Abstract

Thailand has long faced two major and unresolvable economic problems. The first is the “middle-income trap” (MIT). Its economy has not been able to raise incomes from middle to higher levels while rapidly entering the state of a hyper-aged society. The second is a very high degree of inequality. This chapter argues that the problems of MIT and economic disparity are profoundly connected with the prominent characteristic of the Thai state, which is “highly centralised but fragmented”. This is a result of the history of modern nation-state building. The centralised but fragmented nature of the Thai state has been the major cause of the difficulty for increased industrial productivity to escape the MIT. Meanwhile, the highly centralised state means that the Thai elitist class possesses the power to create enormous economic rents for themselves. This is clearly shown in the concentration of wealth in the hands of a small number of people, or the “1 per cent problem” found in many other rich countries. The main argument of this chapter is that the basic characteristic of the Thai state – centralised but fragmented – is a major obstacle in overcoming the MIT problem.