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Utrecht University
Research Institute of History and Culture (OGC)
Faculty of Humanities / Department of History
Research Master History: Cities, States & Citizenship
Rents, Elites and Violence in Malaysia and Thailand
An empirical evaluation of the ‘Violence and Social Orders’
conceptual framework
Thesis by:
Michiel de Haas
Supervisor: Second reader:
Dr. E. Frankema Prof. Dr. M. Prak
September 2011
Studentnr. 0435775
Email: [email protected]
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Table of Contents
Table of Contents ................................................................................................. 1
Chapter 1: Introduction ...................................................................................... 4
1.1. Introducing key debates about development ........................................................................... 4
1.2. Introducing the Violence and Social Orders framework ......................................................... 6
1.3. Introducing the cases and methodology .................................................................................. 7
Chapter 2: The Conceptual Framework ......................................................... 10
2.1. The logic of the LAO ............................................................................................................ 10
2.2. Implications of the LAO logic ............................................................................................... 10
2.3. Development and transition in the Limited Access Order .................................................... 12
2.4. Development and transition in past and present .................................................................... 14
Chapter 3: The Case of Malaysia..................................................................... 15
3.1. Introduction ........................................................................................................................... 15
3.2. The establishment and consolidation of colonial dominance (1750 – 1957) ........................ 16
3.3. Declining colonial legitimacy (1930 – 1957) ........................................................................ 18
3.4. Consociationalism; a new elite arrangement (1957-1969) .................................................... 20
3.5. The state intervenes: the New Economic Policy (1970 – 1990) ............................................ 23
3.6. Limits to access, limits to growth? (1990 – present) ............................................................. 27
3.7. Conclusion ............................................................................................................................. 30
Chapter 4: The Case of Thailand..................................................................... 32
4.1. Introduction ........................................................................................................................... 32
4.2. State formation (1800 – 1932) ............................................................................................... 33
4.3. Contestation for access to the state and the bureaucratic polity (1932 – 1968)..................... 35
4.4. The rise of politics and Thailand’s developmental state (1968 – 1988) ................................ 39
4.5. Money politics and collapse (1988 – 1997) .......................................................................... 43
4.6. The rise and fall of Thaksin Shinawatra (1997 – present) ..................................................... 46
4.7. Conclusion ............................................................................................................................. 49
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Chapter 5: Empirical evaluation of the framework ...................................... 51
5.1. A confrontation of cases and theory ...................................................................................... 51
5.2. A comparative perspective .................................................................................................... 54
5.3. Fundamental criticisms of the conceptual framework ........................................................... 55
Conclusion .......................................................................................................... 59
Bibliography ....................................................................................................... 62
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Chapter 1: Introduction
1.1. Introducing key debates about development
Rapid social, political and economic changes define the condition in which most of the world
population has found itself over the last decades. It has become common to speak of these
processes of change in terms of ‘development’. The term development, however, is so broad
that it can both be signified with clearly defined quantitative indicators (such as GDP, infant
mortality, school enrolment) as well be a substitute for much more normative and
controversial notions of improvement and progress. As much as observers agree on the fact
that things are changing, as little have they achieved consensus on how we can define the
outcomes of change, or on the causal drivers of change. Culture, geography, international
relations, property rights, war and irrigation are only some of the most well-known causal
drivers that have been suggested to approach the issue of development.
An important development-related debate revolves around the role of states and the role of
markets. Some scholars point at the importance of a ‘developmental state’ to achieve high
levels of economic growth, especially in a context of uneven international economic relations
(Johnson 1982). Others disagree and defend the ‘neoliberal’ argument that competitive
markets, not states, drive economic development. In this argument, state intervention is often
associated with rent-seeking as an economically inefficient and wasteful phenomenon that can
best be combated by ‘getting prices right’ or ‘getting basics right’ (Jomo 2002).
‘Modernity’ and ‘modernization’ is another set of terms that time and again enter discussions
about the experience of change. Like ‘development’, ‘modernization’ is a term without a
clearly demarcated analytical content. In the broadest sense, the term ‘modernization’
signifies the notion that the nature of change is encompassing and fundamental, involving
intertwined and irreversible shifts in society, culture, religion, politics and economics
(Acemoglu et al. 2009). Often, though, it implies a causal relation from economic
development to political development and aims to explain the emergence of authoritarianism
and democracy (Thompson 1996). Barrington Moore Jr. (1965), famously argued, for
example, that only when a broader – middle class – segment of society has a significant stake
in economic affairs, democracy is a viable option in the process of modernization (Moore
1965). Often, modernization theories involve a somewhat schematic conception of societies as
divided in groups or ‘classes’ with more or less clear and coherent interests (Yoshinori
2003).1 Although the modernization debate has been declared dead and buried many times, it
seems to have been excavated and reexamined at least as many times.2
Another ‘big concept’ that enters discussion about development is that of ‘democracy’.
Scholars have described democracy as conducive to growth, for example pointing at more
efficient institutions (North 1990) or higher levels of stability (Olsen 2000). Others argue – in
1 For a classical example of modernization theory, see Moore Jr. (1966), for a new approach see Acemoglu &
Robinson (2006). 2 Recent examples include Fukuyama (1989), Thompson (1996), Khan (2005), Acemoglu et al. (2009) and
Fukuyama (2011)
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the opposite direction – that economic growth leads to, and is even necessary for, the
emergence or consolidation of democracy. Khan (2005) shows that we need to be careful in
applying the term ‘democracy’ because it has different meanings in different contexts.
According to Khan, democracy works differently in developed and developing countries.
Whereas Western politicians generally attract their voters by formulating a public policy
agenda based on programmatic foundations, politicians in developing nations use their
political leverage for patronage and promise personalized material benefits in return for voter
support. For example, while India is considered a democracy, the subcontinent is rife with
‘corruption’ and ‘patron-client networks’ to a degree that is unthinkable in Western European
economies (Khan 2000). Because of the disparity in mechanisms that can be involved in
democracies, causally connecting democracy to underdevelopment and authoritarianism to
growth would lead to ‘general results about the effects of democratization [which] are certain
to be misleading’ (Khan 2005, p.721).
