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SUFFICIENCY ECONOMYSUFFICIENCY ECONOMY

““Income Generation and Poverty Reduction for Development” Income Generation and Poverty Reduction for Development” CourseCourse

Mekong InstituteMekong Institute

1 April 2009 1 April 2009

Montree BoonpanitMontree BoonpanitDirector Director

Northeastern Economic Northeastern Economic and Social Development Officeand Social Development Office

Contents to be discussedContents to be discussed

1.1. What is “Sufficiency Economy”What is “Sufficiency Economy”

2.2. How is S.E. importance?How is S.E. importance?

3.3. To what extent S.E. can alleviate To what extent S.E. can alleviate

poverty?poverty?

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Sufficiency Economy Sufficiency Economy in the views of most Thaisin the views of most Thais

It is applicable It is applicable for agriculture onlyfor agriculture only

It is a It is a subsistence economysubsistence economy

or economy for the or economy for the poorpoor

Consumption andConsumption andeconomic will decline economic will decline

Country developmentCountry development will lag far behindwill lag far behind

Can not use luxury goods Can not use luxury goods or modern technology, or modern technology, applies only primitiveapplies only primitive instruments or things.instruments or things.

One has to be enoughOne has to be enough

or satisfy what one hasor satisfy what one has

No need to work hard No need to work hard

to get more products to get more products

or to earn higher income.or to earn higher income.

Contradict to Contradict to capitalism economycapitalism economy

Sufficiency

Economy

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What is “Sufficiency What is “Sufficiency Economy”Economy”

“Sufficiency Economy” is a philosophy that stresses the middle path as an overriding principle for appropriate conduct by the populace at all levels. This applies to conduct starting from the level

of the families, communities as well as the level of nation in development and administration so as to modernize in line with the

forces of globalization.

“Sufficiency” means moderation, reasonableness, and the need of self-immunity mechanism for sufficient protection from impact arising from internal and external changes. To achieve this, an

application of knowledge with due consideration and prudence is essential. In particular, great care is needed in the utilization of

theories and methodologies for planning and implementation in every step. At the same time, it is essential to strengthen the moral fiber of the nation, so that everyone, particularly public officials, academia,

businessmen at all levels, adhere first and foremost to the principle of honesty and integrity. In addition, a way of life based on patience, perseverance, diligence, wisdom and prudence is indispensable to

create balance and be able to cope appropriately with critical challenges arising from extensive and rapid socioeconomic,

environmental, and cultural changes in the world. 1Notice 1 Unofficial translation of the Thai working definition approved by His Majesty and sent by His Majesty’s Principle Secretary to the NESDB on November 29’1999

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SufficiencyEconomy

Appropriate conduct by the populace at all level

Moral honesty, integrity, patience,

perseverance, diligence, wisdom

Protection from internal and external shock

Moderation, reasonableness, self-immunity

is a philosophy

Stresses

Sufficiency

Middle path

Modernize in line with globalization

meansApplicable of knowledge

with due consideration and prudence

Great care utilization of theories, methodologies with great care

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Moderation: - How many is considered moderation?

- Can we consume luxury goods? (depend on each individual’s capability

so long as it harmless one-self & others or not make trouble to anyone)

Knowledge condition: - Concerning living and livelihood; theories, methodology, technologies, changing of environment, globalization, local wisdom, socio-geology etc.

- Right and accuracy.

Moral condition: - Lead to responsibility; one-self, family, community, social and national

(Know, prudence, great care,due consideration)

(honesty, integrity, sincere, diligence, perseverance,

Sharing)

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Summary of the Philosophy of Summary of the Philosophy of Sufficiency EconomySufficiency Economy

The Middle Path

Reasonableness Self-immunity

Moderation

balance / stability / sustainability

life / economy / social

Lead to

Moral Condition (honest, sincere, diligence,

perseverance, sharing)

Knowledge Condition(Know, prudence, great care)

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How is S.E. importance?How is S.E. importance? We are now in the globalization stream.

Changes are rapid and extensive. Its effects are enormous and severe to the people’s ways

of life.

S.E.

S.E. is the foundation of

life and stability of nation

Aim to

BalanceStability

Lead to

Cope with changes:Internal and external

Economic: Economic groupings & changes in global financial markets ; (inter-country flow of capital, goods and services)

Technology: Leapfrog advances in technologies; communication, bio, material, nanotechnology Social: Social changes: ageing society.

Environment: Changes in the environment and natural resources : climate change, incident of natural disasters.

