Labelling standards and enforcement could easily improve this situation. While the Thai government has expanded highway and irrigation systems, there is still a persistent lack of local infrastructure. Chirmsak (1977) argues that local roads would reduce transport costs, make paddy markets more competitive, and facilitate farm access by trucks and machinery. He also argues that improved on-farm storage facilities and the credit necessary to make such storage feasible would improve the efficiency and equity of Thai agricultural markets. Gisselquist (1976) has also noted that the compensation paid to farmers for land taken for the construction of irrigation works is based on the assessed value of the land for tax purposes and thus well below the market value of the land. As a result, farmers are reluctant to co-operate in building the distribution networks needed to realize the full potential of irrigation systems. Furthermore, Gisselquist notes that village government has no right of eminent domain which would permit farm groups to co-operatively build local infrastructure facilities to make efficient use of irrigation. Village government also lacks powers of taxation.21 This last example brings up a broader issue about the role of rural Thailand in the national political system. In general, with some exceptions for infrequent elections, rural Thailand has little political power vis-a-vis the urban populace and government bureaucracy with the result that few government agencies and institutions depend on the approval of the rural populace which they are in part designed to serve. Thus, it is not surprising that institutions and government policies have not favoured the majority who live in rural areas. Unless rural Thailand assumes a more powerful political position, it is likely that in many cases government policy and institution building will continue to serve rural interests poorly. Perhaps regular elections and a more competitive and democratic political system would enhance rural political power. Greater decentralization of political power would also help. Such an increase in rural political power in Thailand may well imply a basic change in the patron-client social and political system.22 Obviously, outsiders have little part to play in such a fundamental change in Thai social organization. The research agenda for the agricultural sector in Thailand should include commodity-specific research aimed at increasing farm income for each of the nineteen agro-climatic zones which have been delineated (see Welsch [1971, 1972], Fukui [1978], and DAE-CARD [1977]); four regional agricultural research centres have been established to further this work. Deep water rice research is important for many areas, and in zones not well-suited to rice cultivation, research

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123

on sorghum, oil seeds, legumes, and other upland crops as well as cropping systems may have a high payoff.23 Research programmes and increased water control facilities will require that the government invest significantly in the agricultural sector. The development of a capable extension system to communicate the research results to farmers and farm groups will also be necessary if the potential gains from research and development are to be realized.24 A capable extension system can also communicate production problems experienced by farmers to agricultural researchers. Decentralization of research and extension services may make these institutions more responsive to the needs of the agricultural sector. The provision of additional agricultural credit and investments in rural human capital will complement these efforts. The need for investing in increasing agricultural production and productivity is highlighted in recent studies by Stoecker (1979) and Herdt, Te, and Barker (1977-78). Projections and simulations of the national crop model developed by the Thai government's Division of Agricultural Economics in co-operation with Iowa State University indicate that moderate increases in irrigation or in the use of high-yielding varieties of rice along with fertilizer will be needed if Thailand is to maintain domestic consumption and high export targets in the period from 1970-71 to 1981 (Stoecker [1979]). Achievement of these production goals will necessitate significantly higher prices for paddy if the high-yielding varieties and increased use of fertilizer path of agricultural output expansion is not followed. The expansion of production with the existing technology alone will only satisfy domestic consumption targets and would involve reduced levels of the rice export. The need for more irrigation, fertilizer, and continuing varietal development to sustain adequate levels of rice production in the future is not limited to Thailand. Projections of Asian rice production to 1985 indicate that unless there is additional technological change, the increase in output will not match the growth in population (Herdt, Te, and Barker [1977-78]). Rates of expansion of the area under irrigation and use of fertilizer in excess of recent historical growth rates will not be enough to increase rice production by more than 2.4 per cent per year. The Thai case is not an isolated one.

IMPLICATIONS FOR AGRICULTURAL DEVELOPMENT IN LESS DEVELOPED COUNTRIES

This interpretation of Thai rural underdevelopment and the policies to alleviate that underdevelopment have implications for other less developed countries. The conclusions point to the need for governments to invest in increasing agricultural productivity. The development of institutions which respond to trends in relative factor prices and social profitability in generating technical and institutional change is a key in the development process (see Hayami and Ruttan [1971] and

124

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Ruttan [1977]).25 Contemporary agricultural development requires the establishment of social research capabilities, an effective extension service, investments in rural human capital, investments in industry to provide modern agricultural inputs, and the further development of land and water resources (Ruttan [1977]). Development along these lines will allow for an interaction between the agricultural, industrial, and public sectors. Given the role of trends in relative factor and product prices in shaping subsequent technological change (see Binswanger [1977] and Hayami and Ruttan [1971]), it becomes increasingly important to ensure that prices are not distorted. In addition to the static misallocation of resource effects, the economy will be given misleading incentives for the development of new technologies and institutions. In cases where governments decide to alter relative prices, compensating measures to correct the dynamic technological change incentives may be needed. The dangers of distorting the price system in agricultural development are emphasized by D. Gale Johnson (1978) and Schultz (1977, 19780, 19800, 1980fc). Johnson notes the low level of fertilizer use and low levels of productivity in countries with relatively high fertilizer to paddy price ratios, including Thailand. Schultz (1977) looks at the broader implications of marketing boards and rice export taxes in Burma and Thailand which have depressed paddy prices far below world market levels: In the production of rice, I see Thailand and Burma as having a very large unrealized economic potential. . . . In Thailand, the politically convenient export tax on rice has long been the means to keep the price that rice producers receive a third to two-fifths below its real economic value. The new highyielding dwarf rices and their costly complement, i.e., investments to control the water, continue to remain uneconomic. In contrast, the pricing, the use made of research, and the impressive gains in the production of corn in Thailand reflect a story of real economic success.26 Schultz points out that while world market prices for rice were more than double those for corn in the 1960 to 1973 period, their prices were virtually the same within Thailand. He concludes that "in my view, a large part of the poor performance of agriculture in many low-income countries is a consequence of bad economic policies."27 The Thai case is no exception to Bruce Johnston's generalization: The development of agriculture has often been impeded because of unfavorable terms of trade, sometimes accentuated by an urban-oriented emphasis on keeping food prices low. The slow expansion of nonfarm employment and sluggish growth of agriculture engendered by such policies have had adverse effects on income distribution and have prevented broad participation of the

Post-World War II Thai Agricultural Development

725

population in gains in productivity and income with the result that serious problems of poverty have persisted (1977, p. 881). The evidence on Thai agricultural development provides yet another example of the general phenomenon of underinvestment in agricultural research. Evenson and Kislev's estimates indicate that agricultural research in less developed countries has paid much higher rates of return than most development projects (Evenson and Kislev [1975]).28 Even in developed countries the social rates of return on agricultural research appear to be higher than normal rates of return. Evenson and Kislev's research also highlights the importance of an indigenous research capacity in determining the ability of a country or region to borrow technical change. Thus, research institutions contribute directly to growth and development by increasing productivity and indirectly through an enhanced rate of borrowing. The underinvestment in agricultural development found in many less developed countries is largely a result of policy choices; the relative underdevelopments of the rural areas comes as no surprise. This study has called attention to the neglect of rural areas in Thailand in both the pre- and post-World War II periods. Through supply and demand models of technical and institutional change, the study has provided an explanation for the crucial trends in such changes. The growth of rice exports could have stimulated research and advantageous irrigation projects if the government had invested in developing Thailand's comparative advantage.29 The failure of the Thai government to provide infrastructure and social research facilities for increasing agricultural productivity accounts for much of Thailand's lack of development. The future of agricultural development in the third world countries, as in Thailand, depends critically on the choices their governments make.

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Appendix 1

Economic Data

TABLE Al-1: QUANTITY, PRICE, AND VALUE OF RICE EXPORTS, 1857 TO 1941

Year 185 1858 1859 1860 1861 1862 1863 1864 1865 1866 1867 1868 1869 1870 1871 1872 1873 1874 1875 1876 1877 1878 1879

Quantity (metric tons) 54,432 63,504 45,360 86,183 116,121 83,915 94,348 145,152 3,024 88,904 110,678 126,403 163,901 156,038 112,493 122,170 52,618 120,960 237,082 254,621 188,093 143,338 243,734

Export Price Value (Millions Index, Index, (bahtl Index, 1864 = 100 metric ton) 1864 = 100 of bahf) 1864 = 100 37.5 43.7 31.2 59.4 80.0 57.8 65.0 50.3 100.00 7.30 100.0 100.0 3.0 72.8 2.1 144.7 0.22 47.2 61.3 4.20 57.5 93.9 63.1 3.51 48.1 31.7 76.3 n.a. 87.1 n.a. n.a. n.a. n.a. n.a. 112.9 n.a. n.a. 83.1 41.8 107.5 6.52 89.3 51.1 77.5 101.6 78.8 5.75 84,2 102.9 6.32 86.6 51.736.3 39.5 78.6 2.08 28.5 80.2 66.8 83.3 40.3 4.88 163.3 41.0 81.5 9.72 133.2 132.1 175.4 9.64 37.9 75.3 105.4 129.6 53.0 9.97 136.6 98.8 64.2 127.6 126.0 9.20 164.4 167.9 49.2 12.00 97.9

128

Year 1880 1881 1882 1883 1884 1885 1886 1887 1888 1889 1890 1891 1892 1893 1894 1895 1896 1897 1898 1899 1900 1901 1902 1903 1904 1905-6 1906-7 1907-8 1908-9 1909-10 1910-11 1911-12 1912-13 1913-14 1914-15 1915-16 1916-17 1917-18 1918-19 1919-20 1920-21 1921-22 1922-23 1923-24 1924-25 1925-26 1926-27 1927-28 1928-29 1929-30

The Political Economy of Productivity

Quantity (metric tons) 208,656 225,590 202,608 159,667 286,675 223,776 219,542 400,982 457,229 307,843 489,283 229,824 215,914 804,384 534,038 491,098 486,259 604,800 590,650 462,672 421,546 696,125 811,642 594,518 858,816 878,773 873,331 808,618 933,206 968,285 1,063,843 637,459 597,542 ,192,666 ,112,227 ,136,419 ,196,294 ,134,000 858,816 448,157 284,861 ,305,158 ,295,482 ,345,680 ,172,707 386,806 ,318,464 ,733,962 ,492,042 ,140,653

Export Price Index, Index, (bahtl 1864 = 100 metric ton) 1864 = 100 143.8 93.2 46.9 155.4 83.1 41.8 139.6 43.2 86.0 110.0 47.2 93.9 197.5 41.4 82.3 154.2 87.2 43.8 151.3 98.7 49.6 276.3 95.2 47.9 315.0 46.0 91.5 212.1 93.2 46.9 337.1 51.3 102.0 158.3 50.2 100.0 148.8 54.3 108.0 554.2 53.2 105.8 367.9 53.3 105.9 338.3 50.8 100.9 335.0 146.2 73.5 416.7 65.7 130.6 386.3 83.1 165.2 318.8 84.0 167.0 290.4 89.0 176.9 479.6 86.6 172.2 559.2 171.1 86.1 409.6 95.3 189.5 591.7 94.4 187.8 605.4 188.1 94.6 601.7 93.8 186.5 557.1 93.5 185.9 642.9 85.1 169.2 667.1 87.9 174.7 732.9 85.6 170.2 439.2 205.4 103.3 411.7 109.2 217.4 821.7 82.8 164.6 766.3 76.7 152.6 782.9 77.2 153.4 824.2 83.6 166.2 781.3 86.3 171.6 591.7 153.8 305.8 308.3 274.6 546.1 196.. 3 102.6 204.0 899.2 108.0 214.8 892.5 99.0 196.8 927.1 106.9 212.5 807.9 119.1 236.7 955.4 120.7 240.0 908.3 125.3 249.2 1194.6 116.0 230.7 1027.9 117.4 233.4 785.8 121.9 242.5

Value (Millions Index, of baht) 1864 = 100 134.0 9.78 138.5 10.11 120.0 8.76 7.54 103.3 162.2 11.87 134.3 9.81 149.3 10.90 262.9 19.19 288.4 21.05 197.7 14.43 343.7 25.09 157.9 11.53 160.7 11.73 42.80 586.3 389.7 28.45 341.5 24.93 489.7 35.75 39.72 544.1 638.2 46.59 38.86 532.3 513.7 37.50 825.8 60.28 957.0 69.86 56.67 776.3 81.11 1111.1 83.13 1138.8 81.92 1122.2 75.58 1035.3 1087.5 79.39 85.08 1165.5 1247.4 91.06 65.84 901.9 65.32 894.8 98.70 1352.1 1169.2 85.35 1201.4 87.70 99.97 1369.5 1340.5 97.86 132.10 1809.6 123.08 1686.0 29.22 400.0 140.98 1931.2 128.21 1756.3 1970.4 143.84 1912.7 139.63 167.41 2293.3 2263.4 165.23 2755.6 201.16 175.12 2398.9 1905.3 139.09

