Sufficiency Economy Philosophy:Sufficiency Economy Philosophy:

A Model for Sustainable DevelopmentA Model for Sustainable Development

Mario T. TabucanonVisiting Professor, UNU-IAS

Professor, Asian Institute of Technology

Presentation at the 3rd ASEAN-Plus-Three Leadership Programme on

Sustainable Production and Consumption6-7 October 2010, Bayview Park Hotel, Manila, Philippines

The Sufficiency EconomyThe Sufficiency Economy Philosophy (SEP)Philosophy (SEP)

His Majesty, the King of Thailand His Majesty, the King of Thailand developed SEPdeveloped SEPHM introduced SEP in all Royal HM introduced SEP in all Royal Projects in Thailand (Since 1974)Projects in Thailand (Since 1974)SEP is a model for achieving SDSEP is a model for achieving SDSEP is the overarching principle in the SEP is the overarching principle in the 99thth and current (10 and current (10thth) Thailand National ) Thailand National Economic and Social Development Economic and Social Development Plans, 2001-2006 & 2007-2012Plans, 2001-2006 & 2007-2012

Philosophy of “Sufficiency Philosophy of “Sufficiency Economy”Economy”

“Sufficiency Economy” is a philosophy that stresses the middle path as an overriding principle for appropriate conduct at all levels of society -. individuals, households, community, organizations or government

”

•1992: During economic boom, HM warned against hastily jumping into the wind of “Asian NICs” and “Asian Tigers.”.

•1997: Indeed, Thailand suffered during the Asian financial crisis. But due in part to the application ofSEP, Thailand had recovered relatively fast.

•Although His Majesty has been talking

about sufficiency economy since 1974, it

was only in 1997 at the height of the

financial crisis that HM began to use

the term “Sufficiency Economy”.

Components of SEPComponents of SEP

“Sufficiency has three components: moderation; reasonableness; and the need for built-in resilience against the risks which arise from unwanted internal or external change.”

Main Components of Sufficiency Main Components of Sufficiency

EconomyEconomy

Sufficiency

Economy

(1) Moderation

(2) Reasonableness

(3) Self-Immunity

Conditions: SEP Will work best if there is

(1) Application of appropriate knowledge and prudence

(2) Adherence to morality

Middle Path

Moderation

Reasonableness

Resiliency

Knowledge Morality

BalanceSecurity

Sustainability

สมดุ�ล/ม��นคง/ยั่��งยั่�นชี�วิ�ต/เศรษฐกิ�จ/ส�งคม

The Middle Path

Reasonableness “Immune” System

Moderation

Wisdom Condition(an application of knowledge with due consideration and

prudence )

Balance/Stable/Sustainable

Life/Economic/Social

Moral Condition (honesty, integrity, diligence, patience,

perseverance)

HM King’s Philosophy of "Sufficiency Economy”HM King’s Philosophy of "Sufficiency Economy”

Frameworks of the 9th & 10th PlansFrameworks of the 9th & 10th Plans

Leading to

PARTIAL INFORMATION

WRONG INFORMATION

MISINFORMATION

ICT ICT

KNOWLEDGE-BASEDDEVELOPMENT &

PROBLEM-SOLVINGCONTEXT, SITUATION, LOCATION,

& TIME DEPENDENT

KNOWLEDGE-BASEDDEVELOPMENT &

PROBLEM-SOLVINGCONTEXT, SITUATION, LOCATION,

& TIME DEPENDENT

KNOWLEDGE ACCESS KNOWLEDGE VALIDATION KNOWLEDGE VALUATION

GLOBAL KNOWLEDGE POOL EXPLODED & CONNECTED

GLOBAL KNOWLEDGE POOL EXPLODED & CONNECTED

Ethical Valuesgoverning

TECHNOLOGY ASSESSMENT

SUSTAINABILITY

Ethical Valuesgoverning

TECHNOLOGY ASSESSMENT

SUSTAINABILITY

Discoveries & InnovationsPatents & monopolyPricing of technology

Needs for technologyLimited resources

POORER

IMMUNITY ?

