‘Creative destruction inevitable for Thai growth’
September 2, 2013 Leave a comment
‘Creative destruction inevitable for Thai growth’
THE NATION September 2, 2013 1:00 am
THAILAND HAS to face another era of creative destruction if has to maintain its competitiveness, Bank of Thailand economists said last week. Creative destruction – the shift of labour to high-growth industries and the death of some non-competitive businesses – is going on, but not at the same level in each industry and not in all industries. Their paper entitled “Thailand’s Quest for Economic Growth: From Factor Accumulation to Creative Destruction”, aims to show the economic environments that are supportive of the change or hinder the process.The paper is one of six to be presented at the annual BOT Symposium on September 19-20, whose theme this year is the foundation for Thailand’s economic sustainability.
The authors attributed the past growth story to creative destruction. In the beginning, the economy accumulated production factors particularly labour. The labour force grew in line with the population.
In the beginning, the labour force was concentrated in old production modes – particularly agriculture – which resulted in low productivity.
In the past two decades, like other developing countries, Thailand witnessed the shift of the labour force to new and higher-productivity industries, which benefited from the free flow of new technology.
In stark contrast, countries in Latin America witnessed the shift of production factors from high-productivity areas to low-productivity areas.
“The process shows that Thailand’s economy has been reconstructed from time to time and the reconstruction supported overall growth. Accumulation of production factors [labour and capital] also propelled past growth.
“Yet, such accumulation has emitted weakening forces. Capital accumulation has been declining while the labour force expands slowly in line with declining population growth.
Thailand’s technology and productivity are inching near their limits. Although industry shows high productivity, it could not effectively draw resources.
“This shows that the growth pattern could see its demise soon,” they said.
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