Appendix 1: Economic Data

Year 1930-31 1931-32 1932-33 1933-34 1934-35 1935-36 1936-37 1937-38 1938-39 1939^0 1940 1941

Quantity (metric tons) ,034,813 ,342,656 ,685,578 ,676,506 2,038,176 ,513,814 ,571,270 ,111,018 ,567,037 ,907,539 ,219,277 ,173,312

Export Price Index, (bahtl Index, 1864 = 100 metric ton) 1864 = 100 712.9 99.6 198.0 925.0 57.7 114.8 111.1 1161.3 55.9 98.4 49.5 1155.0 1404.2 48.3 96.0 1042.9 60.0 119.3 121.4 1082.5 61.1 765.4 67.8 134.8 62.2 1079.6 123.6 59.4 118.1 1314.2 76.7 840.0 152.6 126.8 808.3 252.2

129

Value (Millions Index, of baht) 1864 = 100 103.07 1411.9 77.50 1061.6 94.20 1290.4 82.97 1136.6 98.44 1348.5 90.84 1244.4 95.94 1314.2 75.34 1032.1 97.42 1334.5 113.30 1552.1 93.56 1281.6 2038.4 148.80

Note: This table corresponds to Table 3-1. Sources: The data for 1857 through 1863 are taken from van der Heide (19060), p. 82; the data for 1864 through 1941 are taken from Ingram (1964), pp. 120-22; the years 1857 through 1904 are the Western calendar years, for 1905-6 through 1940 the years are the Thai calendar years; the number of metric tons was calculated using 60.48 kg/picul for data prior to 1923 and 60 kg/picul for data from 1923-24 on.

TABLE Al-2: TOTAL VALUE OF IMPORTS, EXPORTS, AND TRADE SURPLUS FOR SELECTED YEARS, 1850 TO 1940

Year 1850 1864 1866 1870 1880 1890 1900 1910 1920 1930 1940

Total Imports (Millions of baht) 4.33 9.34 6.32 7.91 10.57 26.31 43.39 68.21 159.68 155.01 124.25

Index 1850 = 100 100.0 215.7 146.0 182.7 244.1 607.6 1002.1 1575.3 3687.8 3579.9 2869.5

Total Exports (Millions of baht) 5.59 10.50 7.40 11.05 16.17 32.10 52.00 108.91 90.49 161.52 185.84

Index 1850 = 100 100.0 187.8 132.4 197.7 289.3 574.2 930.0 1948.3 1618.8 2889.4 3324.5

Trade Surplus (Millions of baht) 1.26 1.16 1.08 3.14 5.60 5.79 8.61 40.70 -69.19 6.51 61.59

Index 1850 = 100 100.0 92.1 85.7 249.2 444.4 459.5 683.3 3230.2 -5491.3 516.7 4888.1

Note: This table corresponds to Table 3-3. Source: The data for the value of the imports, exports, and surplus were taken from Ingram (1971), pp. 332-35.

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TABLE Al-3: NOMINAL VALUE AND INDEX OF VALUE OF COTTON GOODS IMPORTS, 1859 TO 1940, AND IMPORT PRICES AND INDICES FOR WHITE AND GREY SHIRTING, 1865 TO 1940

Year 1859 1864 1865 1866 1867 1870 1880 1885 1892 1895 1900 1905-6 1910-11 1915-16 1920-21 1925-26 1930-31 1935-36 1940

Value in Thousands of Index of Import Price baht of the of White Cotton Goods Shirting Value, 1864 = 100 (baht/Kg) Imports 1,500 90.4 n.a. 1,660 100.0 n.a. n.a. n.a. 1.72 n.a. n.a. 1.57 n.a. n.a. 1.36 1,530 92.2 0.81 2,760 166.3 0.94 n.a. n.a. 0.90 3,600 216.9 n.a. 4,980 300.0 1.19 5,832 351.3 1.57 15,527 935.4 1.90 11,808 711.3 1.61 12,772 769.4 1.84 32,354 1949.0 6.04 28,692 1728.4 3.11 1130.4 18,765 2.22 18,869 1136.7 1.21 17,645 1062.9 1.57

Price Index, 1865 = 100 n.a. n.a. 100.0 91.3 79.1 47.1 54.7 52.3 n.a. 69.2 91.3 110.5 93.6 107.0 351.1 181.0 129.2 70.6 91.3

Import Price of Grey Shirting (baht/Kg) n.a. n.a. 1.28 1.32 1.09 0.72 0.80 0.64 n.a. 0.73 0.78

.35 .30 .23

3.32

.89 .12

0.84 0.9

Price Index, 1865 = 100 n.a. n.a. 100.0 103.1 85.2 56.3 62.5 50.0 n.a. 57.0 60.9 105.5 101.6 96.1 259.7 147.7 87.3 65.9 70.6

Note: This table corresponds to Tables 3-4 and 3-5. Sources: The data for the value of cotton goods imports for 1859 through 1892 come from Ingram (1971), p. 120; the data for the import prices of white and grey shirting come from Ingram (1964), pp. 123-24; data for the value of cotton goods imports for 1895 through 1902 come from H.S.M. 's Customs, Statistics of the Import and Export Trade ofSiam, 1901-1904, Port of Bangkok (four vols.); data for the value of cotton goods imports for 1903-04, through 1940 come from H. S. M. 's Customs The Foreign Trade and Navigation of the Port of Bangkok Year ending March 31st, 1908,1912,1913,1918,1921 (five vols.) and Central Service of Statistics, Statistical Year Book of the Kingdom ofSiam, No. 18 (1933-35), No. 20 (1938-1939), and No. 21 (1939-40 to 1944).

Appendix 1: Economic Data

131

TABLE Al-^: INDICES OF THE TERMS OF TRADE, 1865-67 TO 1940, RATIO OF RICE EXPORT PRICE TO IMPORT PRICE OF WHITE AND GREY SHIRTING

Year 1865-67 1870 1875 1880 1885 1889 1895 1900 1905 1910 1915 1920 1925 1930 1935 1940

Index of the Ratio of Rice Export to White Shirting Import Price (1865-67 = 100) 100.0 161.7 162.7 156.3 152.7 163.3 133.7 177.6 156.1 166.7 131.5 53.2 121.6 140.4 154.9 304.5

Index of the Ratio of Rice Export to Grey Shirting Import Price (1865-67 = 100) 100.0 143.0 138.4 144.4 168.8 n.a. 171.4 281.1 172.7 162.3 154.6 76.1 157.4 219.6 175.4 416.0

Note: This table corresponds to Table 3-6. Sources: For the sources of the rice export price data see Table Al-1; for the data sources on the textile import prices see Table A1-3.

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The Political Economy of Productivity

TABLE Al-5: NOMINAL URBAN UNSKILLED AND RURAL WAGES, 1820 TO 1950

Year 1820 1850 1864 1889 1890'stol900's

Nominal Unskilled Bangkok Wage (baht per Day) 0.37 0.33-0.50; 0.42* 0.60-0.80; 0.70* 0.75*

1890 1892

0.75*

1895

1.25

1896 1898 1899

0.50* 0.50* 0.625

1901

0.833*

1902

0.75-1.0; 0.875*

1903

1905 1905

0.50

1905

1-1.5

1905

0.50*

1906 1907 1907 1908 1908

Rural or Agricultural Wage (baht)

8 per month, Petburi 80 per season, rough average, range 40 to 120, Central Plain 60 per season May to January skilled labour, railway construction on Bangkok to Khorat line unskilled labour, railway construction on Bangkok to Khorat line

Source Ingram (1964), p. 115 Ingram (1964), p. 115 Ingram (1964), p. 115 r.5.k.s.3.1/l Johnston (1976), p. 41 Ingram (1964), p. 115 Child (1892), p. 143 Holm (1977), p. 92 Ingram (1964), p. 115 Smyth (1898), 1:228 Holm (1977), p. 92 Royal Survey Dept. (1901-02), p. 48 Ingram (1964), p. 115, and vanderHeide(1903a), p.

19 per month for Lao in the Central Plain 10 per month for Bangkok silk farm workers 24 per rai to harvest cotton wage for unskilled workers before construction began on railway north of Pitsanulok wage for railway construction workers north of Pitsanulok 85.75 for the season plus 4.3 per month for board 20 per month, livestock r.5. k.s.7/4 2 per day, pre-boom; 3 after boom at Rangsit 0.25 per day to work off tax debt 25-30 per month in a rice mill 6 per day, Rangsit

116

Royal Survey Dept. (1903-4), p. 55 Toyama(1903), p. 5 Holm (1977), p. 118 Holm (1977), p. 118

Holm (1977), p. 118 Thompson (n.d.), p. 196 r.5.k.s.7/4 Johnston (1981), p. 113 r.5.k.s.3.2/35 Stiven(1908), p. 149 Johnston (1981), p. 113

Appendix 1: Economic Data

Year 1910

Nominal Unskilled Bangkok Wage (baht per Day)

1911

Rural or Agricultural Wage (baht} 21 per month plus board for land survey 80- 120 for 9 month season plus food, cloth, bedding, tobacco, and betel

1912 1914-15

0.75-1.0; 0.875* 0.75*

1915-16

0.75*

1916-17 through 1923-24

1.0*

1924-25

1.12*

1925-26

1.0*

85 per season

1926-27

1.0*

8 1 per season

1927-28

1.0*

85 per season

1928-29

1.0*

85 per season

1929-30 1930-31

1.0* 1.0*

25 per month, livestock station

1931-32

0.8*

1932-33 through 1938-39 1950

0.8*

was 60-80 per season Angthong; now 30-50 per season - Angthong was 80 per season Pitsanulok; now 40 per season Pitsanulok was 60-100 per season Lopburi; now 40-60 per season - Lopburi

20.0*

133

Source Royal Survey Dept. (1910-11), p. 15 Yai Suphan Sanitwongse (1911), p. 4 Ingram (1964), p. 115 Stat. Year Book No. 20, (1938-39) Stat. Year Book, No. 5 (1920) Stat. Year Book, No. 5 (1920), and No. 11 (1925-26) Stat. Year Book, No. 11 (1925-26) Stat . Year Book, No. 1 1 (1925-26); Tardt (1930), p. 127 Stat. Year Book, No. 20 (1938-39); Tardt (1930), p. 127 Stat. Year Book, No. 20 (1938-39); Tardt (1930), p. 127 Stat. Year Book, No. 20 (1938-39); Tardt (1930), p. 127 r.7.k.s.8/3 Stat . Year Book, No. 20 (1938-39) r.7.ph.!3/5

Stat. Year Book, No. 20 (1938-39) Ingram (1964), p. 115

Note: This table corresponds to Table 3-8. The asterisk* indicates that observation was used in the construction of the real wage series presented in Table Al-6. The data for the Bangkok unskilled workers are generally baht per day for dock workers. The rural or agricultural worker wages are for government operations upcountry or agricultural workers per season or month. The sources are as indicated.

134

The Political Economy of Productivity

TABLE Al-6: THREE REAL WAGE INDICES FOR BANGKOK DOCK WORKERS, 1850 TO 1950

Year 1850 1864 1865 1889 1890 1896 1898 1901 1902 1905 1912 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1950

Kilograms of Rice per Daily Wage 23.33 13.23 n.a. 16.0 14.63

6.8

7.02 9.62 10.17 5.29

8.0

9.77 9.72 11.97 11.59

6.5

3.64 9.75 9.26 10.1 9.36 9.41 8.28 7.98 8.62 8.52 8.20 10.04 13.86 14.31 16.16 16.56 13.33 13.10 11.80 12.87 9.78

Index, (1864 = 100) 176.4 100.0 n.a. 121.0 110.6 51.4 45.6 72.7 76.9 40.0 60.5 73.9 73.5 90.5 87.6 49.1 27.5 73.7 70.0 76.4 70.8 71.1 62.6 60.3 65.2 64.4 62.0 75.9 104.8 108.2 122.2 125.2 100.8 99.0 89.2 97.3 74.0

Index of White Shirting per Daily Wage (1865 = 100)(kg)

n.a. n.a. 100.0 204.7 n.a. 104.9 111.8 131.2 119.4 64.7 119.4 97.1 100.2 112.3 74.7 48.6 40.8 40.8 75.9 77.6 69.3 77.1 78.9 91.4 99.8 95.8 90.9 110.6 121.6 156.3 153.1 172.7 161.9 132.9 164.1 148.2 n.a.