New Ethicseg. brain death, GMO, stem cells, global warming,

democracy, corporate social responsibility

“Uneducated person can do petty corruption,

Educated can do deliberate ones”.

PROHIBITIONS1. Dishonesty, plagiarism

2. Academic lie

SUSTAINABILITYNatural resources Environment

Consumption Production

SUSTAINABILITYNatural resources Environment

Consumption Production

How does SE relate to Neoclassical How does SE relate to Neoclassical

Economics?Economics?

Preference

Optimality

X

Y

Max (1)-t E[U(C,..,t)] Subject to Budget Constraints

A

How does SE relate to Neoclassical How does SE relate to Neoclassical

Economics?Economics?

Preference

Middle path solution

X

Y

“Satisfice” (1)-t E[U(C,..,t)] Subject to Budget Constraints

A

• Depend on Preference,

and Constraints to

Maximize Utility

Optimality Middle path

• Choose middle path

based on moderation,

reasonableness and

self-immunities –

“Bounded Rationality” or

“Satisficing”

Neoclassical Economics Sufficiency Economy

Difference between SE and Neoclassical Difference between SE and Neoclassical

EconomicsEconomics

Applications of Neoclassical Applications of Neoclassical

Economics Economics Neoclassical economics tries to understand human choices and

explains the observed pattern using the optimizing framework

Risk Loving

Short-sightedLong-sighted

Risk Averse

Social Status

Envy

Addiction

Prudence

Human behavior

PrudentPerson

Lack of Self Discipline

SE and Human BehaviorSE and Human Behavior

(1) Moderation

(2) Reasonableness

(3) Self-Immunity

The behavior of those who adhere to SEP will be similar to the behavior of “prudent

persons”.

Prudent Person

Misconceptions concerning SEPMisconceptions concerning SEP

1. Sufficiency Economy is about self-1. Sufficiency Economy is about self-sufficiency: This is a misconception. sufficiency: This is a misconception. SE concept entails a two-stage process: the first stage involves basic sufficiency, or relative self-sufficiency, and once a firm foundation is established, one can progress to a second stage of advanced sufficiency.

MisconceptionMisconception

2. 2. Sufficiency Economy is anti-globalization and leads to the closing-up of the economy: This is a misconception: This is a misconceptionThe two-stage principle of Sufficiency Economy suggests that in order to cope with globalization, we first need to build a strong foundation for the country and proceed cautiously with an awareness of the risks involved.

SEP strategic framework for a country in the globalization era

Build a strong domestic economy and improve networking at all levels (local, national & global)

Liberalization of key sectors has to be carried out in steps and to be consistent with the country’s state of readiness

Proper supply-side management policy to help withstand the shocks and volatility arising from external factors

Misconception

3. That ‘Economy’ in the term ‘Sufficiency Economy’ only refers to the conventional concept of ‘Economics’. This is a misconception.

‘Economy’ in SE encompasses the triple bottom line – Economics, Social & Way of Life, and Environmental.

MisconceptionMisconception

4. 4. Sufficiency Economy is only applicable in the agricultural sector and rural areas: This is a misconception: This is a misconception

Sufficiency Economy is a philosophy that helps guide the behavior of each individual and can be applied to all sectors of the economy

Sufficiency Economy

2. Economic Development

- Agricultural/Community Development

- Business Practices

- Government Policies

Applications of Sufficiency Economy Philosophy

1. Daily life

- Moderation

- Reasonableness

- Self-immunity

SEP Applications to Daily LifeSEP Applications to Daily Life

As guiding principle in daily activities:As guiding principle in daily activities:

Especially in answering questions such as : How should we act?

Which items should we buy?

How should we live our lives?

Together, the answers to these questions will help define what it means to “live according to a sufficiency lifestyle”.

Example: Buying a HouseExample: Buying a HouseIf we try to follow SEP, then we have to ask ou

rselves at least three questions: First, whether this house is a suitably moderate choice, given limited resources. Second, whether it is a reasonable thing to do to buy a large house just to show it off occasionally to our friends. Third, whether the financing of this particular house will leave the buyer vulnerable to adverse effects that might happen in the future.