The fact that development scholars often bury old orthodoxies and reappraise others is, of
course, informed by actual trends and events. Whereas waves of democratization seem to
provide ammunition to those who discern a causal relation between growth and
democratization, economic development in countries like China, Singapore or Malaysia
seems to come without fundamental political openness. In these cases, observers have to
acknowledge that ‘halfway houses’, as Samuel Huntington (1968, 1991) famously named
instable, developing political systems, have turned out to be more resilient than expected
(Case 1996; 2001). Whereas growth and accountable government are often associated with
each other, the mixed evidence from reform efforts leads proponents of good governance to
have to ask the urgent question whether interventions to decrease corruption in countries like
Brazil, Thailand or Egypt, if realized, will be sustainable. The macro-economic reform and
good governance agendas promoted by the major international financial institutions, also
known as the ‘Washington Consensus’, have only delivered moderate success and have
certainly not resolved impeded growth trajectories in the developing world. The correlation
between democracy and economic development is too strong to ignore, but too contentious
and broad to fully embrace. Empirical observations intensify the urgency for an answer to the
question: what are the actual causal processes involved in development? The long stream of
disagreements on even the most fundamental issues of the ‘development debate’, might
invoke desperation or even cynicism about the merits of such a debate. However, it is rather
unsurprising that this encompassing and important theme draws large numbers of scholars to
the academic arena. Moreover, the fact that issues are contested also means that the debate is
alive, calling upon scholars to develop new and creative angles and perspectives. The
complexity of recent events shows that there is still much to learn, both at the empirical and
the theoretical level.
Recently, a consideration of the historical dimension has (re)gained ground in the
development debate. Most scholars agree that modern economic growth first took off in
Europe and the United States. Firm disagreements arise when the causality enters the
discussion (Pomeranz 2000; Ferguson 2011). The question rises, if current and future
development does or does not mirror the experiences of the (western) past. Such concerns
informed the classical theories of Adam Smith, Karl Marx and Max Weber. Similar views
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have recently resurfaced in the works of Daron Acemoglu and James Robinson (2006),
Douglass North, John Joseph Wallis and Barry Weingast (henceforth NWW) (2009) and
Francis Fukuyama (2011). Acemoglu and Robinson developed a highly formalized,
econometrical approach to understand the relationship between masses and elites. Fukuyama
offers an impressive historical account of the development of political organizations and the
emergence of the state in the West, China, India and the Arab world. This paper will discuss
the contribution of NWW.
1.2. Introducing the Violence and Social Orders framework
In Violence and Social Orders: a conceptual framework for interpreting recorded human
history3 NWW lay out an argument that has deep implications for the above mentioned
discussions about development, democracy, modernization and the role of states and markets.
The central contention of the framework is that we should distinguish two stable equilibrium
social orders to understand historical and present-day development: the limited access order
(henceforth LAO) and the open access order (OAO). Central to the LAO-OAO logic are the
concepts of violence, elites and rents. OAOs are societies that are capable of sustaining
political and economic competition. In line with the neoliberal argument, NWW argue that
these societies achieve high levels of economic growth and distribution of wealth through
competition and innovation.4 At the same time, NWW point out that the conditions that allow
open access and competition to flourish are not automatically existent. Only when rule of law
is enforced, organizations are perpetual and the military is under consolidated control can
societies sustain open access. However, no society automatically inherits a design that fulfills
such conditions. Instead, all societies at some point have been – and most societies still are –
LAOs, or ‘natural states’. LAOs are societies which are organized in patron-client networks,
and in which stability depends on a distribution of rents among elites.5 Because – by
definition – competition inhibits the ability to collect permanent rents, LAOs are characterized
by the limitation of access in politics and economics by elites. NWW show that only by
limiting access can elites sustain an institutional framework that guarantees a credible
commitment to a distribution of rents. This means that the neoliberal laws of competition and
growth do not apply to the LAO. If we apply this argument to the issue of development, it
means that societies first have to achieve a stable natural state, and then make a transition
from limited access to open access. The latter happens when a critical mass is achieved: open
access in one dimension – political or economic – presses the opening up of access in the
other dimension (NWWW 2007, p.24). The transition can only take place, however, when
3 NWW 2009, the framework is also laid out in NWW & Webb 2007 and NWW & Webb 2010
4 NWW argue that the only type of rents that truly flourish in a competitive environment are ‘Schumpeterian
rents’, involving the (temporary) surplus drawn from innovation. Because Schumpeterian rents are always
temporary, actors in a competitive environment have a strong incentive to keep innovating, thus contributing to
high economic growth. 5 For an elaborate discussion of rents, see Khan & Jomo (2000). The term will also be specified more in the first
chapter of this paper. For now, the following definition should suffice: material surplus (for example from the
extraction of resources, innovation, production, war or trade) ending up in the hands of powerful individuals,
who can use this surplus to enrich themselves, but also to buy support from clients (patronage).
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elites operate on the basis of rule of law, perpetual organizations, and consolidated control of
the military.
The NWW argument has deep implications. It means that development fundamentally
revolves around distribution and elite relations. It means that to understand modernization,
one has to look at two different processes: development of a strong natural state and the
transition to open access (NWW 2009, pp.12-13). It also means that to understand
development in a LAO context one should not focus on achieving free markets and restrained
states but on the more fundamental condition of achieving stable elite relations. The limitation
of access in a limited access order can be presented as a ‘double edged sword.’ On the one
hand it inhibits full economic and political development.6 Because, according to NWW,
competition is the key high-level and sustained growth, current-day limited access orders,
unless they have access to high rents from oil, are capped in terms of GDP growth and will
not be able to exceed per capita GDP of $20.000 (NWW 2009, p. 11). On the other hand,
limited access is necessary for stability and can lead a LAO to develop from a ‘fragile’ to a
‘mature’ status.
1.3. Introducing the cases and methodology
This paper is an attempt at ‘doubly engaged social science’ (Skocpol 2003), delivering a
contribution to the development debate on both a theoretical and an empirical level. It tests
the conceptual framework of NWW, while it will also contribute to a conceptual
restructuration of the debates about Malaysian and Thai development. The paper is based on a
survey of secondary literature.