Index of Grey Shirting per Daily Wage (1865 = 100) (kg) n.a. n.a. 100.0 n.a. n.a. 140.6 166.2 155.4 161.6 67.7 120.3 104.8 111.5 129.6 77.1 50.1 53.4 55.0 93.4 105.5 100.5 113.3 96.7 110.6 128.2 131.6 123.2 130.9 169.1 172.0 159.8 169.7 173.5 171.7 141.5 193.2 n.a.

Note: This table corresponds to Table 3-8. Sources: The nominal wage data are taken from Table A1-5. The rice prices per kilogram are derived from the export prices per metric ton presented in Table Al-1. The textile import prices per kilogram are taken from Table Al-3. Rice balance sheet computations utilize an estimate of per capita rice consumption of 170 kilograms per year (see Table Al-18).

Appendix 1: Economic Data

135

TABLE Al-7: NOMINAL LAND PRICES AND RENTS, 1889 TO 1948 Land Price (baht per mi)

8.3 25 sale; 4 rent 15 sale 10 sale; 1.5 rent 80 sale; 9-10 rent

Location Agricultural: Bangkok area Bang Chan land sale, near Bangkok Rangsit during first years of cultivation Rangsit, later when cultivation established; tenant pays taxes and expenses Bangkok area paddy land sale Agricultural: Prathumthani Agricultural: Rangsit area canal project proposal Agricultural: Rangsit area Agricultural: Ayuthia canal proposal Ayuthia land sale Ayuthia khaayfaak mortgage Ayuthia mortgage Nakori Chaisi, good Nakori Chaisi, medium Nakori Chaisi, poor Lowland Rangsit

20-50 sale

Average Rangsit

10-20 sale; 1-2 rent

Highland Rangsit

25

40

West Bank Chao Phya proposal Rangsit company statement Ayuthia

20

Rangsit, low value

4 rent

Ratburi

2 rent

Bangkhuad, Bangkok area good Central Plain land Rangsit (land originally sold for 4 baht per rai) Central Plain land sale Ratburi

Year 1889

5

1890's

1.25

1890's

1 to 2 rent 4.6 rent

1891

1

1894

2

1897

5to8.to 10

1900

20-50 4

1901

13 7.8

1903 1903

1904

25

1905

1906

33.8 rent 20-30 sale; 4 rent

1907

8 35^0

1908

72

Sen Saeb canal land sale, Bangkok area

Source r.5. k.s. 3.1/3 Hanks (1972), p. 105 Tanabe(1978), p. 66 Tanabe(1978), p. 66

r.5. k.s. 3.3/10

r.5. k.s. 3.3/5 r.5. k.s. 9.4k/35

r.5. k.s. 11/6 r.5. k.s. 3.1/7 r.5. k.s. 4.2/3 r.5. k.s. 4.2/3 r.5. k.s. 4.2/3 r.5. k.s. 10/1 r.5. k.s. 10/1 r.5. k.s. 10/1 van der Heide (1903a), pp. 30,36 van der Heide (1903a), pp. 30,36 van der Heide (1903a), pp. 30,36 van der Heide (1904), p. 22 r.5. k.s. 9.4/14 van der Heide (1905/7), p43 van der Heide (1905fe), p. 43 van der Heide (1905/7), p. 43 Kaufman (1960), p. 15 Thompson (n.d.), p. 195 r.5. k.s. 3.1/11 r.5. k.s. 3.3/39 Royal Survey Dept. (1907-8), p. 25 r.5. k.s. 3.3/40

736

Year 1911

1915

The Political Economy of Productivity

Land Price (baht per rai) rent 40% rent 12-16% 10.5

9.5 9.0 1915

16 to 24 to 32

1922

16

40

Suphan project area, irrigation Nakorn Nayok project area, irrigation land for government use in project area, Pasak project on boundary

25

outside project

was 40-50; now 80-100 40 with control 25 without control 40-50 before

Rangsit area, Pasak project Ayuthia, Pasak project Ayuthia, Pasak project Saraburi Pasak project area Saraburi Pasak project area Ayuthia-Pasak land value average Saraburi land value average Thanyaburi land value average average rent in 1 3 tambons Bangkok area Angthong

24 1923 1925

1925

8

40-80

80-100 after

1926

20 23.3 13.3

1931

4.9

1932

rents, better land was 12, now 6 rents, medium land was 8, now 3 rents, poor land was 6, now 2.5 rents, were 6-8, now

3^

1936-37

1942 1948

Location crop on good land on poor land Irrigation dept. land purchase, Ayuthia, Pasak Irrigation dept. land purchase, Saraburi Irrigation dept. land, Thayaburi Central-Rasak area

sale was 40, now 10

26

52 sale 138-350

Source r.6. k.s. 1/12 r.6. k.s. 1/12 Files of the Financial Adviser 18, no. 13 Files of the Financial Adviser 18, no. 13 Files of the Financial Adviser 18, no. 13 Royal Irrigation Dept. (19156), vol. 2, appendix R.I.D. (1922), 30, 36 R.I.D. (1922), 30, 36 r.6 k.s. 4/1 Files of the Financial Adviser 18, #11 Files of the Financial Adviser 18, #11 Files of the Financial Adviser 18, #11

r.5-7 bl. 3/7 #8 r.5-7 bl. 3/7 #8 r.5-7 bl. 3/7 #8 r.5-7 bl. 3/7 #8 Files of the Financial Adviser 18, #13 Files of the Financial Adviser 18, #13 Files of the Financial Adviser 18, #13 Files of the Financial Adviser 2, #14 r.7. ph. 13/5

Angthong

r.7. ph. 13/5

Angthong

r.7. ph. 13/5

Lopburi

r.7. ph. 13/5

Pitsanulok average paddy land value per rai for cooperative members Central Plain Bang Chan, Bangkok area

r.7. ph. 13/5 Report of the Financial Adviser (1937-38), p. 9 Ladejinsky(1942), p. 169 Kamol(1955), p. 69

Appendix 1: Economic Data

137

Note: The data are for the land value or where indicated cash rent in bahl per rai. The land in question is paddy land and does not include observations for higher value garden or orchard lands. Naturally comparisons are difficult because of differences in fertility, access to transportation, depth, reliability, and severity of flooding, and other factors. Most of the observations are for the Central Plain, the major rice export producing region. One rai equals 0.16 hectares or 0.4 acres.

TABLE Al-8: NOMINAL VALUE OF PADDY LAND MORTGAGED PER HECTARE AND INDEX OF THE NOMINAL VALUE, 1916 TO 1941

Year 1915-16 1916-17 1917-18 1918-19 1919-20 1920-21 1921-22 1922-23 1923-24 1924-25 1925-26 1926-27 1927-28 1928-29 1929-30 1930-31 1931-32 1932-33 1933-34 1934-35 1935-36 1936-37 1937-38 1938-39 1939-40 1940 1941

Average baht per Hectare of Newly Mortgaged Land 102.0 87.9 71.9 82.6 104.4 111.9 112.8 127.3 124.6 127.9 154.6 152.5 155.0 174.5 176.2 180.9 161.4 142.6 116.9 107.4 121.6 113.8 118.4 115.5 148.2 144.0 136.8

Index of the Nominal Value, (1915-16 = 100) 100.0 86.2 70.5 81.0 102.4 109.7 110.6 124.8 122.2 125.4 151.6 149.5 152.0 171.1 172.7 177.4 158.2 139.8 114.6 105.3 119.2 111.6 116.1 113.2 145.3 141.2 134.1

Note: This table corresponds to Table 3-10. Data on the real land price indices can be found there. Sources: There are 6.25 rai per hectare. The data are for the average value per hectare of new mortgages registered in that year. The mortgages are for paddy land which was for the most part found in the Central Plain. Very similar results were obtained when a series on Central Plain paddy land mortgages was constructed. The trends in the value per hectare for redeemed or foreclosed mortgages were the same as shown above for newly mortgaged land. The data \verel2kenfromStatisticalYearBookqftheKingdomofSiam, Nos. 5(1920), 11(1925-26), 12 (1926-27), 15 (1929-30), 17 (1931-33), 18 (1933-35), 19 (1935-37), 20 (1938-39), and 21 (1939-40 to 1944).

138

The Political Economy of Productivity

TABLE Al-9: WHOLE KINGDOM PADDY AREA PLANTED, MAJOR CROP AREA PLANTED, AND PERCENTAGE OF PADDY AREA PLANTED THAT WAS HARVESTED, 1905-06 TO 1941

Year 1905-6 1906-7 1907-8 1908-9 1909-10 1910-11 1911-12 1912-13 1913-14 1914-15 1915-16 1916-17 1917-18 1918-19 1919-20 1920-21 1921-22 1922-23 1923-24 1924-25 1925-26 1926-27 1927-28 1928-29 1929-30 1930-31 1931-32 1932-33 1933-34 1934-35 1935-36 1936-37 1937-38 1938-39 1939-40 1940 1941

Paddy Area Planted (hax 1,000) 1281.23 1388.42 1385.23 1253.15 1752.86 1454.75 1571.69 1974.73 2162.32 2038.30 2072.24 2169.44 2222.50 2158.57 2478.80 2446.90 2595.87 2527.26 2686.60 2776.98 2736.54 2894.68 2927.75 2849.68 3035.86 3180.08 3090.79 3213.79 3245.30 3336.69 3377.70 3258.18 3369.98 3507.02 3463.88 3806.98 3969.25

Percentage of Paddy Area Planted Harvested n.a. n.a.

93 86 99 97 96 100 93 99 99 96 79 93 57 92 91 95 88 92 87 96 87 84 81 92 84 94 93 88 88 68 87 89 89 85 91

Planted Area for Major Crops (hax 1,000) n.a. n.a. n.a. n.a. n.a. n.a. 1606.96 2007.61 2195.70 2066.70 2104.48 2198.14 2247.41 2184.43 2504.31 2475.01 2621.68 2558.76 2710.34 2807.77 2766.33 2923.02 3008.04 2931.87 3114.56 3249.34 3167.14 3291.45 3329.43 3425.83 3458.96 3337.86 3461.54 3595.86 3552.46 3892.20 4077.25

Note: This table corresponds to Table 3-13. Sources: The data were converted from mi to hectares on the basis of 6.25 rai per hectare. Indices of the paddy area and major crop area planted are shown in Table Al-10. The data on the per cent harvested for 1907-8 through 1910-11 are taken from Welsch and Sopin (1973), 130. The rest of the data were taken from the Statistical Year Book of the Kingdom ofSiam, Nos. 1 (1916), 6 (1921), 11 (1925-26), 16 (1930-31), 17 (1931-33), 18 (1933-35), 19 (1935-37), 20 (1938-39) 21 (1939-40 to 1944), and 22 (1945-1955). For an evaluation of the reliability of this data see Table Al-20.

Appendix 1: Economic Data

139

TABLE Al-10: INDEX OF PADDY AND MAJOR CROP AREA PLANTED, WHOLE KINGDOM, 1905-6 TO 1941

Year 1905-6 1906-7 1907-8 1908-9 1909-10 1910-11 1911-12 1912-13 1913-14 1914-15 1915-16 1916-17 1917-18 1918-19 1919-20 1920-21 1921-22 1922-23 1923-24 1924-25 1925-26 1926-27 1927-28 1928-29 1929-30 1930-31 1931-32 1932-33 1933-34 1934-35 1935-36 1936-37 1937-38 1938-39 1939-40 1940 1941

Index of Paddy Area Planted (1911-12 = 100) 81.5 88.3 88.1 79.7 111.5 92.6 100.0 125.6 137.6 129.7 131.8 138.0 141.4 137.3 157.7 155.7 165.2 160.8 170.9 176.7 174.1 184.2 186.3 181.3 193.2 202.3 196.7 204.5 206.5 212.3 214.9 207.3 214.4 223.1 220.4 242.2 252.5

Index of Major Crop Area Planted (1911-12 = 100) n.a. n.a. n.a. n.a. n.a. n.a. 100.0 124.9 136.6 128.6 131.0 136.8 139.9 135.9 155.8 154.0 163.1 159.2 168.7 174.7 172.1 181.9 187.2 182.4 193.8 202.2 197.1 204.8 207.2 213.2 215.2 207.7 215.4 223.8 221.1 242.2 253.7

Note: This table corresponds to Table 3-13. Source: See references listed in Table Al-9. For a discussion of the reliability of the data see Table Al-20.