AVOID EXCESSIVE OVERCONSUMPTION BEHAVIORS

UNNECESSARY DESIRE UNNECESSARY DESIRE

NATURAL DESIRELongest life

Youthfulness Beauty

Ease of livingEnjoymentRecreation

etc.

Anti-oxidant food supplements/ potions/ drugs

Cosmetic surgery

Addictions: drugs, non-drugs, sugar, lifestyles

Satiety for violence, sex, extremes

KNOWLEDGE & WISDOMFor Rational Decision

KNOWLEDGE & WISDOMFor Rational Decision

NECESSITIESIN LIFE

FoodEnergyWater

TransportationCommunication

Housingetc.

‘AFFLUEZA’

OBESITY

ELECTRICITY, FOSSIL FUEL, PETROLEUM

INFRASTRUCTURES

IMMUNITYagainst seduction

& addiction

IMMUNITYagainst seduction

& addiction

Prohibition of sale of junk food in schools.

Prohibition of sale of junk food in schools.

OBESITY

In Thailand, up to 30% of adults and adolescents reached “obese” range.

From 1986 to 2008, the situations were getting worse.

Change of food habits from rice, vegetables and fruits to Western style of food – food of high fat, protein & sugar

Soaring sale of “food supplements” claimed to control weight.Advertisement, promotion & direct sale

Booming of spa and exercise businesses

PublicExercise Programs

PublicExercise Programs

MOTIVATION

Advertisement

Luxurious houses

From 18.5 million baht

AdvertisementLuxurious cars from 10 million baht

International Watch Fair

over 1 million bahtTrade FairsTrendy fashion

Individuals: resisting me-too temptation

Society: virtue of saving, shame for showing off luxuries.

Individuals: resisting me-too temptation

Society: virtue of saving, shame for showing off luxuries.

SUFFICIENCY ECONOMYSUFFICIENCY ECONOMY

DESIRE-BASED TRADEDESIRE-BASED TRADE

BEAUTY

RECREATION

EXCITEMENT

GAMBLING

AGEING YOUTHFULNESS

IMMORTALITY

Advertisement, Sale Promotion

BUSINESSESCosmeticsHealth Health foodSpa Exercise Weight controlSport Lottery

SELF CONTROL OF DESIRERestraint against profit from desire-based trade

SELF CONTROL OF DESIRERestraint against profit from desire-based trade

Spiritual Dimension of SEPSpiritual Dimension of SEP

“If one is moderate in one’s desires, one will have less craving. If one has less craving, one will take less advantage of others. …Sufficiency means to have enough to live on. Sufficiency means to lead a reasonably comfortable life, without excess, or overindulgence in luxury, but enough….” (Royal Speech, given at

Dusit Palace, 4 December 1998)

Agricultural and Community Development

Thai agriculture in the Thai agriculture in the

recent past - Monoculturerecent past - Monoculture

- Problems from Monoculture- Problems from Supply/Demand Adjustment- Weather- Debt Problem- Migration and weakness of the villages

New Theory of AgricultureNew Theory of Agriculture

Emphasizes diversified farming techniques and the need to develop the communities, stage by stage, by laying down a firm foundation first.

New Theory for New Theory for

AgricultureAgriculture 1. First step The aim is to let the farmers be

able to support themselves (self-sufficiency) especially concerning rice. If the main problem is water then they should dig a pond in their land to make sure that they have enough water for farming and household usages which they might need support from the government or private sector in digging the pond. (30% water, 30% rice, 30% vegetables/fruits/livestock, and 10% house of the total area)

 

New Theory

2. Second step Farmers should work together and create a cooperative to reduce the cost of production and for saving purposes as well as social security and together they will also have more negotiating power in selling their products to the markets.

New Theory

3. Third step For developed communities, further expansion of the production process and commerce such as cooperative stores or rice milling factories can rely further from the cooperation from commercial banks in improving their livelihood.