NWW propose a theory of development that is distilled and extrapolated from the historical
cases of England, France and the United States (NWW 2009). However, the conceptual
framework is abstracted and generalized and explicitly presented as a tool to understand
contemporary cases of development: ‘[Our intention is to] provide a new framework for
interpreting the course of human history over the past ten thousand years, and to open new
ways of thinking about the pressing problems of political and economic development facing
the world today’ (NWW 2009, p. xiii). Historian Charles Tilly (1984, p.145) distinguishes
four different forms of comparisons: individualizing, universalizing, variation-finding and
encompassing. The Violence and Social Orders framework falls in the universalizing
comparison category, to which Tilly attributes ‘rare clarifying power’:
To show that the same sequence or conjunction of cause and effect recurs in widely separated
settings reduces the intellectual need to erect separate explanatory frameworks for each setting,
sharpens our sensitivity to other similarities and differences among settings, and helps identify
forms of intervention in those settings that are likely to affect them (Tilly 1984, p.145).
6 LAO growth runs up to a ceiling, both in terms of markets and the distribution of public goods. According to
NWW, current day LAOs are restrained to move from a per capita GDP level of ‘$8,000 to 35,000’ (NWWW,
2007, p. 4)
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Only in confrontation with empirical cases can we see if the abstractions and generalizations
hold, and assess if the framework of NWW lives up to its promise of delivering an
encompassing explanatory framework and truly achieve ‘rare clarifying power’. The
confrontation with new cases is especially important considering the high degree of difference
between the historical cases and current day cases of development (not to mention the
regional, cultural, political, religious, geographical, etc. differences that are to be
distinguished presently). For this paper, two cases have been selected: Malaysia and Thailand,
both discussed in a perspective of approximately the most recent century of historical
development. Both cases are interesting examples of social, economic and political change. In
both cases, heated discussions about development, democracy, modernization and the role of
state and market are taking place.
The NWW framework is expected to contribute to our understanding of development in
Malaysia and Thailand. As will be discussed in more detail in chapters 3 and 4, Malaysia and
Thailand have achieved remarkable economic growth. Observers have even spoken about
‘growth miracles’. Nevertheless, in terms of GDP, Malaysia ($8,423) and especially Thailand
($4,992) remain behind the ‘East Asian Tigers’ and even below the current world average
($9,218) (IMF 2011). In both cases the roles and interests of different groups (based on
ethnicity, class, geographical location, religion) in the process of development and
modernization are extensively discussed. In both cases the role of states and markets are also
hotly debated and of great significance to current and future policy measures. New
perspectives on Thailand and Malaysia are particularly relevant because in both societies
policy debates take place about whether large scale institutional reforms are necessary to
achieve more growth and equity. Thailand suffers from high levels of corruption and political
polarization threatening the country’s stability. Malaysia has been ruled for over fifty years by
a coalition which is now rapidly losing legitimacy and popular support. In both countries,
policy makers attempt to deal with the threat of a ‘middle income trap’ and the kind of
measures necessary (and feasible) to escape such a trap. The NWW conceptual framework
promises to offer new ammunition for these discussions.
Both Malaysia and Thailand could function as single-case evaluations of the NWW
conceptual framework. However, the cases also lend themselves for an interesting
comparison. The reason for this is that, while both countries can be lumped together in terms
of natural resource endowment, geography, pace of development and levels of foreign
investment, they are also very different, in terms of colonial legacy, social structure and
political system. Thailand achieved rather strong growth despite political instability and
without the ‘blessings’ and ‘curses’ of a colonial past. Malaysia inherited an open political
system from its colonial past but achieved its impressive levels of growth in a relatively
closed and semi-authoritarian system. Because of such diverging characteristics, general
explanatory frameworks will stand a rather big chance of being incapable explaining one or
the other case.7 A theory that is capable of explaining both cases will gain in strength and
credibility as a truly overarching and encompassing approach to development.
7 One could think about the praise of the World Bank and International Monetary Fund (IMF) for Thailand’s
market capitalism while growth in much more restricted Malaysia was equally strong, or about the opposing
9
Without going into more detail about the cases, as will be done in Chapter 3 and 4, we can
already hypothesize that, if we apply the NWW framework, Malaysia and Thailand should
both be conceptualized as mature natural states. Both countries are relatively stable and
economically successful but have not made the transition to open and competitive politics,
and have not attained the per capita GDP levels that NWW associate with open access
societies. This means that, if Malaysia and Thailand can indeed be understood as LAOs,
access to politics and economics must have been restricted by elites, which has hampered the
emergence of competitive economic and political systems but has also delivered the necessary
condition for development: stability, or absence of violence. It also means that only if the
doorstep conditions of rule of law, perpetual organizations and consolidated control of the
military are fulfilled, the countries can make a transition to open access.
Based on the above, the following research question has been formulated:
To what extent can we use the concepts of ‘limited access order’ and ‘transition to open
access’ to understand the social, political and economic development of Thailand and
Malaysia over the course of approximately the last century?
The following sub-questions will be used to answer the overall research question:
Sub-question #1: Is competition and organization outside the orbit of the state (i.e. civil
society) restricted?
Sub-question # 2: Is access to economics and politics restricted simultaneously?
Sub-question #3: Is the limitation of access connected to the necessity to achieve stability?
Sub-question #4: Is the existence of ‘open access’ organizations dependent on a fulfillment of
the doorstep conditions of rule of law for elites, perpetual organizations and a military under
consolidated civilian control?
Before moving on to a discussion of the cases, Chapter 2 deals with the conceptual framework
and its contributions to scholarly debates about development in some more detail. Chapter 3
and 4 form the empirical core of the paper, sketching the development histories of Malaysia
and Thailand respectively in more detail. These chapters will zoom in on the development of
access in the economic and political spheres and pay particular attention to the building
blocks necessary to evaluate the theoretical framework. Chapter 5 assesses the merits of the
theoretical framework in the light of the two individual cases as well as in comparative
perspective and on a more fundamental, theoretical level. The Conclusion gives a summary
and synthesis of the most important findings of the preceding chapters.
strategies with which Thailand and Malaysia solved the aftermath of the 1997 crisis. These issues will be
discussed in more depth in the next chapters.