140

The Political Economy of Productivity

TABLE Al-11: WHOLE KINGDOM PADDY OUTPUT, INDEX OF PADDY OUTPUT, PADDY YIELDS AND INDEX OF PADDY YIELDS, 1906-7 TO 1941

Year 1906-07 1907-08 1908-09 1909-10 1910-11 1911-12 1912-13 1913-14 1914-15 1915-16 1916-17 1917-18 1918-19 1919-20 1920-21 1921-22 1922-23 1923-24 1924-25 1925-26 1926-27 1927-28 1928-29 1929-30 1930-31 1931-32 1932-33 1933-34 1934-35 1935-36 1936-37 1937-38 1938-39 1939-40 1940 1941

P&ddy Output (metric tons) 2,614,472 2,616,637 2,387,267 3,068,314 2,976,743 2,903,648 3,698,885 2,876,064 3,126,732 3,046,692 3,816,160 3,013,143 3,411,275 2,288,574 4,311,735 4,266,166 4,375,187 4,434,923 4,941,573 4,193,102 5,226,037 4,564,096 3,882,165 3,874,834 4,826,301 4,068,530 5,116,405 5,007,734 4,597,786 4,726,983 3,379,856 4,555,706 4,523,633 4,560,463 4,923,350 5,120,097

Index of Paddy Output (1911-12 = 100) 90.0 90.1 82.2 105.7 102.5 100.0 127.4 99.1 107.7 104.9 131.4 103.8 117.5 78.8 148.5 146.9 150.7 152.7 170.2 144.4 180.0 157.2 133.7 133.4 166.2 140.1 176.2 172.5 158.3 162.8 116.4 156.9 155.6 157.1 169.6 176.3

Paddy Yields (kg/ha) 1883 1889 1905 1750 2046 1847 1873 1330 1534 1470 1759 1356 1580

922

1761 1644 1731 1652 1779 1532 1804 1560 1361 1275 1515 1316 1590 1541 1376 1399 1039 1350 1290 1316 1294 1316

Index of Paddy Yields (1911-12 = 100) 101.9 102.3 103.1 94.7 110.8 100.0 101.4 72.0 83.1 79.6 95.2 73.4 85.5 49.9 95.3 89.0 93.7 89.4 96.3 82.9 97.7 84.5 73.7 69.0 82.0 71.3 86.1 83.4 74.5 75.7 56.3 73.1 69.8 71.3 70.1 71.3

Note: This table corresponds to Table 3-13. Sources: The data for 1906-07 through 1922-23 were converted to metric tons using a factor of 60.48 kg perpicul. For 1923-24 on the factor used was 60 kg perpicul. Output and yields are in paddy or unhusked rice. The data sources are listed in Table A1-9. For an evaluation of the reliability of the data see Table Al-20.

141

Appendix 1: Economic Data

TABLE Al-12: CENTRAL PLAIN PADDY AND MAJOR CROP AREA, PADDY OUTPUT, YIELDS, AND PER CENT AREA HARVESTED, 1911-12 TO 1941

Year 1911-12 1912-13 1913-14 1914-15 1915-16 1916-17 1917-18 1918-19 1919-20 1920-21 1921-22 1922-23 1923-24 1924-25 1925-26 1926-27 1927-28 1928-29 1929-30 1930-31 1931-32 1932-33 1933-34 1934-35 1935-36 1936-37 1937-38 1938-39 1939-40 1940 1941

Area Planted in Major Paddy Area Crops Planted (ha) (ha) 973.81 950.69 1102.34 1113.81 1225.20 1181.45 1089.46 1062.98 1123.07 1084.67 1178.56 1188.53 1235.38 1228.42 1225.37 1217.21 1324.74 1316.46 1309.20 1300.93 1472.15 1377.19 1370.75 1361.00 1466.70 1459.88 1526.10 1537.03 1531.56 1524.80 1612.39 1603.58 1618.34 1645.39 1615.76 1641.63 1730.21 1703.76 1762.68 1740.70 1721.36 1698.28 1747.40 1722.92 1768.02 1740.21 1729.55 1700.16 1704.16 1682.22 1674.99 1655.86 1707.17 • 1687.65 1758.98 1787.02 — 1811.96 — 1913.24 1961.60 —

Paddy Output (metric tons)

976,902 2,074,254 2,255,123 2,231,492 2,033,488 2,574,538 2,047,995 2,850,400 2,374,100 1,971,107 2,113,909 2,475,430 2,158,425 2,805,379 2,794,488 2,331,391 2,233,353 1,912,714 2,377,731 2,258,954 2,410,093 2,373,422 2,570,053

Paddy Yield Per Cent of Planted Area (kg/ha Harvested planted)

742

1594 1637 1640 1393 1687 1343 1778 1467 1220 1241 1422 1271 1628 1606 1371 1328 1155 1409 1284 1330 1241 1310

92 84 85 72 85 84 85 80 91

Sources: The data are taken from the Statistical Year Book of the Kingdom ofSiam, Nos. 1 (1916), 6 (1921), 9 (1924), 11 (1925-26), 15 (1929-30), 17 (1931-33), 18 (1933-35), 19 (1935-37), 20 (1938-39), and 21 (1939-40 to 1944).

142

The Political Economy of Productivity

TABLE Al-13: INDICES OF CENTRAL PLAIN MAJOR CROP AREA, PADDY AREA, PADDY YIELD, AND PADDY OUTPUT, 1911-12 TO 1941

Year 1911-12 1912-13 1913-14 1914-15 1915-16 1916-17 1917-18 1918-19 1919-20 1920-21 1921-22 1922-23 1923-24 1924-25 1925-26 1926-27 1927-28 1928-29 1929-30 1930-31 1931-32 1932-33 1933-34 1934-35 1935-36 1936-37 1937-38 1938-39 1939-40 1940 1941

Index of Index of Area Index of Index of Planted to Paddy Area Paddy Yields Planted Paddy Output Major Crops (1911-12 = 100) (1911-12 = 100) (1920-21 = 100) (1920-21 = 100) 100.0 100.0 116.4 116.0 124.3 125.8 111.8 111.9 114.1 115.3 122.0 124.0 129.2 126.9 128.0 125.8 47.1 136.0 138.5 46.5 100.0 134.4 136.8 100.0 108.7 102.7 151.1 144.9 107.6 102.9 140.8 143.2 98.0 87.4 153.6 150.6 124.1 157.8 105.8 160.5 98.7 160.4 157.3 84.3 137.4 165.6 168.7 111.5 170.2 92.0 114.5 169.0 95.0 168.6 170.0 76.5 177.7 179.2 77.9 101.9 89.2 119.3 181.0 183.1 104.1 176.8 178.6 79.7 179.4 102.1 135.2 181.2 134.7 181.6 183.0 100.8 112.4 177.6 178.8 86.0 107.7 83.3 175.0 176.9 172.0 174.2 72.5 92.2 88.4 114.6 175.3 177.5 185.0 80.6 108.9 183.5 83.4 116.2 190.6 114.4 201.2 77.9 206.3 82.2 123.9

Note: For information on the data sources, see the sources given for Table Al-12.

Appendix 1: Economic Data

143

TABLE Al-14: OBSERVATIONS ON PADDY YIELDS IN KG/HA, 1892-1952

Year 1892 1900 1902

Paddy Yield (kg/ha) 3438 1719-2063 2578 3125 2292

1903

1375-2063

1904 1905 1906

2063 3438 344-688

1909

2063 2750 458

688-764 2750

1910

551-2194

1911 1920 1921

2750 1837 2290

1925

900

1927 1929

Region Central Plain, good land Central Plain Central Plain irrigated Central Plain Muang Phaan, Northern Thailand Nakorn Pathom, Central Thailand Bangkok area Central Thailand flood conditions, Rangsit area normal year, Rangsit area Pukhet and Trang, Southern Thailand flood year, Saen Seeb Canal area, Central Thailand poorly drained area, Rangsit Rangsit area, 10 rai family farm range of yield in Thanyaburi, Central Thailand, 1909-28 Rangsit area Whole Kingdom Ayuthia, Central Thailand Rangsit area

2625

yield expected by the government on class 1 land

2344

yield expected by the government on class 2 land

2063

yield expected by the government on class 3 land

1969

yield expected by the government on class 4 land

1781

yield expected by the government on class 5 land

1373-1867 2063

Whole Kingdom Whole Kingdom

1781-2625

Whole Kingdom

Source Child (1892), p. 143. r.5. k.s. 10/1 r.5. k.s. 4.5/6 Grassi(1902), p. 13. r.5. k.s. 3.2/35.

r.5. k.s. 10/1. r.5. k.s. 8/2. Thompson (n.d.), p. 197. r.5. k.s. 3.2/35. r.5. k.s. 3.2/35. r.5. k.s. 10/5. r.5. k.s. 3.1/13 r.5. k.s. 3.1/12. r.5. k.s. 3.1/12 R.I.D. (1929), Statement 9

r.6. k.s. 1/6 r.6. kh. 20/4. Board of Commmercial Development (1921), pp. 14-15. Files of the Financial Adviser, Section 18, #11 Stat. Year Book of the Kingdom ofSiam, No. 11 (1925-26), p. 355. Stat. Year Book of the Kingdom ofSiam^o. 11 (1925-26), p. 355. Stat. Year Book of the Kingdom ofSiam,No. 11 (1925-26), p. 355. Stat. Year Book of the Kingdom ofSiam,No. 11 (1925-26), p. 355. Stat. Year Book of the Kingdom ofStam,No. 11 (1925-26), p. 355. Van Valkenburg (1933), p. 8. Annusorn Sithiporn ( 1 97 1 ), p. 126. Pugh(1929), 11.

144

Year 1930

The Political Economy of Productivity

Paddy Yield (kg/ha) 1680 1146 1500-1875 489-4002

Region Central Thailand Central Thailand, Rangsit Whole Kingdom Central Thailand, range

2292

Central Thailand, average

1581

Central Thailand

1175

Central Thailand Northern Thailand

1452

Southern Thailand

1674

Northeastern Thailand

1931

1983

1932 1948-52

1515-2250 1719 1980

Pranakorn and Thonburi, Central Thailand average yield for 1 8 tambons yield range, 18 tambons Anthong, Central Thailand 4 year average yield in Bangchan, Central Plain village

Source Ladell(1930), 1. Zimmerman (1931), 308. Ministry of Commerce and Communication (1930), p. 183. Anusorn Sithiporn (1971), Section KH Anusorn Sithiporn (1971), Section KH Anusorn Sithiporn ( 1 97 1 ), p. 103. Zimmerman ( 1 93 1 ), pp. 25-28. Zimmerman ( 1 93 1 ), pp. 25-28. Zimmerman (1931), pp. 25-28. Zimmerman ( 1 93 1 ), pp. 25-28. Files of the Financial Adviser, Section 2, #14

r.7. ph. 13/5. Kamol(1955), p. 52.

Appendix 1: Economic Data

145

TABLE Al-15: OBSERVATIONS ON THE NUMBER OF RAI PER HOLDING OR FAMILY FARM IN THE CENTRAL PLAIN, 1884 TO 1949 Year 1884 1900-1901

Number of Rai 15a 14b

Location Central Plain Ayuthia

1901-2

15"

Ayuthia

1902-3

b

Prachin

16

28b

1903-04

Chantaburi b

9-12

river areas in Nakorn Chaisi

15-20b

best areas in Nakorn Chaisi 3

80-100

1904-5

19.6 20b

in the low areas of the delta, up to 200 in the higher areas in the Central Plain Baan Khlong Yai Nakorn Chaisi

1905-6

19b 22b

Ayuthia Nakorn Chaisi

16b

Ayuthia

20* 20, 25a 20a

Central Plain Central Plain for a family of 5

18b 380

Central Plain landlord average holding in Nakorn Chaisi landlord average holding in Nontaburi Klong Prawet average holding of farmers who attended irrigation meeting in Nakorn Khuam Khan meeting in Samutprakan meeting in Samutprakan meeting in Samutprakan

30^0* b

1906-7 1908-9

234

1-15 48.5

50.8 44.3 50.6

Source Hardouin(1884), p. 439 Royal Survey Dept. (1900-1901) Royal Survey Dept. (1901-2), p. 39 Royal Survey Dept., (1902-3), 35-36 Royal Survey Dept. (1902-3), 35 Royal Survey Dept. (1903-4), p. 44 Royal Survey Dept. (1903-4), p. 44 vanderHeide(1903a), p. 44

r.5. k.s. 4/7. Royal Survey Dept. (1904-5), p. 32 r.5. k.s. 4/7 Royal Survey Dept. (1905-6), p. 17 Royal Survey Dept. (1905-6), 3. van der Heide (19060), p. 93. Thompson (n.d.), p. 185. van der Heide (n.d.), p. 10, or van der Heide (1907), p. 19. Royal Survey Dept. (1908-9). r.5. k.s. 3.3/31. r.5. k.s. 3.3/31. r.5. k.s. 3.3/31. r.5. k.s. 9.3/20.

r.5. k.s. 9.3/20. r.5. k.s. 9.3/20. r.5. Ls. 9.3/20.