Procedure of the New TheoryProcedure of the New Theory

1st phase: Implementation / Production

Advising/Experimenting

Advising/Experimenting ImplementingImplementing Getting

results

Gettingresults

2nd phase: Expansion / Marketing

Better living conditions

Better living conditions Production / MarketingProduction / Marketing Joining

forces

Joiningforces

Supportfromoutside

3rd phase: Advancement / Processing / Adding Value

Cooperation/ Capital

Cooperation/ Capital Quality of lifeQuality of life Sustainable

development

Sustainable development

Supportfromoutside

Supportfromoutside

Benefits of the New TheoryBenefits of the New Theory

Agriculture in accordance with the New Theory

Agriculture in accordance with the New Theory

Steady and higher income marginSteady and higher income margin

Advice, consultations: Farmer-farmer Official- farmer

Advice, consultations: Farmer-farmer Official- farmer

Monitoring of news and information on farming practices

Monitoring of news and information on farming practices

Farmers and their children have better education opportunities

Farmers and their children have better education opportunities

Knowledge and learning on the job

Knowledge and learning on the job

Better learning/education

Better learning/education

Farm Families and Communities: Socio-economic Farm Families and Communities: Socio-economic ImpactImpact

More frequent harvestsMore frequent harvests

Diverse activities,perennial trees,fruits, vegetables,livestock

Diverse activities,perennial trees,fruits, vegetables,livestock

Job available the whole year round

Job available the whole year round Work in the localityWork in the locality

Family members joining activities, spending more time together, taking good care of children and the elderly

Family members joining activities, spending more time together, taking good care of children and the elderly

Steady and higher income marginSteady and higher income margin

Strengthened CommunityStrengthened Community

Diverse activities,perennial trees,fruit trees,vegetables,livestock

Diverse activities,perennial trees,fruit trees,vegetables,livestock

Members ofworking ageare kept in the locality

Members ofworking ageare kept in the locality

Different harvesttimes

Different harvesttimes

Increased and diverseproduction

Increased and diverseproduction

Resources in the rice fields are better utilized in turn

Resources in the rice fields are better utilized in turn

Working force is available for community workand other communal work in the rice fields and plantations

Working force is available for community workand other communal work in the rice fields and plantations

Steady incomesHigher incomesEquitabledistributionof income

Steady incomesHigher incomesEquitabledistributionof income

Sufficientfood

Sufficientfood

Strengthenedcommunity

Strengthenedcommunity

Organizing as groupsOr cooperatives for production, marketing, welfare

Organizing as groupsOr cooperatives for production, marketing, welfare

Dependence on outside sources is reduced

Dependence on outside sources is reduced

Business Practices

For the Corporate Sector SEP For the Corporate Sector SEP suggestssuggests

Greater emphasis on:

good risk management,

well thought-out business plans,

sustainable investment,

good corporate governance,

good corporate citizenship in terms of taking on corporate social responsibilities (CSR).

Siam Cement CaseSiam Cement Case

Decided to adopt SEP as its guiding principle. It restructured and refocused its activities on its core business, where it has strong competitiveness, and put more emphasis on risk management to build greater resiliency.

Siam Cement CaseSiam Cement Case

It now gives priority to its human resource development program to build a quality workforce that will provide the firm with greater immunity to future uncertainty; It also engages in a wide range of corporate social responsibility activities such as community development and environmental protection, as well as supporting other social causes.

Examples (Applying Examples (Applying

Immunity)Immunity)• Thinking about others Saha Farm

• Self immunity Hana - Prudence and not too greedy

• Thinking about staffs Seven Eleven

• Cautious expansion Golden Place

Pricing moderately

Do not borrow

unnecessarily Empathy

to your staffs

Building your

foundation

Pantasen, A et al: Application of Sufficiency Economy to Small andMedium-sized Industries, a survey of 296 enterprises, 2003

SufficiencyEconomyIndicators

6 groupsof

Industries

90% felt that “Sufficiency Economy” could be applied to their enterprises.