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Chapter 2: The Conceptual Framework
2.1. The logic of the LAO
This chapter discusses the concept of the LAO and transition from LAO to OAO. Next to the
LAO and OAO, NWW distinguish another way of organizing human society: the foraging
order. The foraging order preceded the LAO. Because the foraging order has become extinct
and all current day societies should have to be conceptualized as either LAO or OAO, a
discussion of the foraging order will not be necessary. The theoretical argument will therefore
start from the LAO. The concept of the LAO is meant to capture such a wide diversity of
societies as ‘[t]he Roman republic and empire, Mesopotamia in the third millennia BCE,
Britain under the Tudors, and modern Nigeria, Bolivia and Russia’ (NWW & Webb 2007,
p.9). Currently, about 85% of the world population still lives in societies that would fall under
the natural state category (NWW 2009, p.xii).
The logic of the LAO starts from the observation that is essential for human societies to
manage the continuous threat of outbreaks of violence between groups. The consideration of
stability as a necessary condition not only for development, but also for the preservation of
social order is of central concern. Humans, according to NWW do not manage violence by
handing over their sovereignty to an almighty Leviathan, as in Hobbes’ famous theory, but by
forming interdependent coalitions of powerful individuals, or elites, who represent larger
social groups (religious groups, ethnic groups, kinship networks, political parties, villages,
etc.).8 In the words of the authors, the framework is motivated by ‘the problem of providing
powerful individuals with an incentive to be peaceful’ (NWW & Webb 2007, p.2; p.8). The
necessary ingredient for creating peaceful coalitions is distribution of rents. Elites derive their
legitimacy from the capability to extract surpluses (rents) to distribute among their adherents,
through patron-client arrangements. In a more stable environment, it becomes easier to extract
rents. Elites can form a coalition to distribute the rents from resources – land, labor and
capital – and valuable activities – contract enforcement, property right enforcement, worship,
trade, education and welfare – in an area under their control (NWW & Webb 2007, p.3).
‘[R]eciprocal respect for one another’s privileges’ (NWW & Webb 2007, p.27) in the
dominant coalition, therefore, allows the elite members to extract more rents, which is in their
individual benefit. As a consequence, their clienteles are also better off. Rent-creation of elites
‘provides the glue that holds the coalition together’ (NWW & Webb 2007, p.8). Stability,
then, depends on the formation of ‘a dominant coalition containing all individuals and groups
with sufficient access to violence that can, if they act unilaterally, create disorder’ (NWW &
Webb 2007, p.7).
2.2. Implications of the LAO logic
An important consequence of the above logic, according to NWW, is that access to politics
and economics needs to be limited to members of the elite coalition. The key contention is
8 The concept of elites remains somewhat abstract and generalistic in the work of NWW (Leftwich 2010)
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that in a competitive environment permanent rents cannot be maintained. If individuals who
are not ‘part of the deal’ gain access to economic opportunities – such as agriculture, mining,
industry, trade, manufacturing – and start to compete with the economic activities deployed
by the dominant coalition of elites, the rents of the dominant coalition are under threat. If
these rents are undermined, the logic that holds the coalition together dissipates and a direct
threat of violence ensues. Only by blocking off political access to outsiders can members of
the elite coalition divide the rents among each other and divide their share of the spoils among
their own clienteles.
Applying the logic of the natural state has serious implications for the kinds of institutional
arrangements and organizational forms that can develop in limited access societies. The
limitation of access to rents involves both politics and economics, meaning that these two
spheres are deeply intertwined and mutually dependent.9 In a LAO the state is platform for
cooperation of, and bargaining between, elites to agree upon the distribution of rents. NWW
& Webb (2007, p.11) define the state as ‘the web of relationships that make up the credible
commitments within the dominant coalition.’ This means that the state is not a single-actor
organization. It is not a party that can easily act to induce or hamper processes of
development. Rather, it is a complex interrelated organization that faces serious collective
action problems.
The necessity of an interdependent elite and arrangements of rent-access means that
organizational activities in natural states are generally under close supervision and control of
the state, and access to politics needs to be limited. In practice, this means that even if
elections take place in a LAO, they are probably not fair. Parliaments may exist, but they will
at most function as ceremonial platforms, suffer from intimidation or be abrogated when
decisions are taken that go against the interests of the dominant coalition. Opposition
candidates may formally participate in elections, but they will experience harassments, threats
or unfounded criminal charges, face a skewed and gerrymandered electoral system or be
severely restricted in the opportunities to propagate their causes. The incumbent ruling
coalition, moreover, has the power to make basic services dependent on citizens’ votes10
,
which makes voting for opposition parties much less likely, even if they face a fair voting
system.
The blocking off of economic access to entrepreneurs outside the dominant coalition means
that the size of the private sector in LAOs is self-limiting. It also means that the occurrence of
forms of economic activity that are – in neoclassical economical terms – growth-enhancing,
such as temporary Schumpeterian rents from innovation and highly competitive markets, will
be severely limited. It does not mean that economic growth or an increase in wealth is
9 According to NWW, politics and economics are too often and too rigidly separated analytically in modern
scholarship (NWW 2009, p. xi). This idea is not new. In 1944, Karl Polanyi argued: ‘…no society can exist
without a system of some kind which ensures order in the production and distribution of goods. But that does not
imply the existence of separate economic institutions; normally, the economic order is merely a function of the
social in which it is contained. Neither under tribal or feudal, nor mercantile conditions was there, as we have
shown a separate economic system in society. Nineteenth century society, in which economic activity was
isolated and imputed to a distinctive economic motive, was, indeed a singular departure’ (Polanyi 1944, p. 68-
76) 10
Diaz, Magaloni and Weingast (2006) refer to this mechanism as the ‘tragic brilliance mechanism’ (NWWW
2007, p. 28)
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impossible. Rents in LAOs are mainly tailored at maintaining stability, not at economic
growth. In some situations, LAO rents can generate economic growth. One can, for example,
think of how natural resources, such as oil, produce considerable wealth in limited-access
societies such as Saudi Arabia. In general, however, the point that NWW want to make, is that
LAO rents are not good for economic growth, but necessary to achieve a more fundamental
condition for economic growth: stability. Therefore, economic growth, in a LAO perspective,
cannot be seen independent of the need to maintain stability within the dominant coalition: as
long as the LAO logic operates, economic access needs to be restricted. This integrated logic,
which I will refer to as the ‘double edged sword of the LAO’ is central to the conceptual
framework.