146

Year 1909-10

The Political Economy of Productivity

Number of Rai 10

30

51.8 1915-16

76

68.4 1908

75 8-21 8

1926-27 1930-31

20 24a

1932-33

203

2?a

15a 16a 8

1933-34 1936-37

40-50 36

1937-38

32

1938-39

30

1940

31

1948

30.7a

1949 a

23.a r 50

Location farmers with no livestock at Rangsit farmers with livestock at Rangsit average holding of farmers attending an irrigation meeting in Klong Prawet per holding in Ayuthia, disputed land per holding in Prathumthani, disputed land overall average of both family farm plots Central Plain Central Plain Central Plain Central Plain broadcast family farm, Pitsanulok transplant family farm, Angthong transplant family farm, Lopburi Central Plain average for cooperative members average for cooperative members average for cooperative members average for cooperative members average farm Bang Chan Central Plain average Central Plain

Source r.5.k.3.1-12 r.5. k.3.1-12 r.5. k.s. 9-10

r.6. k.s. 10.1-19 r.6. k.s. 10.1-19 Johnston (1975) Tardt(1930), p. 126 Zimmerman (1930), pp. 18-19 Zimmerman (1937), p. 386 r.7. ph. 13/5 r.7. ph. 13/5 r.7. ph. 13/5

Van Valkenburg (1933), p. 6. Report of the Fin. Adv. (1937-38), 19. Report of Fin. Adv. (1938-39), 10. Report of Fin. Adv. (1939-^0), 16. Report of Fin. Adv. (1941), 12. Kamol(1955), p. 169. Kamol(1955), p. 169. X. Kambhu(1949), p. 70

Indicates average size paddy farm in that region. Indicates average size holding per holder of a title deed or similar document. Note: One rai is approximately 0.16 hectares or 0.40 acres.

b

Appendix 1: Economic Data

147

TABLE Al-16: COMPARISON OF VARIOUS POPULATION AND POPULATION GROWTH RATE ESTIMATES, 1911 TO 1970 Total Population in Thousands

Year 1911 1919 1929 1937 1947 1956 1960 1970

Period 1911-19 1919-29 1929-37 1937-47 1947-56 1956-60 1960-70 1947-60 1919^7 1919-41 a

Census 8266 9207 11506 14464 17443 20095" 26258 34152

Bourgeois-Pichat 9966 12433 14549 17549 20776

Skinner 8432 9608 12059 14721 17643 20865b

Average Annual Per Cent Rate of Growth Census Bourgeois-Pichat Skinner 1.37 1.65 2.24 2.25 2.30 2.52 2.90 1.98 1.83 1.89 1.89 1.88 1.88 1.59 6.92 2.66

2.04 2.08

Das Gupta

17890 27170

Das Gupta

3.27

2.19 2.23

The 1956 population estimate is based on a survey rather than a complete census. The 1956 Skinner estimate was interpolated by adding 1.8813% to Skinner's 1955 population estimate of 20,480,000. Note: The Bourgeois-Pichat and Skinner estimates do not seriously differ. The Skinner series indicates a higher rate of population growth for the 1929 to 1937 period than the Bourgeois-Pichat estimate, because Skinner may have underestimated the degree of under enumeration in the 1929 census. However, the use of the Bourgeois-Pichat series instead of the Skinner series would not reverse the conclusions that paddy area grew faster than population while paddy output grew at a slower pace than population. For instance, paddy output grew by 1.78% per year from 1919 to 1941 (see Table Al-11), while either population series indicate a population growth rate in excess of 2% per year. Sources: The census data for 1911 through 1956 are taken from Bourgeois-Pichat (1959), p. 29. The census data for 1960 and 1970 are taken from Thomlinson (1972), p. 23. The BourgeoisPichat data are taken from Bourgeois-Pichat (1959), p. 9. The Skinner data are taken from Skinner (1957), pp. 79 and 183. For Skinner population estimates from 1825 to 1942, see Table 3-11. The Das Gupta data are taken from Das Gupta et al. (1965), p. 11.

b

148

The Political Economy of Productivity

TABLE Al-17: VARIOUS ESTIMATES OF CRUDE MORTALITY AND FERTILITY, 1910-11 TO 1956

Period 1910-11

Death Rate per Thousand 15.2

Birth Rate per Thousand

25.8

29.4 30.1 28.0 23.1 or 29.9a

roughly 50 roughly 50 roughly 50

1922

16

27

1923

16

28

1924

16

29

1925

15

28

1926

14

30

1927

17

28

1928

14

30

1929

16

30

1930

16

31

1930-31

10.1

30.3 Whole Kingdom

8.1

26.9 Central Plain

10.8

29.8 Northern Thailand

6.8

37.2 Southern Thailand

14.6

29.6 Northeast Thailand

1919-29 1929-37 1937-47 1947-56

1921

a

17

roughly 50

26

Source Stat. Year Book of the Kingdom of Siam, No. 1 (1916) p. 17 Bourgeois-Pichat (1959), p. 22 Bourgeois-Pichat (1959), p. 22 Bourgeois-Pichat (1959), p. 22 Bourgeois-Pichat (1959), p. 22 Ear Eastern Association of Tropical Medicine (1930), p. 216 Far Eastern Association of Tropical Medicine (1930), p. 216 Far Eastern Association of Tropical Medicine (1930), p. 216 Far Eastern Association of Tropical Medicine (1930), p. 216 Far Eastern Association of Tropical Medicine (1930), p. 216 Far Eastern Association of Tropical Medicine (1930), p. 216 Far Eastern Association of Tropical Medicine (1930), p. 216 Ear Eastern Association of Tropical Medicine (1930), p. 216 Far Eastern Association of Tropical Medicine (1930), p. 216 Far Eastern Association of Tropical Medicine (1930), p. 216 Zimmerman ( 1 93 1 ), pp. 21 -24 and 268-71. Zimmerman (1931), pp. 21-24 and 268-71. Zimmerman (1931), pp. 21-24 and 268-71. Zimmerman (1931), pp. 21-24 and 268-71. Zimmerman (1931), pp. 21-24 and 268-71.

Bourgeois-Pichat feels that there was little drop in the crude death rate in Thailand until after 1946 (Bourgeois-Pichat [1959], p. 10). Note: The Far Eastern Association of Tropical Medicine estimated that one-third of live births died within their first year of life (Far Eastern Association [1930], p. 228).

Appendix 1: Economic Data

149

TABLE Al-18: VARIOUS ESTIMATES AND OBSERVATIONS ON THE ANNUAL PER CAPITA CONSUMPTION OF RICE, 1855 TO 1968

Period 1855 1892 1904 1906 1909 1915 ca. 1905 1930-31

1953 1942 ca. 1950 1950 1918-19 to 1947

1956-61 1961-63 1956-60 1962

1960 1958-68 pre-World War II 1949-50 1960 1962 1964 1962 1946-62

Annual per Capita Consumption of Rice (kg) 192 for adults 58-102 192 for Central Plain farmers 181 in the Central Plain 275 in Rangsit 136 in the North

182

143 estimated consumption by farmers, Central Plain 177 estimated consumption by farmers, North 165 estimated consumption by farmers, Northeast 134 estimated consumption by farmers, South

205

Source Bowring(1855), 1:202. Child (1892), p. 146 r.5. k.s. 8/2 vanderHeide(1906a), p. 93. r.5. k.s. 3.1/12. R.I.D. (1915/?), 1:115. Hanks (1972), p. 48. Zimmerman (1931), p. 279. Zimmerman (1931), p. 279. Zimmerman (1931), p. 279. Zimmerman (1931), p. 279.

150 Whole Kingdom 138 Whole Kingdom

Kamol(1955), p. 25. Ladejinsky(1942), p. 169. Ladejinsky(1942), p. 169. Kaufman (1960), p. 166. Ministry of Agriculture (1950), p. 115. Estimates made by the Ministry of Agriculture. Ministry of Agriculture (1950), p. 113. Supanee and Wagner (1969), p. 33. Supanee and Wagner (1969), p. 33. Supanee and Wagner (1969), p. 33. Household Expenditure Survey Estimate Household Expenditure Survey Estimate Household Expenditure Survey Estimate Household Expenditure Survey Estimate Household Expenditure Survey Estimate Household Expenditure Survey Estimate Supanee and Wagner (1969), pp. 43-53. National Accounts Division, National Economic and Social Development Board Ingram (1971), 242. Reported in Behrman (1968), p. 94

119 Whole Kingdom 145 13 villages 134 Whole Kingdom 151 Whole Kingdom 1 39 Northeast urban 1 86 Northeast rural 1 80 Whole Kingdom average

Reported Reported Reported Reported Reported Reported Reported

248 in North and Northeast 199 in Central and South 199 in Central 144 Whole Kingdom 132 with a range of 71-191 145 Whole Kingdom

152 121

167 Whole Kingdom 99 Bangkok-Thonburi 184 Northeast 181 North 158 East 158 Central 154 South 155 Whole Kingdom

in Behrman (1968), p. 94 in Behrman (1968), p. 94 in Behrman (1968), p. 94 in Behrman (1968), p. 94 in Behrman (1968), p. 94 in Behrman (1968), p. 94 in Behrman (1968), p. 383

150

The Political Economy of Productivity

Note to Table Al-18: For purposes of constructing estimates of the consumption of rice in Thailand, an estimate of 170 kg of rice per person per year was selected. This would imply at 367 calories per 100 grams of rice, a daily caloric intake from rice of 1709. The Household Expenditure Survey of 1962 estimated daily rice consumption at 1695 calories out of a total of 1986, or 85%. If the estimate of 1709 calories per day from rice were 85% of total caloric intake, it would imply that total caloric intake would be 2011. Using the FAO method, Supanee and Wagner estimated that the Thai population needs 1932 calories per person per day. Therefore the estimate of 170 kg per person per year would have been sufficient to meet the requirements of the population and is consistent with the observations made by Zimmerman and others that the population did not generally suffer from insufficient caloric intake. For the overall rice use estimates see Table A1-20. For information on Thai food consumption, caloric intake estimates, and food requirements based on the age structure, body weight of the population, and climate, see Supanee and Wagner (1969).

TABLE Al-19: VARIOUS OBSERVATIONS AND ESTIMATES OF THE USE OF PADDY SEED, 1909-1968 Paddy Seed (kg/ha)

Year 1 9th century 1909

94 258

1911 1921 1921

138 113 153

Location Whole Kingdom Rangsit, a bad year in which reseeding was needed Rangsit Central Plain Ayuthia

1930-31

69

Central Plain

1930 1950-60

206

Central Plain Central Plain

1952-65

1950

1953 1958-56

63 for transplant 156 for broadcast 50 for transplant 100 for broadcast 88 average

60 for transplant 163 for broadcast

Whole Kingdom

69

Whole Kingdom Whole Kingdom Bang Chan, Central Plain

60 average

Whole Kingdom

Source Motooka( 1978), 290. r.5. k.s. 3.1/2.

r.6. k.s. 1/6. Ladell (1930), p. 13. Board of Commercial Development ( 1 92 1 ), p. 14. Zimmerman ( 1 93 1 ), pp. 18-19. Indra Montri (1930), p. 4. see Small (1972), p. 103; Behrman(1968), p. 110 National Accounts Division, National Economic and Social Development Board Ministry of Agriculture (1950), p. 115. Kamol(1955), pp. 25 and

53.

Ingram (1971), p. 242.

Note: For purposes of estimating seed use in Thailand an average of 125 kg/ha was taken implying that a large part of the crop would have been planted using the broadcast method which uses more seed. As a result, there may be a tendency to have overestimated seed use. This however will not impart a serious bias to the overall rice use estimates. For the rice use estimates see Table Al-20.