Sustainable

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World EconomyWorld Economy World economy now is in the stage of recession, while World economy now is in the stage of recession, while

last year it grew 2.5 last year it grew 2.5 %%., resulting in unemployment of ., resulting in unemployment of

200 million person worldwide. 200 million person worldwide. European economy in 2008 was a lion share of world European economy in 2008 was a lion share of world

economy account for economy account for 242. % 242. %.. U.S.A. Economy was the second of U.S.A. Economy was the second of 1 8 .3 %1 8 .3 % , its GDP was , its GDP was

about us$ about us$ 1430 1430 billion.billion. Thai economy depends 70 Thai economy depends 70 % % on exporton export

Asian Asian 214. % 214. % of Thai exportof Thai export EUEU 128. % 128. % of Thai exportof Thai export U.S.AU.S.A 126. % 126. % of Thai exportof Thai export JapanJapan 118. % 118. % of Thai exportof Thai export ChinaChina 9.7% 9.7% of Thai exportof Thai export

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Climate Change; Climate Change; global warmingglobal warming

Intergovernmental Panel on Intergovernmental Panel on climate change (climate change (IPCC) reported to IPCC) reported to UN.UN. This is the first time in 4,500 mil years that the earth

has tremendous changed by human being.

Before the industry revolution Co2 was at 280 ppm.

200 years after the industry revolution, Co2 in the

atmosphere has increased to be 380 ppm.

The critical point is at 450 ppm.

Now we annually generate 2 ppm of co2 to the air

So we have 35 years left to solve this problem.

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What we are facing in the What we are facing in the complex modern world or complex modern world or

globalizationglobalization Food insecurityFood insecurity

Massive environmental destructionMassive environmental destruction

Growing inequalities in distribution of Growing inequalities in distribution of

incomeincome

Crippling financial crisisCrippling financial crisis

Market failureMarket failure

Poor people increasePoor people increase

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Present & Future

Economic Development

- Food shortages- Energy shortages - Lack of resources- etc

- income disparity- migration- terrorism- communicable deceases

- climate change - deforest, flood - ozone layer destruction- acid rain- decease from pollution

1. Economic Development without

CSR

2. shortage of natural resources

3. Environmental degradation

Three Major Problems Threatening World Survival and Limit to Growth

- water pollution- soil degradation- air pollution - over garbage - slums etc

worldpast

Amount of Resources Food andEnergy

Environmental Quality Environmental

Quality

Economic Development

adhere to capitalist without sufficiency

Quantity of Resources Food andEnergy

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(Sufficiency economy)(Sufficiency economy)

Extreme and Middle Path of Economic Extreme and Middle Path of Economic SystemSystem

MainstreamMainstream AlternativeAlternative stream stream

Capitalism economyCapitalism economy Socialism economySocialism economy

Self-sufficiency Self-sufficiency economyeconomy

Trade economyTrade economy(Greed (Greed economy)economy) - Self-reliance 100%

- Close the country- Borderless even in the space -Looking to occupy other planets

GlobaliGlobalizationzation

Understood human nature Accept limitation

Indicate weaknessesAware of danger

InefficiencyLack of goodsUnwillingness sharing

Slow progressLag far behindCan’t catch up with new knowledge

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C.E. VS S.E.Capitalist EconomyCapitalist Economy Sufficiency EconomySufficiency Economy

Maximize profitMaximize productionMaximize consumption

Abstemious use of resources

RiskRisk Self-immunitySelf-immunity

Work for self-interest Create the poor

Work for oneself & Others Joint activities , Joint consumption

at the expense of others (Less CSR)

Give away part of their wealth

Income concentration Income distribution

Short-term profit Long-term profit

Aims at wealth Aims at happiness

Adam Smith’s work “The wealth of Nation”

(free market, greed, the role of self-interest)

Adam Smith’s work“The Theory of Moral

Sentiments” (conscience will lead us to do what is

right)

Greed Moderation

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33 Stages of SufficiencyStages of Sufficiency

1.

2.

3.

Sufficiency at family or farm level“Stage of self-reliance”

Sufficiency at community or organization level“Stage of cooperation among people/famers”

“cooperative, community enterprise”

Sufficiency at the national level“Stage of cooperation among cooperative”

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3 steps for country 3 steps for country developmentdevelopment

1.1.

2.2.

* Building a good basis or infrastructure for enabling people to have enough to live on or enough to eat.

* People join hands in various activities (in the form of group or enterprise)

* Participate in decision making process* Develop mutual learning processes* Appropriately apply the uncomplicated technology in development

Individual orfamily level

(self-reliance)

Communitylevel

(cooperative)

National level

(cooperation among cooperative)

3.3.