In LAOs, elites must remain closely connected and divide rents among each other in a
mutually agreed fashion in order to retain a state of internal cohesion and stability.
Specialization in military, economic and religious affairs is possible, but elite relations in a
limited access order must be inherently personal, because only through personal relations can
credible commitments to distribute rents best be made. Privileges are given to persons as
individuals, not to people in abstractly defined roles. LAOs therefore do not function on the
basis of rule of law, which is by definition impersonal. This means that changes in leadership
can cause considerable imbalance and redefinition of relations in the dominant coalition.
Individual elite members, in order to retain their position of strength in the dominant coalition
need to have access to, (factions within) the military. Members of the elite need to be
connected to individuals with violence potential in order to retain their bargaining position
within the coalition. As a consequence, violence potential (in the hands of military factions,
policy or local militias) remains dispersed in LAOs. The fact that violence remains dispersed
between individuals in the coalition who have to come to an agreement about the division of
rents, means that LAOs are vulnerable in the occasion of external shocks. If such a shock
takes place, for example when economic growth stagnates, or when a country faces
international sanctions, elites have to renegotiate their bargain. This is a difficult process that
may result in instability:
A shift in the incentives facing a major player that leads him to defect from the coalition and use
violence or other means to forward his interests will produce instability, if not civil war. […]
Any shock that changes the distribution of violence potential can force renegotiation of the
distribution of rents; and actual violence is a constant possibility, because members of the
dominant coalition may fail to reach a negotiated redistribution (NWW & Webb 2007, pp.9-10)
2.3. Development and Transition in the Limited Access Order
Within the natural state equilibrium, NWW allow for a gradual development through ‘fragile’,
‘basic’, and ‘mature’ stages (with the possibility to move back and forth).11
The stages are
11
NWW conceptualize history as development through stages. The roots of ‘stage thinking’, as an analytical tool
to simplify the plurality of historical experiences can be found in the Enlightenment. Adam Smith, for example,
argued that societies move through four stages, from hunters to shepherds to husbandmen to a final stage of
commerce. The dialectical stage theory of Karl Marx is also based on a predictable development process. More
recently, the controversial but influential ‘End of History’ argument by Francis Fukuyama (1989) builds on the
idea that there is an end stage to human development.
13
defined on the basis of the stability of the dominant coalition and the institutional capacities of
the state. Fragile natural states are barely capable of making credible commitments and
sustaining a stable coalition. They face endemic violence and are often referred to as ‘failed
states’. Basic natural states have a well developed state structure with specialized
organizations and public law institutions, but allow for hardly any kind of organization
outside the direct orbit of the state. Mature natural states are capable of sustaining private elite
organizations outside of the state, such as limited liability corporations, and work with a well
articulated body of public law which must be embodied in a state organization that is capable
of enforcement, such as a court or bureaucracy (NWW & Webb 2007, p.14). In the mature
LAO, the role of violence specialists becomes more distinct, and organized in defined police
or military organizations; ‘[t]he violence organizations, however, cannot be outside of the
state structure and control’ (NWW & Webb, p.15). The authors argue that ‘the great
civilizations of the past were all successful limited access orders’ (NWW & Webb 2007, p.9).
NWW predict that LAO logic hampers the development of economic and political
competition. The challenge seems to be to find the ‘tipping point’ where enough institutional
stability is reached to open up access (by either instituting new laws, or enforcing them
differently). Reaching the tipping point involves so many interconnected processes in a
society that it can hardly be imposed from outside or through sudden occasions, such as a
revolution or the foreign imposition of democracy. NWW’s logic predicts that such
revolutionary events will not be able to realize a full and sudden shift towards open access,
since the institutions are not ‘ready’ yet. In order to continue to develop beyond a certain
point – like Western countries, Japan, South Korea and Taiwan have – LAO’s will have to
escape the logic that glues their elite relations together. How does this happen?
According to NWW, societies can only move away from the logic of the LAO if three
‘doorstep conditions’ are fulfilled. When this happens, a society makes the transition to an
‘open access order’ (OAO). These doorstep conditions evolve within the logic of the LAO as
the size and the complexity of the dominant coalition increase. This evolution of ‘marginal
increase of access’ (NWW &Webb 2007, p.22) can result in the formalization of elite
relations, meaning that elites operate on the basis of (written or informal) rules rather than
privileges, and that elites develop relations based on ‘role’ or ‘function’ rather than personal
characteristics. NWW call this doorstep condition ‘rule of law for elites’. A second doorstep
condition that needs to be fulfilled is the ‘perpetuity of organizations’, meaning that societies
must have the capacity to deal with organizations as entities that are independent of the person
who is in charge. This means that a stable transition of power between political, military,
religious and business leaders can take place without this altering the relation of elites towards
the organization at stake. The third doorstep condition that NWW specify is ‘consolidated
control of the military’. Only when violence is monopolized, and therefore the direct access of
elite members to the military undermined, can open access in both politics and economics
become a viable option.
The ‘tipping point’, or actual transition, from LAO to OAO according to NWW & Webb
(2007, p.24) comes when
open access in one dimension – economic or political – commands sufficient power to press
successfully for open access to the commanding heights in the other dimension. […] When the
14
tipping point is reached, the dominant coalition finds that its internal arrangements are better
served by supporting intra-elite competition, rather than intra-elite cooperation to perpetuate
existing mechanisms of rent-creation.
