|
Dear
friends,
Having
learned
some
especially
interesting
ideas on
the
topic of
development
economics
over the
past
several
months
from
Harvard
University
professor,
Ricardo
Hausman,
I would
like to
share
some of
these
concepts,
which,
connecting
directly
to my
own
field of
interest,
I will
now
apply to
Thailand’s
case.
Hausman
believes
that the
government’s
tendency
to
attempt
problem-solving
in
simultaneous
dimensions,
focusing
on too
many
details,
does not
bode
well for
the
country’s
positive
growth
development.
Thus,
government
problem-solving
must
begin
with the
most
binding
constraint,
all
problem-solving
attempts
construed
useless
without
the use
of this
initial
key.
Picture,
for
example,
a barrel
full of
holes
into
which
water is
poured.
Unless
the
lowest
perforation
is
patched
first,
the
container’s
water
storage
capacity
will be
restricted
to that
of the
lowest
puncture
level.
Accordingly,
the
puncture
at
lowest
level
can be
considered
the
barrel’s
most
binding
constraint,
with the
level of
storage
water in
that
barrel
likened
to its
income,
or as in
the case
of a
nation,
the
nation’s
most
binding
constraint
measures
the
level of
its
national
income.
Hausman
sorts
binding
constraints
between
two main
sources:
financing
and
investment
returns.
Binding
constraints
are
first
sourced
in
excessive
financing
costs
for
investment
as
witnessed
in an
interest
rate
that is
also too
high.
High
financing
costs
likewise
develop
from
many
roots,
for
example,
a low
national
savings
rate,
the
international
financial
system
or
market
power
over
local
banking
systems.
The
second
source
of
binding
constraints,
low
investment
returns,
may also
stem
from
many
roots,
whether
geographical
location,
labour
productivity,
the
transportation
system,
government
policy,
or other
possibilities.
Now we
will
turn to
Thailand
as I
attempt
to
answer
the
question,
What is
the most
binding
constraint
in
Thailand?
My
answer
follows.
Prior to
the
economic
crisis
of 1997,
Thailand’s
high
finance
costs
were the
most
binding
constraint
in the
country.
Even by
China’s
‘new
emergent
economy’
standards,
Thailand
had had
a
longtime
high
interest
rate,
especially
before
the
crisis
in 1997. |