* Serve domestic demand first* Enhance cooperative networking * Promote holistic development processes to create balance* Take into account country’s capital; social, economic, resources

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Application of S.E.Application of S.E. Cost reduction in stead of targeted Cost reduction in stead of targeted

earning.earning. Increasing income together with Increasing income together with

reducing expensesreducing expenses Reduce risk :Reduce risk :

Sources of income earning have to diversifySources of income earning have to diversify Cope with the changing world through the process of Cope with the changing world through the process of

learning together & working togetherlearning together & working together

Expanding opportunity together with Expanding opportunity together with preparing the people with appropriate preparing the people with appropriate knowledge & know-howknowledge & know-how

(for instance village fund)(for instance village fund)

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Factors give rise to poverty

Poverty

Over expenses

Low income

Lack of opportunities

Behavior in spendingHigh cost of livingHigh dependency ratioPhysical or health problem

Low endowment; asset, capability etc. Low educationLow quality & less products to saleBehavior; not persevere, lazy

Capital High income job Public services

Education Health services

to access, to acquire

Soft loan Land

Non pro-poor policies

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S.E. & poverty alleviation

Reduce Expenses

Increase Income

Generate Opportunities

Change behavior

Change behavior

New TheoryAgriculture

Government Intervention

Provide soft loan(village fund)

Tuition-free Education

Treatment-freefor hospital visit

S.E

OTOP community enterprise

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New Theory Agriculture: New Theory Agriculture: NTANTA

Main purpose is to make farmers more self-reliant Main purpose is to make farmers more self-reliant through an integrated management of their land, living through an integrated management of their land, living harmoniously with nature.harmoniously with nature.

NTANTA has 3 stageshas 3 stages1.1. Create selfCreate self--reliance at the household level; in term of reliance at the household level; in term of

food, healthy and income from extra crops.food, healthy and income from extra crops.Do mixed farming by dividing land into 4 parts with Do mixed farming by dividing land into 4 parts with proportion of 30/30/30/10 for rice cultivation, garden proportion of 30/30/30/10 for rice cultivation, garden crop, a pond and housing respectively.crop, a pond and housing respectively.

2.2. Create selfCreate self--reliance at the community level; reliance at the community level; Based on cooperative activities among members within Based on cooperative activities among members within community based on a concept of sharing excess community based on a concept of sharing excess resource of each household. It can be community resource of each household. It can be community enterprise.enterprise.

3.3. Advance stage; Advance stage; The community expands their activities through reaching The community expands their activities through reaching out to other communities, cooperatives as business out to other communities, cooperatives as business partnerships.partnerships.

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What is What is Community Community

PlanPlan A plan that is formulated A plan that is formulated

for the development of for the development of

community by community community by community

and for the community and for the community

itselfitself

A participant from A participant from

members of the members of the

community in the process community in the process

of formulationof formulation

Self-relianceSelf-reliance

Local resource and Local resource and

wisdomwisdom

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Principles of Community Principles of Community PlanPlan

““explode from withinexplode from within " " / “knowing oneself”/ “knowing oneself”

Area-based/Community based development: for by and Area-based/Community based development: for by and

of the community: not for the government or NGO of the community: not for the government or NGO

agenciesagencies

Participation from all sectorsParticipation from all sectors

Other levels or agencies support but not guide/controlOther levels or agencies support but not guide/control

Community Information “know oneself”: reduces Community Information “know oneself”: reduces

expenses, increases income and generates expenses, increases income and generates

opportunitiesopportunities

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Community Development Plan Community Development Plan Formulation ProcessesFormulation Processes

1.1. Meeting to share the understanding.Meeting to share the understanding.• PurposePurpose• BenefitsBenefits• ApplicationApplication

2.2. Explore the information by community member.Explore the information by community member.• IncomeIncome• ExpenditureExpenditure• Natural resourcesNatural resources• Public utilitiesPublic utilities• Etc.Etc.

3.3. Meeting for presenting & discussing.Meeting for presenting & discussing.• Know one selfKnow one self• Form a share visionForm a share vision• Form development planForm development plan

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S.E. business practiceS.E. business practice Appropriate use of technology:Appropriate use of technology: use of inexpensive use of inexpensive

butbut technicallytechnically

sound technologysound technology Appropriate manufacturing capacity: Appropriate manufacturing capacity: consistence with consistence with

businessbusiness ability to manageability to manage Focus on long term profit:Focus on long term profit: moderate profitmoderate profit Emphasis on honesty:Emphasis on honesty: fair to consumers, fair to consumers,

customers, customers, workers, suppliersworkers, suppliers Risk management:Risk management: diversification, variousdiversification, various

products, ability to adjustproducts, ability to adjust Don’t create unmanageable debtsDon’t create unmanageable debts RespondRespond respectivelyrespectively to local, regional, domestic to local, regional, domestic

and and international market.international market.