Appendix 1: Economic Data

TABLE Al-20: RICE BALANCE SHEET PADDY CROP ESTIMATES IN METRIC TONS AND AS A PERCENTAGE OF OFFICIAL PRODUCTION ESTIMATES, 1902 TO 1940

Year 1902 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940

Rice Balance Sheet Paddy Crop Estimate3 (metric tons) 3,359,105 3,865,861 3,930,285 3,962,371 3,858,190 4,127,784 4,214,205 4,427,752 3,711,188 3,739,199 4,822,140 4,730,397 4,814,799 4,966,228 4,912,599 4,482,718 3,814,256 3,609,733 5,407,971 5,448,874 5,585,965 5,372,949 5,824,565 5,782,241 6,604,373 6,260,113 5,748,517 5,686,099 6,349,380 7,016,160 7,150,816 7,799,333 6,975,985 7,230,734 6,523,010 7,420,044 8,098,093 6,988,066 7,031,837

Estimate as a Percentage of Official Production Estimates6

148 158 177 144 125 129 130 164 154 163 129 149 112 158 125 128 128 121 118 138 126 137 148 147 132 172 140 156 152 153 193 163 179 153 143

151

152

a

b

The Political Economy of Productivity

TABLE A1-20 (continued)

These estimates are for the whole kingdom and were constructed as follows: The total estimate is the sum of rice exports for the following year, consumption for the current year, seed use for the current year, and an allowance for feed, waste, and loss. The figures for the rice exports for the following year are taken from Table Al-1. Rice was converted into paddy by assuming a milling ratio of 60%. The National Accounts Division uses a 60% milling ratio (per cent of paddy by weight that is left as rice after milling) for small mills and a 64.4% ratio for medium and large mills. A 60% was chosen since this figure is a reasonable one for hand and machine milling. The current year consumption estimate was constructed by taking 170 kg of rice (283.33 kg of paddy) per person (see Table Al-18) times the number of people (for the population estimates see Table 3-11). The seed use figure was computed by taking 125 kg/ha times the number of hectares planted to paddy. For information on the seed use per hectare see Table Al-19. The data on the area planted come from Table Al-9. To the sum of the rice exports, consumption, and seed use, 3% was added to estimate the losses due to feed and waste. The 3% figure comes from the National Accounts Division, National Economic and Social Development Board. A 2% estimate was used in Ministry of Agriculture (1950), p. 113. Since consumption per capita was assumed to be constant over the whole period, the trends in the total crop estimate are determined by trends in rice exports and population. The simple average for 1906 to 1940 is 145.5 and the range is 112 to 193. See also note 6, Chapter 3.

Note: It would appear as if the official production data underestimate what the total crop must have been. Since there is no significant trend in the discrepancy, it was concluded in Chapter 3 that the trends in the official data are reliable even if the absolute figures are not. The crop estimates presented here are crude but essentially the same conclusions would emerge if other parameters were used in making the estimates.

Appendix 1: Economic Data

153

TABLE Al-21: NUMBER OF BUFFALO AND BULLOCKS, WHOLE KINGDOM AND CENTRAL PLAIN, 1917-18 TO 1940 Year 1917-18 1918-19 1919-20 1920-21 1921-22 1922-23 1923-24 1924-25 1925-26 1926-27 1927-28 1928-29 1929-30 1930-31 1931-32 1932-33 1933-34 1934-35 1935-36 1936-37 1937-38 1938-39 1939-40 1940

Buffalo (x 1 ,000) Whole Kingdom Central Plain 2293 2333 2394 2508 3273 3298 4066 4132 4216 4366 4440 4571 4569 4739 4895 5006 5077 5114 5223 5433 5551 5751 5891 6159

729 746 762 776 751 702 802 827 847

1267 1307 1357 1348 1396 1432 1386 1429 1457 1499 1551 1704 1640

Bullocks (x 1,000) Whole Kingdom Central Plain 2483 558 2531 561 2541 568 2621 577 2864 481 2972 589 730 3799 741 3872 4014 767 4128 816 4256 829 4408 846 4584 835 4774 864 4972 886 5120 900 5222 945 5314 980 5412 997 5617 1019 5712 987 5858 1048 5965 6249

Sources: The data on the number of bullock and buffalo come from the Statistical Year Book of the Kingdom ofSiam, Nos. 5 (1920), 6 (1921), 11 (1925-26), 20 (1938-39), and 22 (1945-55). The data are presented in index form in Table A1-22.

154

The Political Economy of Productivity

TABLE Al-22: INDICES OF THE NUMBER OF BUFFALO AND BULLOCKS, WHOLE KINGDOM AND CENTRAL PLAIN, 1917-18 TO 1940 Year 1917-18 1918-19 1919-20 1920-21 1921-22 1922-23 1923-24 1924-25 1925-26 1926-27 1927-28 1928-29 1929-30 1930-31 1931-32 1932-33 1933-34 1934-35 1935-36 1936-37 1937-38 1938-39 1939-40 1940

Buffalo Whole Kingdom Central Plain 100.0 100.0 102.3 102.2 104.6 104.9 106.5 109.9 143.4 103.0 96.3 144.5 178.1 110.1 113.5 181.0 184.7 116.2 173.8 191.3 179.3 194.5 200.2 186.2 200.2 185.0 207.6 191.5 196.4 214.5 190.2 219.3 196.0 222.4 224.0 200.0 205.6 228.8 212.8 238.0 233.8 243.2 225.0 251.9 258.1 269.8

Sources: The data sources are given in Table Al-21.

Bullocks Whole Kingdom Central Plain 100.0 100.0 102.0 100.6 102.4 101.9 103.6 105.5 115.3 86.3 119.7 105.7 153.0 130.9 155.9 132.9 161.7 137.5 146.4 166.3 171.4 148.7 177.6 151.7 184.6 149.7 155.0 192.3 200.3 158.9 206.2 161.4 169.5 210.3 214.0 175.9 218.0 178.8 226.2 182.8 177.0 230.0 235.9 188.0 240.2 251.7

Appendix 1: Economic Data

155

TABLE Al-23: NOMINAL BUFFALO EXPORT PRICES AND INDICES OF NOMINAL AND REAL BUFFALO EXPORT PRICES, 1896-97 TO 1941

Year 1896-97 1897-98 1898-99 1899-1900 1900-1901 1901-2 1902-3 1903-4 1904-5 1905-6 1906-7 1907-8 1908-9 1909-10 1910-11 1911-12 1912-13 1913-14 1914-15 1915-16 1916-17 1917-18 1918-19 1919-20 1920-21 1921-22 1922-23 1923-24 1924-25 1925-26 1926-27 1927-28 1928-29 1929-30 1930-31 1931-32 1932-33 1933-34 1934-35 1935-36 1936-37 1937-38 1938-39 1939-40 1940 1941

Nominal Buffalo Export Price (baht) 29.5 40.2 41.9 62.3 51.3 55.4 65.0 62.8 63.6 66.4 84.6 95.9 91.5 98.0 94.2 79.1 86.4 94.8 67.5 68.2 67.2 59.7 63.2 53.0 64.9 62.3 63.4 56.7 54.0 63.4 67.4 71.3 66.8 67.8 63.4 57.9 44.6 38.3 40.4 46.1 42.7 43.3 37.5 37.1 39.2 45.7

Index of the Nominal Buffalo Export Price (1911-12 = 100) 37.3 50.8 53.0 78.8 64.9 70.0 82.2 77.6 79.8 78.9 104.0 121.2 115.7 123.9 119.1 100.0 109.2 119.8 85.3 86.2 85.0 75.5 80.0 67.0 82.0 78.8 80.2 71.7 68.3 80.2 85.2 90.1 84.5 85.7 80.2 73.2 56.4 48.4 51.1 58.3 54.0 54.7 47.4 46.9 49.6 57.8

Index of the Real8 Buffalo Export Price (1911-12 = 100) 52.3 79.9 65.8 96.9 75.2 83.6 98.6 86.0 88.0 91.6 117.8 133.9 140.3 145.6 143.6 100.0 103.1 149.5 114.9 115.3 105.0 90.3 53.7 25.2 82.6 75.3 83.6 69.2 59.1 68.5 70.2 80.3 74.3 72.6 83.2 130.9 104.2 101.0 109.1 100.3 91.3 83.4 78.7 81.6 66.7 47.0

756

The Political Economy of Productivity

a

The real buffalo export price is the nominal price divided by the rice export price. The rice export prices are taken from Table A1-1. Sources: The data on the buffalo export prices were derived from data taken from Statistics of the Import and Export Trade ofSiam, Port of Bangkok, 1901, 1902, 1903, 1904, and 1906; The Foreign Trade and Navigation of the Kingdom of Siam, 1907-8 and 1908-9 to 1909-10; Statistical Year Book of the Kingdom of Siam, Nos. 1 (1916), 5 (1920), 15 (1929-30), 17 (1931-33), 18 (1933-35), 19 (1935-37), 20 (1938-39), and 21 (1939-40 to 1944).

TABLE Al-24: OBSERVATIONS ON ANNUAL RAINFALL IN BANGKOK, 1845-1955

Year 1845 1846 1847 1859-68 1882 1883 1884 1885 1886 1887 1888 1889 1890 1891 1900-1901 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930

Annual Rainfall (cm) 194.36 133.76 162.99 144.9 136.24 107.21 85.75 152.04 165.55 140.0 117.02 177.98 124.21 94.92 142.54 150.15 116.71 125.40 183.21 150.62 174.8 146.26 133.1 129.87 142.74 144.42 120.89 171.48 118.46 132.28 86.71 145.15 136.37 146.94 145.32 134.84 164.02 162.35 182.77 127.14 130.38

Index of Rainfall (1921 = 100.0)

133.9 92.2 112.3 99.8 93.9 73.9 59.1 104.7 114.1 96.5 80.6 122.6 85.6 65.4 98.4 103.4 80.4 86.4 126.2 103.8 120.4 100.8 91.7 89.5 98.3 99.5 83.3 118.1 81.6 91.1 59.7 100.0 94.0 101.2 100.1 92.9 113.0 111.8 125.9 87.6 89.8

Source Bowring(1857), I, 400. Bowring(1857), I, 400. Bowring(1857), I, 400. Statistical Year Book, No. 21 (1939-40 to 1944). van der Heide (19030), appendices 2 and 3 van der Heide (19030), appendices 2 and 3 van der Heide (19030), appendices 2 and 3 van der Heide (19030), appendices 2 and 3 van der Heide (19030), appendices 2 and 3 van der Heide (19030), appendices 2 and 3 van der Heide (19030), appendices 2 and 3 van der Heide (19030), appendices 2 and 3 van der Heide (19030), appendices 2 and 3 van der Heide ( 1 9030), appendices 2 and 3 Campbell (1902), 49 Stat. Year Book, No. 1 (1916). Stat. Year Book, No. 1 (1916). Stat. Year Book, No. 1 (1916) Stat. Year Book, No. 1 (1916). Stat. Year Book, No. 1 (1916). Stat. Year Book, No. 1 (1916). Stat. Year Book, No. 1 (1916). Stat. Year Book, No. 1 (1916). Stat. YearBook,No. 1 (1916). Stat. Year Book, No. 1 (1916) Stat. Year Book, No. 2 (1917). Stat. Year Book, No. 2 (1917). Stat. Year Book, No. 2 (1917). Stat. Year Book, No. 2 (1917). Stat. Year Book, No. 2 (1917). Stat. Year Book, No. 2(1917). Stat. Year Book, No. 2 (1917). Stat. Year Book, No. 2 (1917). Stat. Year Book, No. 2 (1917). Stat. Year Book, No. 2 (1917). Stat. Year Book, No. 2 (1917). Stat. Year Book, No. 17 (1931-33). Stat. Year Book, No. 17 (1931-33). Stat. Year Book, No. 17 (1931-33). Stat. Year Book, No. 17 (1931-33). Stat. Year Book, No. 17 (1931-33).

Appendix 1: Economic Data

Year 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955

Annual Rainfall (cm) 161.77 126.55 123.95 95.66 179.32 153.91 111.13 139.11 122.80 91.6 119.2 167.4 154.2 168.5 142.8 123.8 147.1 171.9 151.8 155.0 T63.6 164.1 158.4 149.5 151.4

Index of Rainfall (1921 = 100.0) 111.5 87.2 85.4 65.9 123.5 106.0 76.6 95.8 84.6 63.1 82.1 115.3 106.2 116.1 98.4 85.3 101.3 118.4 104.6 106.8 112.7 113.1 109.1 103.0 104.3

Source Stat. Year Book, No. 17 (1931-33). Stat. Year Book, No. 20 (1938-39). Stat. Year Book, No. 20 (1938-39). Stat. Year Book, No. 20 (1938-39). Stat. Year Book, No. 20 (1938-39). Stat. Year Book, No. 20 (1938-39). Stat. Year Book, No. 20 (1938-39). Stat. Year Book, No. 20 (1938-39). Stat. Year Book, No. 20 (1938-39). Stat. Year Book, No. 21 (1939-40 to 1944). Stat. Year Book, No. 21 (1939-40 to 1944). Stat. Year Book, No. 21 (1939-40 to 1944). Stat. Year Book, No. 22 (1945-55), vol. 1. Stat. Year Book, No. 22 (1945-55), vol. 1. Stat. Year Book, No. 22 (1945-55), vol. 1. Stat. Year Book, No. 22 (1945-55), vol. 1. Stat. Year Book, No. 22 (1945-55), vol. 1. Stat. Year Book, No. 22 (1945-55), vol. . Stat. Year Book, No. 22 (1945-55), vol. . Stat. Year Book, No. 22 (1945-55), vol. . Stat. Year Book, No. 22 (1945-55), vol. . Stat. Year Book, No. 22 (1945-55), vol. . Stat. Year Book, No. 22 (1945-55), vol. . Stat. Year Book, No. 22 (1945-55), vol. . Stat. Year Book, No. 22 (1945-55), vol. .