When the transition has taken place, the new social order functions on the basis of open
access and competition in both politics and economics. A large proportion of the population is
citizen and has the freedom to form economic, political and social organizations. These
organizations are protected by impartially enforced rule of law and property rights. The shift
from LAO to OAO has created a new environment of incentives in which monopolization of
rents has become much harder, since there will always be countervailing powers in the form
of new corporations, political parties or interest representation organizations:
The persistent competition that results from open entry […] frustrates the desires of economic
and political actors to create permanent rents through limited access. This is the core logic of
open access (NWW & Webb 2007, p.18).
2.4. Development and transition in past and present
According to NWW, countries such as France, England and the United States have developed
the doorstep conditions during a process of centuries, and finally have made the transition to
open access in a time span of approximately fifty years during the 19th
century. Countries like
Japan, Spain and Germany have made the transition in the decades after the second world
war, while South Korea and Taiwan are in the process of completing their transition to open
access. In concrete, modern day development terms, the transition from limited access to open
access involves an increase of per capita incomes from $8,000 to $ 35,000, due to increased
economic competition (NWW & Webb 2007, p.4).
The logic of the LAO is designed to apply to past and present. NWW do, however, note a
number of important differences between past and present. For example, limitation of access
was formal in past societies, but is often informal today (NWW & Webb 2007, p.32). The
transition process from LAO to OAO also differs in the present from the past. The authors
acknowledge that ‘the context [in which countries make the transition] has changed
dramatically’ (NWW & Webb 2007, p.5), due to the worldwide availability of OAO
institutional forms (meaning that limited liability stock companies, impartial courts and
armies under civilian control have already been ‘invented’ while the ‘first movers’ had to
‘design’ these institutions more or less from scratch), the world political order that sustains
weak states (because of supranational agreements, weak states cannot just be invaded and
overthrown anymore), the presence of modern (communication) technology, and the presence
of multinational firms (NWW & Webb 2007, pp.30-42). Also, the authors acknowledge that
the process of extension of citizenship rights is a markedly different affair in 18th
century
France, compared to modern-day China. Nevertheless, NWW argue, the LAO logic as
described above applies as much to historical cases as it does to contemporary cases. This
claim needs further empirical investigation, to which this paper hopes to offer a contribution.
15
Chapter 3: The Case of Malaysia
3.1. Introduction
This chapter discusses Malaysia’s economic and political development. Five periods have
been distinguished, starting with the establishment and consolidation of colonial rule, moving
through the decline of colonial rule, the first post-independence decade, the period of the New
Economic Policy, and the last two decades leading up to the present. This periodization will
be used to investigate if the dynamics of the LAO manifest themselves. The focus of this
chapter will lie in the period from 1957 – the year in which Malaysia achieved independence
from the British empire – to the present. However, to understand the nature of the social order
of Malaysia in this period, it is also important to move back in time and take into
consideration the most important forces involved in the establishment of the post-colonial
social order.
Before moving into the more in-depth chronology of Malaysia, it deserves mention that, in
terms of economic development since independence, Malaysia is considered a Southeast
Asian success story (Meesook 2001). Observers such as Joseph Stiglitz even speak of the
‘Malaysian Miracle’ (Stiglitz 2007). At independence, Malaysia’s level of wealth was
comparable to Honduras, Haiti or Ghana. Since then, real GDP growth has averaged 6.5
percent12
and per capita incomes have risen more than eight-fold (Hill 2011). Poverty
declined from 50 percent of the population in the 1970s to a mere 3.9 percent in 2005, while
total population grew fourfold in the period since independence. In Malaysia, the rise of
manufacturing and services is also reflected by the high rates of urbanization. While in 1957
only a quarter of the population lived in cities, this number grew to an impressive 63 percent
in 2005 (Yusof&Bhattasali 2008, pp.1-3)
Some observers question the ‘miraculousness’ of Malaysia’s growth, especially when
compared to the East Asian Tigers (Jomo 2002). The country has been warned by the World
Bank for the serious brain drain of well-educated ethnic Chinese and Indian citizens that is it
facing (World Bank, 2011). Foreign investment has been declining over the past decade
compared to surrounding nations, which some consider a sign of stagnation (Athukorala &
Wagle 2011). Corruption and patronage are still rife (Transparency International 2011).
Government policy is characterized by its repressive and semi-authoritarian character,
displaying little respect for the rule of law (Lopez 2009). Pointing at the persistent semi-
democratic political system, William Case refers to Malaysia as a ‘resilient pseudo-
democracy’ (Case 2001), suggesting that the Malaysian ‘halfway house’ is perhaps more
capable of standing than Samuel Huntington (1991) might have expected.
Nevertheless, whereas observers can disagree on their normative assessment of Malaysia’s
development, it is hard to disagree on the fact that the country has gone through a
fundamental process of economic, social and political change. To determine if these changes
12
My calculation over the period 1960 – 2010, based on data from Drabble (2004) and Tarrant (2011)
16
were mediated through the logic of the LAO will be the aim of the following historical
narrative.
3.2. The establishment and consolidation of colonial dominance (1750 –
1957)
The Malay peninsula has long been a lucrative area for trade and the exploitation of natural
resources.13
Before the British established their colonial rule, the peninsula was subject to
much competition over control of the land. Traders from Portugal, the Netherlands and Britain
vied for access to the area. In the 18th
century, they competed with local rulers of the Malay
negeri or polities, Buginese lords from Sulawesi and Siamese forces from the northern
mainland over the tin mines and well-located ports on the west coast. The outcome was
colonial dominance over the area, forged through an uneasy alliance between the Dutch and
the British, in the context of their broader coalition due to the French Revolution and its
aftermath in Europe. The British East India Company firmly established its commercial
interests in Southeast Asia. It successfully urged the British to acquire Singapore in 1819 and
establish a tax-free port for trade. Under the Anglo-Dutch treaty of 1824, Sumatra was
allocated to the Dutch, while the Malay peninsula became British territory. Agreements
between the colonial powers led to a stable division of spoils, but also ‘the extinction or
subjugation of virtually all indigenous political authority throughout the Malay world and a
permanent redrawing of the map’ (Owen 2005, p.139).
