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The Non-Farm Rate of Profit and the Thai Economic Development: 1970–2010
Abstract
The article measures the non-farm profit rate in Thailand from 1970 to 2010. The shape of the profit rate suggests that the Thai economy can be differentiated into four phases. The decomposition analysis reveals that the organic composition of capital has greatly contributed to fluctuations of the profit rate, while the rate of capacity utilization and the capacity—capital ratio have positive impacts in three out of four phases. Meanwhile, the profit share and the rate of surplus value have just slight impacts on the profit rate. Furthermore, the article discusses that the capitalist class has always been a dominant class who could benefit from economic development, and the profit rate determines the growth rate of capital stock in Thailand.
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Notes
The data of the rate of “industrial” capacity utilization, which could be used to estimate “non-farm” potential output, from the Bank of Thailand is available from 1978 to 2010. There are two reasons that require me to estimate potential output and the rate of capacity utilization for this article. First, the Bank of Thailand does not have the data from 1970 to 1977, but the decomposition analysis, presented in this article, needs the data from 1970 to 2010. Second, the Bank of Thailand measures the rate of “industrial” capacity utilization, not the “non-farm” one. Hence, I would argue that my estimated “non-farm” potential output and rate of “non-farm” capacity utilization is more complete (since it is a measure of the data from 1970 to 2010) and more suitable for this article (since it is non-farm, not just industrial).
Following Weisskopf (1979), I can transform
into a function of 
by setting 
Then, since all series move through time, annual-average geometric growth rates of all series are computed to see the impacts of each component on the rate of profit in each phase. The columns g of the table present annual-average geometric growth rates in each phase. The columns i of the table are calculated by having the values in column g in each phase divided by the annual-average geometric growth rates of the rate of profit, and then have them multiplied by 100 to get numbers in a form of percentage. The percentages in columns i can be rough indicators estimating the contribution of each determinant on the growth rate of the rate of profit in each phase. It is necessary to note that, from Equation (13), the organic composition of capital has a negative relationship with the rate of profit. Therefore, to properly present the impact of occ, Pkw , and tcc a negative one is multiplied.
After the crisis, neoliberalism has become a main track of development for the Thai economy. The apparent neoliberal policy to enhance export demand was the attempt to encourage international free trade agreements; the Thaksin administration was “aligning aggressively with bilateral FTAs” (Chirathivat and Mallikamas 2004). Even though this policy could not bring back miraculous export growth rate, it can be argued that this policy played a part to maintain a fair export performance.
The National Peacekeeping Council was a military clique overthrowing the elected government of Chatichai Choonhavan in February 23, 1991. The coup was known as an antidemocratic action from the Thai conservatives. The attempt to weaken the Labor Relation Act, created during the rise of democracy in 1975 to strengthen labor organization, was one practice that the government tried to abolish heritages of left-wing movements.
Net capital stock here is defined differently from that used to measure the non-farm rate of profit. See Appendix 2 for more details.