Production plan in line with their ability to manage,Honesty to customers and social responsibility

Risk taking and outside financing is difficult to avoid for medium-sized ones

Government Policies

Implications of SEP on Government Implications of SEP on Government PoliciesPolicies

1. Macroeconomic Management

2. Government Policy Design

3. Alternative Development Strategy

1. Macro Management

2. Gov. PolicyDesign

3. AlternativeDevelopment

Strategy

Moderation Reasonableness Self- immunity

Mega-project, Growth, Inflation, Budget Deficit

Adequate SavingEnergy Security National Risk Manag..

Design of governmental projects to make people to be more sufficient (Village funds, Debt ‘forgiveness’, Education reform etc.)

Balanced economic development frameworkRural along side with Industrial development; Strong communities; Quality growth; No need to go fast; Emphasis on public well-being

Implications of SEP on Government Policies

Infrastructures: services transportation

water energy

waste management recycling facilities

Pricing, Taxes, Choices, SanctionPricing, Taxes, Choices, Sanction

Regulations & Standards

SEP as an Approach to Sustainable SEP as an Approach to Sustainable DevelopmentDevelopment

The SEP path of development emphasizes a balanced use of material resources, social capital, environmental reserves, and cultural wealth as well as the balanced preservation of these four kinds of resources at all stages and levels of development.

SEP and SDSEP and SD

There are two distinct characteristics of the SEP approach to development:

a consideration of society and of

culture.

SEP and SDSEP and SDThe National Human Development Report 2007 – ‘Sufficiency Economy and Human Development in Thailand’ -- has come up with six key messages for future action.

1. Sufficiency Economy is central to alleviating poverty and reducing the economic vulnerability of the poor.

2. Sufficiency Economy is a means towards community empowerment and the strengthening of communities as foundations as foundations of local economiesof local economies

SEP and SDSEP and SD

3. Sufficiency Economy takes corporate responsibility to a new level by raising the strength of commitment to practices conducive to long-term profitability in a competitive environment.

4. Sufficiency principles are vital for improving standards of governance in public administration.

SEP and SDSEP and SD

5. Sufficiency Economy can guide national policy to immunize a country against shocks, to craft better policies, and to plan strategies for more equitable and sustainable growth.

6. Sufficiency thinking demands a transformation of human values, a revolution in the mindset, necessary for the advancement of human development.

EDUCATION FOR THE NEXT GENERATION

EDUCATION

FORMULATIONOf

PERSONALITYBEHAVIORMINDSET

SUFFICIENCYECONOMY

1. MODERATION2. RATIONALITY

3. IMMUNITY

SUFFICIENCYECONOMY

1. MODERATION2. RATIONALITY

3. IMMUNITY

RATIONALITY: (evidence-based, critical reasoning)INQUISITIVE MIND, CRITICAL MIND

BROAD MIND, OPEN MINDREFLEXIBILITY

RATIONALITY: (evidence-based, critical reasoning)INQUISITIVE MIND, CRITICAL MIND

BROAD MIND, OPEN MINDREFLEXIBILITY

ReferencesReferences

1. SUFFICIENCY ECONOMY PHILOSOPHY AND DEVELOPMENT

Chaiyawat Wibulswasdi; Priyanut Piboolsravut; Kobsak Pootrakool

Published by Sufficiency Economy Research Project Bureau of The Crown Property Bangkok, Thailand Website: http://www.sufficiencyeconomy.org

References

2. Charas Suwanwela, ‘Roles of Universities in Sufficiency Economy’, presented at the 11th UNESCO-APEID International Conference Reinventing Higher Education: Toward Participatory and Sustainable Development’, 12 December 2007, Bangkok, Thailand

3. Charas Suwanwela, ‘Sufficiency Economy Philosophy as an Approach for Sustainable Production & Consumption’, presented at the 2nd ASEAN+3 Leadership Programme on Sustainable Production & Consumption, Sirindhorn International Environmental Park, Cha-am, Petchburi, Thailand, 8 August 2009

Thank YouThank You