In order to achieve stability and control, British administrators designed a ruling system that
was based on a division of tasks and incorporation of different groups. This system allowed
for a coordinated extraction of rents, maintenance of stability and control over the political
and economic spheres. It laid the foundation for a strong state after independence, but also for
the ethnic tensions that would arise. Central to this ruling system were British financiers,
immigrant entrepreneurs and local rulers who all profited from their share in the system.
Stable conditions allowed trade to thrive in the strait of Melaka. Merchants from all over the
Asian and Arab world were to be found there. The largest and most influential immigrant
group came from the Chinese mainland. Chinese immigrants established strong social
networks or ‘secret societies’ and became highly successful in business throughout the Malay
peninsula, and especially in the free port of Singapore. While native Malays were shielded
from the modernizing economy, the British promoted the immigration of Chinese and Indian
laborers to work in the tin mines. Chinese entrepreneurs were given access to the exploitation
of lucrative tin mines on the west coast of the peninsula, often in joint-stock companies with
British partners. While the British offered their technological expertise and capital investment,
Chinese entrepreneurs executed the projects (Drabble 2004). According to some observers,
‘the British held the cow while the Chinese milked it’ (Owen 2005, p. 145). The local Malay
rulers profited from the new economic opportunities through levying tribute and taxes on the
joint-stock companies.
13
The historical information in this section is largely based on Owen (2005) (a standard work on the history of
the region) unless otherwise indicated.
17
In terms of the NWW framework, the ruling system of Malaya in the 19th
century can be
conceptualized as a basic natural state. However, the system was not yet capable of solving
the threat of violence and instability. Tin mines on the peninsula were profitable, but rivalry
over rents that resulted from control over mining areas also increasingly destabilized relations
between local rulers, who had formerly accepted each other’s possessions and had maintained
a fragile but relatively stable dominant coalition. The imbalance and ‘virtual civil war’
(Bowie 1991, p.34) thus resulting from the imbalances directly threatened British economic
interests. The British stepped up their intervention in local Malay affairs in the final quarter of
the 19th
century and sealed their leading position in the dominant coalition by installing
regents. These regents formed coalitions with local Malay sultans who were willing to give up
sovereignty on the condition that they could retain their position of religious authority. In
subsequent decades, the role of the sultans declined – their tax-levying authority taken away –
while the British residents became increasingly powerful. By 1890 the whole peninsula,
divided as the Federated Malay States and the Unfederated Malay States, was effectively
under British colonial rule (Bowie 1991, p.31). Malay traditional elites were co-opted in
British ruling system by giving them positions as civil servants, in the police and the military
(Bowie 1991, p.41). The Malay ruling class accepted their decline in power in return for
benefits that they could reap from the new power equilibrium. These benefits ranged ‘from
the elaborate palaces and substantial incomes provided for the sultans to political pensions for
dispossessed district chiefs, membership of new state councils, and salaried posts at the lower
levels of local administration’ (Owen 2005, p. 145). The new stable dominant coalition, to
which British regents and companies, the Malay aristocracy and Chinese entrepreneurs
belonged, was fully tied to the state. Malaya had now become a stable basic natural state. This
state ensured the continued stability needed for economic extraction by the Chinese-British
joint ventures.14
In the late 19th
and early 20th
century, the Malayan economy grew. Malaya became a leading
exporter of raw materials, such as tin, rubber, timber and oil. By 1921, it delivered 50 percent
of the world production of rubber. In 1929, Malaya was GDP per capita leader in South East
Asia. (Drabble 2004). According to calculations by Pierre van der Eng (1994), it even
outperformed Japan until 1950. The Chinese and Indian immigrant communities, active in the
modern economic sectors, expanded rapidly. Many Chinese immigrants owned small shops
and plots of land. By 1921, foreign entrepreneurs dominated the booming plantation business.
Although 40 percent of the rubber production was in the hands of Malay smallholders, most
Malay peasants were still engaging in subsistence farming (Drabble, 2004). These Kampung
peasants had a long tradition of mobile and relatively independent existence in the abundant
agricultural land,15
and largely stayed in the business of supplying immigrant labor force with
14
This section focuses on the Malay peninsula, which was (and still is) the economic centre of Malaysia. East
Malaysia (North Borneo) has a rather separate colonial history. British control over the northwestern part of
Borneo was established in the 1880s, when James Brooke, a British trader, in cooperation with the sultan from
Brunei, subdued local elites and became the first white Raja of Serawak. In 1907, Shell discovered oil on
Borneo, which increased its economic importance (Drabble 2004). Malay Borneo became an official British
colony in 1946, and became part of Malaysia in 1963. 15
Bowie (1991), p. 32: ‘[…] rulers in Malay society had limited authority. If their demands were deemed
excessive, or if they failed to protect their people against attack, subject populations were likely simply to
18
rice. The condition of land abundance, which characterized the Malay peninsula, enabled the
establishment of European, Chinese and Indian (rubber) plantations without violating the
Malay claims to land. Only approximately 5 percent of the total Malay population lived in
cities by 1921, constituting some 10 percent of the total urban population (Owen 2005,
p.314). The majority did not achieve access to the expanding business of exporting primary
products such as tin, oil palm, rubber and petroleum. The growth of Malaya’s economy, thus,
seems to have depended on an expanded and more efficient extraction of resources. This
could be achieved in a condition of stability and through the import of technology and
investors, and even entrepreneurs and workers. In this way, considerable economic growth
could be achieved in LAO conditions.
3.3. Declining colonial legitimacy (1930 – 1957)
In order to apply the concept of the LAO to this period, the economic and political events
need to be discussed first. First of all, the 1930s worldwide economic slump had a negative
impact on the fate of Malaya. The export oriented economy was vulnerable to international
depression. In response to the international economic circumstances, the British
administrators could, perhaps, have chosen a strategy of upgrading the economy to internal
processing of primary products and manufacturing. However, Malaya was considered the
Empire’s key source of raw material production, and, instead of structurally reforming the
economy, the British took up a strategy of export limitation to drive world prices of Malay
primary goods up and increase profitability (Drabble, 2004). The lack of further development,
and the lack of access to export production rents experienced by the Bumiputera – or ‘sons of
the soil’, as the ethnic Malay and other indigenous groups are referred to – increased popular
dissatisfaction with the status quo. Different strands of Malay nationalism developed,
revolving around Islamic, pan-Indonesian/anti-colonial and anti-Chinese ideas, and finding its
leaders in the educated colonial bureaucracy as well as the – still small – Malay rural elites.