Note: The data presented are for Bangkok rainfall but should be representative for the Central Plain. Data for other Central Plain points and other regions can be found in the sources already cited and r.6. k.s. 1/1. For more information on rainfall see Table A1-25. For information on the level of floods of the Chao Phya river see Table 5-4 and Table 5-1.

TABLE Al-25: SUMMARY OF BANGKOK RAINFALL DATA, 1845 TO 1955 Period 1845-68 1882-91 1900-1901 1905-14 1915-24 1925-34 1935^4 1945-55

Simple Average Annual Rainfall (cm) 149.24 130.09 142.54 158.27 134.80 140.94 140.72 152.67

1845-1955

144.14

Note: The data are taken from Table A1-24. The overall average is for 75 observations.

157

158

The Political Economy of Productivity

TABLE Al-26: VARIOUS ESTIMATES OF THE POPULATION OF BANGKOK, 1840 TO 1960, AND ESTIMATES OF THE RURAL POPULATION, 1857 TO 1960

Year 1840 1849 1857

1858 1907 1909 1920 1927 1937 1947 1960 a

Population of Bangkok 350,000b 160,154b 300,000400,000b 500,000" 700,000C 500,000b 345,000b 518,400" 681,214d 781,662e l,703,346e

Bangkok Population as a Percentage of the Population of the Whole Kingdom

Rural Population3

Total Population

5.6 to 7.5

5,074,000

5,374,000

9.3 8.8 6.1 3.5 4.5 4.6 4.4 6.5

9,457,000 10,900,600 14,039,786 16,861,338 24,554,570

9,802,000 11,419,000 14,721,000 17,643,000 26,257,916

The rural population here is calculated as a residual equal to the total population minus the Bangkok population. For 1857 the 300,000 figure was used as the Bangkok population. b These estimates of the population of Bangkok were taken from Sternstein (1966), p. 67. c This estimate of the population of Bangkok was taken from U.S. Department of Commerce (1908), p. 561. d These estimates of the Bangkok population were taken from Sternstein (1965), pp. 26 and 30. Sources: The total population estimates for 1857 through 1947 come from Table 3-11. The estimate for 1960 is a census figure, taken from Thomlinson (1972), p. 23.

Appendix 1: Economic Data

159

TABLE Al-27: HOUSEHOLD INCOME AND EXPENDITURE FOR RURAL FAMILIES, 1930-31 AND 1934-35 1930-31: Region

Central Northern Southern Northeastern Whole Kingdom

Average Household Income3 (baht) 378.93

278.0 208.3 124 .4 251.7

Expenses as a Percentage of Total Expenditures

Average Household Expenditures6 (baht)

Direct Taxes

Food

Clothing

Household

Interest

340.43 226.78 184.39 111.04 221.9

7.8 4.0 3.8 3.9 5.3

47.8 64.4 64.0 63.6 58.2

5.9

7.4

5.9 6.7 6.5 6.2

6.6 7.4 7.6 7.3

7.0 2.0 0.8 2.2 3.7

Rice as a Percentage of Total Other Incomec

24.0

17.5 17.3 16.2 19.3

60.4 57.5 45.2 41.5 51.3

Direct Taxes include head tax, fruit tree tax, and other taxes. Food expenditures include the value of purchased rice, the imputed value of home produced rice retained for consumption, the value of purchased meat, sugar, salt, fish, and other foodstuffs. The imputed value of other home produced foods is not included. Clothing expenditures include only expenditures on clothing. Household expenditures include expenditures on fuel, matches, lamps, kerosene, mosquito nets, kitchen utensils and dishes, and home improvements. Other expenditures include expenditures on health, tobacco, betel and areca, drugs, ceremonies, travel, gifts and charities. 1934-35:

Region

Average Household Income (bahtd)

Average Household Expenditures (baht*)

Central Northern Southern Northeastern

184.56 65.20 73.89 30.16

119.79 42.13 52.35 25.36

a

This income figure is based on Zimmerman's estimates revised to include the value of home produced rice retained for consumption. This expenditure figure is based on Zimmerman's estimates minus expenses for fanning and investments, plus the imputed value of home produced rice retained for consumption. c This figure represents the value of rice produced by the household (both rice sold and retained) divided by the total household income. d These figures do not include the imputed value of home produced rice retained for consumption. e These figures are based on Andrews' estimates minus farm and business expenses. They do not include the imputed value of retained rice production. Sources: The 1930-31 data come from Zimmerman (1931). The value of retained rice per household was computed using the information Zimmerman presented on household production and retention of rice and village rice prices. For 1930-31 there was an average of 5.58 persons per household. The data for 1934-35 come from Andrews (1935). b

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TABLE Al-28: EXPORT PRICE, IMPORT PRICE, AND TERMS OF TRADE INDICES, 1900 TO 1941 (1913 = 100) Index of

Year

1900 1901 1902 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 3

Export Prices3

Import Prices3

Terms of Trade3

103.1 99.1 100.3 112.1 110.1 111.3 110.4 111.8 102.3 101.2 99.8 118.5 128.0 100.0 94.3 93.4 100.2 110.2 177.5

113.9 108.8 103.7 105.0 106.2 107.7 98.8 93.9 88.8 91.2 94.7 98.6 102.7 100.0 92.2 94.2 115.1 140.1 179.3 183.3 178.3 128.7 118.6 122.2 127.1 121.9 113.6 110.6 109.9 110.1 94.1 79.3 68.9 69.7 68.1 63.5 60.7 70.9 67.4

90.5 91.1 96.7 106.8 103.7 103.4 111.7 119.1 115.1 111.0 105.4 120.3 124.7 100.0 102.3 99.1 87.1 78.6 99.0 135.5 71.2 94.9 96.1 101.5 107.9 118.1 129.9 123.9 122.0 121.4 114.0 84.8 94.6 91.0 96.2 121.2 133.3 123.3 117.7

248.3

126.9 122.2 114.0 124.0 137.2 143.9 147.5 137.1 134.1 133.7 107.4 67.2 65.2 63.4 65.6 76.9 80.9 87.5 79.3

Rice" Export/ White Shirting Import Price

Riceb Export/ Grey Shirting Import Price

130.1 127.5 109.8 120.3 115.4 114.4 121.0 136.7 125.2 126.1 122.1 145.5 139.5 100.0 92.7 96.3 91.3 60.2 70.1 104.9 39.0 76.6 71.9 69.3 76.7 89.1 107.1 108.1 105.1 103.6 102.9 82.1 102.1 88.5 97.4 113.5 118.3 105.3 119.3 102.8 223.1 177.8

188.8 146.3 143.9 143.5 122.2 116.0 121.3 143.3 135.4 127.6 109.0 133.6 136.1 100.0 97.0 103.8 98.1 60.2 70.0 132.9 51.1 91.3 94.6 97.3 109.1 105.7 125.4 134.7 140.0 136.1 147.5 110.5 108.8 89.5 92.7 117.8 118.6 108.7 135.9 124.6 279.4

195.6

These export price, import price, and terms of trade indices are taken from Birnberg and Resnick (1975), p. 315. The terms of trade index is the ratio of the export price index and the import price index. The export and import price indices are Paasche indices (current year weights). For Laspeyres and Fisher Ideal indices, see Birnberg and Resnick (1975), pp. 318-19. The export price index is based

161

Appendix 1: Economic Data

upon trade data for exports of rice, rubber, teak, sticklac, and tin. The import price index is based on trade data for 28 commodities including yarn, sugar, medicines, gunny bags, oil, matches, canned milk, and cotton manufactures (for more detail see Birnberg and Resnick [1975], 317). b The ratios of rice export price to white and grey shirting import prices are based on the data presented in Tables Al-1, Al-3, and Al-4.

TABLE Al-29: VARIOUS INDICATORS OF THE DEGREE OF TENANCY

Location Central Siam Province :d Bangkok Thonburi Thanyaburi* Ayuthia Lopburi Saraburi Pitsanulok Suphanburi Petburi Chachengsao Chantaburi Chantaburi Northern Siam Southern Siam Northeastern Siam

Average Rent on Farm Landc Paid per Household (bahi) 19.56

Land Rented as a Percentage of the Total Area Cultivated3 37.6

Proportion of Households Owning No Landb

47.9 26.5 96.5 39.3 16.7 7.9

78.0 54.0 94.0 42.0 12.0 36.0

7.4 37.5 49.3 17.0 10.0

8.0 46.0 42.0 10.0

8.0

—

12.0 15.2

27.44 14.50 18.00

2.06 1.26 0.23

36.0

2.0

16.56 56.72 40.29 9.89 9.46 0.25 17.63 35.3 17.82

2.0

5.7

-

Percentage of Land Rented and Held by Absentee Landlords6 Location Ayuthia Nakorn Pathom a

1910 4 1

1920 7 5

1930 12 5

1940 23 11

These figures were computed by taking the average number of rai rented per household as a per cent of the average number of rai cultivated per household. The data were taken from Zimmerman's 1930-31 rural survey; see Zimmerman (1931), pp. 25-36. b These figures were taken directly from the Zimmerman survey; see Zimmerman (1931), pp. 25-36. c These data are taken from the Andrews 1934-35 survey; see Andrews (1935), pp. 111-15. d The data listed are for the villages in the provinces indicated that were surveyed by Zimmerman or Andrews. The other data listed are the averages for each region. e These data are for six sample villages, three in each province. Absentee landlords are those who live in another district or province. Landlords living in the same or an adjacent village were not classified as absentee landlords. The data are taken from Stifel (19766). : Thanyaburi province includes the heart of the Rangsit area. However, the Rangsit project includes portions of the provinces of Ayuthia, Prathumthani, Bangkok, and Chachengsao. Note: The degree of tenancy in Thanyaburi is by far the highest, using any of the measures available. In general tenancy was higher in the commercialized provinces of the Central Plain and higher in that region than in other regions.

Appendix 2

A General Equilibrium Model with Two Goods and Three Factors

This Appendix will present the simple general equilibrium Jones-type model which was introduced in Chapter 3. Applied to the analysis of the Thai economy in order to make inferences on trends in relative factor prices and to analyse the importance of the changes in the terms of trade and factor endowments, the model is taken from Hueckel (1972) and this discussion will draw heavily from that work, especially from Chapter 2. The use of general equilibrium models in economic history is becoming relatively common. These models possess certain advantages in that they allow the investigator to concentrate upon the variables which were the most important in shaping the events which occurred. The application of such a model in this case has allowed us to draw more rigorous conclusions on the basis of a less than complete set of data. The ability to make inferences with the use of the model has allowed us to obtain some idea of trends in variables for which a sufficient number of direct observations are not available. In order to assess the usefulness of the model for application to the Thai case, the plausibility of the assumptions made by the model will be explored. Among the important assumptions of this model are full employment, factor mobility (for all factors except land), and pure competition. Without any data on employment it is difficult to assess the plausibility of the full employment assumption. However, contemporary observers often complained of the shortage of labour and difficulty in obtaining coolie labour. Descriptions of conditions in rural areas that pointed to the existence of unemployed or underemployed labour are not numerous and generally were made for remote and non-commercialized areas. Naturally there are considerable seasonal

Appendix 2: A General Equilibrium Model

163

variations in the demand for labour services in agriculture and agricultural commodity processing and some seasonal unemployment is to be expected. Farm labourers were often hired for the whole season rather than just during peak ploughing, planting, and harvesting periods. This type of contract may be a symptom of relatively full employment. In another industry subject to seasonal patterns, rice milling, this type of longer term contract (usually for one year) may also indicate that labour was basically fully employed. It is more difficult to determine the intensity of the employment of capital and land. Certainly large tracts of land were uncultivated in 1855 and while the uncultivated area has been reduced, vacant land was not uncommon even after World War II, although much of it was relatively low in fertility or too remote at the time to justify development. Land was brought under cultivation when commercial opportunities improved. In this process the output of native handicraft industries declined (see Resnick [1970]) and the import of manufactured goods increased (see Tables 3-3 and 3-5). This may imply that the factors of production had been fully employed and that in order to expand production in one sector, output in the other had to decline.1 Therefore the evidence would not appear to contradict the assumption of full employment. Again without direct data it is difficult to assess the plausibility of the assumption of factor mobility for labour and capital. However the evidence does indicate that there was a sufficient flow of resources out of the non-rice sector and into the rice sector to have made the assumption of mobility plausible. The large scale immigration discussed in Chapter 3 should have provided enough mobile labour to have insured that the value of the marginal product of labour was roughly equal across sectors (see also Table Al-5). Chinese immigrants took up a number of occupations in commerce, industry, transportation, construction, and agriculture (primarily vegetable and pork production, also in sugarcane production and refining, and to a lesser degree in rice farming). Lao labourers who journeyed from the northeast to the Central Plain worked in agriculture, transport, and construction. As shown in Table 3-15, there may have been considerable capital formation in agriculture through the growth in the number of livestock registered. While this does not provide any direct evidence on the mobility of capital, we do know that some of the Thai elite invested in rice mills and rice lands (see Chapter 4). There was also considerable capital formation in agriculture through the application of labour (clearing, ditching, and diking of land). Hanks (1972) in his description of the social and economic history of a Central Plain village has indicated that many of the families that first settled the area had come from Bangkok where they had been engaged in non-agricultural activities. The general impression for the economy is one that would support the assumption of substantial factor mobility. The assumption of perfect competition is a reasonable one. Undoubtedly there were local monopolistic and/or monopsonistic elements which were able to exert

164

The Political Economy of Productivity

their influence in the commercially less important areas. However, in those areas which were better served by transportation facilities, the restraint on competition was probably not substantial. Table 2-1 presents some observations on the relationship between farm or provincial market prices for paddy and Bangkok rice export prices. Since rice was the most actively traded commodity within the economy, the degree of competition in rice marketing should be an important indicator of the plausibility of the assumption of competition. For the period under review there are no marketing margins studies for the rice trade, although the data in Table 2-1 sheds some light on the issue. A number of additional observations for the 1890's through 1930's could have been added to the table, but they would not have altered the impression that can be obtained. The last two observations apply to the post-World War II period. Ingram has reached the conclusion, based on his studies of the marketing structure, that the rice market was highly competitive (Ingram [1971], p. 249). While the farmer in the postwar period appears to have received a higher proportion of the final price, part of the increase in his share may be due to the substantial expansion of the transportation and communication systems. In any event, the overall impression is that there is no reason to suspect that the rice markets during the period were uncompetitive. This conclusion is supported by the careful work performed during the Zimmerman survey (Zimmerman [1931]). Table A2-2 presents data based on his survey work. Zimmerman recorded paddy prices in Bangkok and in upcountry villages for the same grade for the same time period and using the same units of measure. Therefore his data do not have many of the problems associated with the data in Table A2-1. Zimmerman concluded that while improvements could be made in the standardization of weights and measures and availability of price information to farmers, rice markets were in fact competitive (Zimmerman [1931], pp. 176-83). He found that upcountry prices followed the Bangkok prices closely, but with a lag.

Appendix 2: A General Equilibrium Model

165

TABLE A2-1: SELECTED RATIOS OF UPCOUNTRY PADDY TO BANGKOK RICE EXPORT PRICES, 1888 TO 1965

Year

Upcountry Region Kamphaengpheta Taaka

(%) 1888 1891 1895 1896 1900 1901 1902

1914 1915 1916 1922 1927 1929 1930 1937-38 1948 1958 1965 a

b c d

e

f

g

(%)

104 66 79 67 65

112 74 82 73 70

Monthon Pitsanulok

Monthon Krungthep

(%) 44 41 44 48 37 56 53

(%) 62 60 57 55 74 74 70

Monthon Ayuthia

(%) 75b 62C

Source

r.5. r.5. r.5. r.5. r.5. r.5. r.5.

k.s. 3.2/2 k.s. 9.3/1 k.s. 10. I k2-k4 k.s. 10. I k2-k4 k.s. 10. I k2-k4 k.s. 10. I k2-k4 k.s. 10. I k2-k4

Monthon Ayuthia

(%) 51 50 61 52 61 65 59 506 46C f

72 79*

r.7. r.7. r.7. r.7. r.7. r.7. r.7.

phS.l. phS.l. ph 8.1. ph 8.1. ph 8.1. ph 8.1. ph 8.1.

Kamol (1955), p. 169; Ingram ( 197 1), p.

38.

Sura (1967), p. 88. Usher (1967), p. 221.

Taak and Kamphaengphet are provinces located in the northern fringe of the Central Plain. They are included in monthon Pitsanulok. The data are for the ratio of local retail milled rice price to rice export price. There is some difficulty in the comparability of the units of measure. These data are for the ratio of upcountry to Bangkok paddy price and both pieces of information were taken by the same observer. Ratio of upcountry paddy price to Bangkok rice export price. These data for monthons Pitsanulok, Krungthep (Bangkok area), and Ayuthia are taken from a report made by the Board of Commercial Development. Comparable units of measure were probably used. The data give the ratio of the provincial paddy prices to the Bangkok rice export price. This represents the per cent of the export price received by farmers as estimated by William Doll. See the Ministry of Finance, Report of the Financial Adviser in Connection with the Budget of the Kingdom ofSiamfor the YearB.E. 2480 (1937-38) (Bangkok), p. 39. The ratio of the farm paddy price to the Bangkok retail price price; taken from Udhis Narkswasdi, Farmers' Indebtedness and Paddy Marketing in Central Thailand (Bangkok, 1958), as quoted in Sura (1967), p. 88. The ratio of the farm paddy price to the Bangkok retail price including the value of bran sold at the mill.

766

The Political Economy of Productivity

Note: Taak and Kampaengphet (and monthon Pitsanulok) were chosen because they are on the fringe of the marketing system for central Siam and their produce was subject to higher transportation costs. For the areas which during the early part of our period contributed to exports, the per cent of the final export price received upcountry in Pitsanulok may therefore be taken at a lower bound. Ayuthia by contrast was the heart of the commercial rice exporting district and is therefore more typical of the conditions for commercialized agriculture in Thailand during the period. The Bangkok area of course had the advantage of lower transport costs. Most of the data presented are simple averages of the monthly upcountry prices divided by the export price or Bangkok price for that year. Therefore, the ratios may be biased upward because the volume of trade is larger for the post harvest months when the price is relatively low.

TABLE A2-2: RATIO OF VILLAGE TO BANGKOK PRICES OF PADDY, 1929 TO 1930 Region

Village Price as % of Bangkok Price

Type of Rice

Central Phra Kanong (Bangkok) Ban Yang (Saraburi) Thong Chai (Phetburi) Chook Krachoer (Chaxerngsao) Klong Narai (Chandaburi) Paknam (Chandaburi) Han Tra (Ayuthia) Taloong (Lopburi) Ta Tong (Pitsanulok) Piharn Daeng (Suphanburi)

84 80 80 83 86 82 91 76 64 95

garden rice garden rice garden rice garden rice garden rice garden rice ordinary broadcasted rice ordinary broadcasted rice ordinary broadcasted rice ordinary broadcasted rice

North Sam Kambaeng (Chiangmai) Na Kuam (Lampang) San Sai (Chiangrai) Nam Pua (Nan) Mae Kam (Chiangrai) Ban Du (Nan) Mae Hiah (Chiangmai) San Mahapon (Chiangmai) San Sai (Chiangmai) Ban Mark (Lampang) Pa Daeng (Prae) Mae Kammee (Prae) Mae Hiah (Chiangmai) San Mahapon (Chiangmai) San Sai (Chiangmai) Ban Mark (Lampang) Mae Kam (Chiangrai)

62 71 51 34 50 38 56 56 63 58 44 39 62 64 66 63 57

glutinous rice glutinous rice glutinous rice glutinous rice glutinous rice glutinous rice glutinous rice glutinous rice glutinous rice glutinous rice glutinous rice glutinous rice garden rice garden rice garden rice garden rice garden rice

Appendix 2: A General Equilibrium Model

Region Northeast Nong Khorn (Ubol) Muang Koa (Khonkaen) Mee Chai (Nongkhai) Ban Loa (Udorn) Phra Lap (Khonkaen) Ngiew Don (Sakonakorn) Na Rajakwai (Nakorn Phanom) Ban Mai (Nakorn Rajasima) South Ta Yang (Chumporn) Wat Pradoo (Surathani) Tai Sampao (Nakorn Sridharmaraj) Pavong (Songkhla) Poo Yudh (Patani) Bang Por (Naradhivas) Na Yong Tak (Trang) Chalong (Phuket)

Village Price as % of Bangkok Price

45 49 35 27 40 32 31 59 84 58 70 116 85 100 95 93

167

Type of Rice glutinous rice glutinous rice glutinous rice glutinous rice glutinous rice glutinous rice glutinous rice garden rice garden rice garden rice garden rice garden rice garden rice garden rice garden rice garden rice

Note: Data were taken for the same grade, same measure, and same time period on village and Bangkok paddy prices. The percentages presented are the simple averages for the observations from May, 1929 through December, 1930. The names listed are village names with the province of their location in parentheses. Because the data presented are simple averages across sixteen months (in most cases, for some there were less than sixteen observations), they may tend to overestimate the ratio of the village to Bangkok price. Zimmerman has also pointed out that the high ratios for the south are accounted for by the shortage in that area. From September to October, 1930 there was a sharp drop in the Bangkok price (due to the depression) which generally did not show up in the village data until November. Glutinous rice production and consumption is concentrated in the ethnic Lao areas (primarily the north and northeast). It is not as actively traded as garden or ordinary broadcast rice which forms the bulk of rice exports. The data for the central region are probably the most important for our purposes. Source: Zimmerman (1931), Tables 9:B through F, pp. 186-93.

While the rice markets were characterized by a reasonable degree of competition, especially for those areas where production and the marketed surplus were relatively large, markets for other products and for inputs may not have been competitive, although the more commercialized areas in the kingdom were probably characterized by a substantial degree of competition. In addition to the assumptions of factor mobility, full employment, and pure competition, the general equilibrium model assumes that movement in relative prices and factor endowments are exogenously determined. In Chapter 3 it was argued that the movements in relative prices were indeed exogenous to the Thai economy, so the small country assumption may be employed here. Chapter 3 also argued that some of the increase in the labour force was in fact exogenous (due to immigration). However some of the immigration and perhaps some of the natural

168

The Political Economy of Productivity

increase in the population may have in fact been endogenous. Similarly some of the increase in the capital stock and the increase in the land brought under cultivation may be endogenous.2 Unfortunately the data to estimate functions which would explain the mechanism by which these partially endogenous trends took place are lacking. Chapter 3 stressed the importance of the terms of trade and population growth in explaining the events which occurred. The terms of trade are clearly exogenous; much of the growth in population is due to immigration which is at least in part exogenous; part of the natural increase may also be exogenous. Therefore the changes that have been pointed to as the driving forces during this period were in fact largely exogenous. Finally it should be pointed out that the general equilibrium model is a comparatively static one. It does not give the pattern of adjustment which the economy will experience. It only gives the conditions of the new equilibrium towards which the economy will generally move. Having outlined the general assumptions of the model and their reasonable plausibility in the Thai case, the model may now be presented formally. Following Hueckel (1972) we define the full employment conditions (the equation numbers correspond to those used by Hueckel in his chapter 2): (1) aLAA = L (2) aKAA + aKMM = K (3) aNAA + aNMM = N where a^ is the amount of the ith factor necessary to produce one unit of the jth output, A is rice output, L is land, M is textiles output, K is capital, and N is labour. Both capital and labour are mobile, while land is specific to rice production. The production functions are assumed to be linear homogenous and well behaved (no factor reversals). In equilibrium in a competitive economy the costs of production are equal to the price of output. Therefore: (4) aLARL + aNARN + a KA R K = PA (5)

aNMRN -I- aKMRK = PM

where the R{ represents the value of the marginal product (equals return to that factor) of the ith factor and Pj is the price of the jth output. The a^s are not fixed but are the result of a cost minimization process which occurs as a result of competition. These equations can be used to solve for the effects of price changes upon factor returns:

Appendix 2: A General Equilibrium Model

169

(6) (7)

where the B^'s are the distributive share of the ith factor in the jth industry and an asterisk denotes a relative change in that variable. These equations and the use of various identities will yield the following equations for the relative trends in factor return as a function of the parameters of the model, the relative terms of trade, and the changes in factor endowments. (12)

(13)

(14)

where

which has a positive sign, *K L is the elasticity of substitution of capital for land in agriculture,