Despite some radical elements, the central Malay message was not harshly anti-colonial but
focused on moderate means to strengthen the position of the ethnic Malay (Owen, 2005).
Criticism of the colonial situation was directed mostly at the Chinese minority. The anti-
Chinese sentiments resulted from the economically backward position of indigenous Malay
compared to Chinese immigrants, especially since Chinese were increasingly engaging in
agriculture – challenging the livelihood of Malay peasants. The Chinese migrants were also
stepping up demands for fairer representation in government. Chinese laborers, farmers and
pawn-shop owners organized in the Malayan Communist Party (MCP), aiming for increasing
political access, through representation in the bureaucracy, which was completely dominated
by Malays. The second world war and Japanese occupation (1941-1945) increased
antagonism between Malays who sided with the Japanese to overcome European colonialism
and Chinese communists who were harshly suppressed by the Japanese and resisted
occupation. The MCP played an important role in resisting the Japanese occupation of the
‘disappear’ into the jungle. Farmers generally did not invest in long term improvements (such as irrigation), or
accumulate material possessions, because they wanted to be able to ‘vote with their feet’, if necessary.’
19
Malayan states between 1941 and 1945. During the war, the British had made plans for a
unified Malayan peninsula (except Singapore), overruling the federal system and introducing
full citizenship rights for all immigrant populations. Upon return, the British wanted to
implement these plans with the founding of the Malayan Union under a new constitution. The
Malays, who had experienced preferential treatment under the Japanese and were weary of
returning to the old colonial arrangement, rejected the proposal. The focus of the protest was
not so much directed at the British colonial rulers, but more at non-Malays, mostly Chinese,
and especially at the idea that Chinese immigrants would gain full citizenship rights. The
opposition against the Malayan Union occasioned the founding of the United Malays National
Organization (UMNO) which in the end managed to forestall implementation of the British
proposals (Owen 2005, p.318).
The British played a key role in the establishment of a stable, post-independence elite
coalition. The British increasingly accepted a future transition to Malayan independence, but
only under the condition that racial tensions would ease, and the British commercial interests
would not be endangered after withdrawal from the dominant coalition. However, the MCP
had radicalized in the instable post-war years, drawing considerable support from the Chinese
community. Most Malays and the UMNO supported the British government in its fight
against the ‘communist insurgency’. The insurgency of Chinese communists was contained
by resettlement of Chinese communities in the early 1950s and the founding of the Malayan
Chinese Association (MCA) in 1949, aiming for ‘the promotion and maintenance of
interracial harmony in Malaya’ (Owen 2005, p.320). The cooptation of Chinese interests in
the dominant coalition through the moderate MCA was a key moment in the development of
Malaysia. The MCA and the UMNO teamed up in a broad ‘Alliance’ with the Malayan Indian
Congress (MIC), winning 51 out of 52 elective seats in the newly established 98-member
Legislative Council during the first federal elections in 1955 (Owen 2005, p.321). UMNO
leader Tengku Abdul Rahman was appointed chief minister. Two years later, the Alliance
presented a proposal for independence, leading to the establishment of the independent
Federation of Malaya on 31 August 1957.
Applying the concept of the LAO contributes to our understanding of the processes in the
1930s, 1940s and 1950s. The dissatisfaction of the Malay and Chinese communities can be
explained as a reaction towards the ideology of colonialism, but perhaps more forcefully as
the result of an untenable and skewed distribution of access to wealth and power among the
population. Anger in the Malay majority was directed mostly at the Chinese minority. Many
reasons have played a role in these ethnic tensions, but certainly the view that the Chinese
were favored in their access to key rents contributed to the Malay anger. The growing
awareness of the Malay population that the existing dominant coalition distributed economic
access in a way that was increasingly disadvantageous to the Malay population certainly
played a role in the developments towards independence. Equally, the dissatisfaction among
the Chinese minority shows that access to politics, from which Chinese in their turn were yet
largely excluded, was perceived to be an essential guarantee for credible commitment to
distribution among elites. These patterns changed the stability of Malaysia’s LAO. Moreover,
successful cooperation between the two major ethnic groups after independence was all but
logical, as the dominant actor – the British colonial rulers – linking those with political and
20
those with economic access would be gone from the coalition of elites, and thereby the glue
holding the coalition together would dissipate. The new institutional platform for cooperation,
as it was designed by the leaving British, prevented further tensions and a collapse into
violence and instability.
3.4. Consociationalism; a new elite arrangement (1957-1969)
The post-independence arrangement was designed to realize political and economic access to
which the Malay population aspired, while also retaining stability. At independence,
approximately 50 percent of the population was Malay, 37 percent Chinese and 12 percent
Indian.16
In the terms of British colonial civil servant and Burma scholar J.S. Furnivall,
Malaysia can be described as a ‘plural society’, where ethnically distinct and separate groups
have to find arrangements to govern their country (Furnivall 1948). After independence,
Malaysia17
became a constitutional democracy with the king as head of state. The central
logic of the dominant coalition revolved around Alliance coalitions at federal and state level
between the dominant UMNO and the junior MCA and MIC partners. Arend Lijphart
described such a democratic arrangement between different and separate groups as
‘consociational democracy’ (Lijphart 1977). In this arrangement, the Malays controlled the
bureaucracy, police, armed forces and judiciary, but would not completely close off political
access to other groups (Crouch 1996, p29). The Malay elite was relatively small and drew
from aristocratic backgrounds, with ties to the sultans in the federal states, among whom the
kingship rotated (Crouch 1996, p.130). The elites of the Chinese minority were allowed to
retain their economic dominance as long as they did not challenge the political dominance of
the UMNO. In the dominant coalition, Malays formed a central and relatively unified front;
other groups were more fragmented but were building an increasingly strong political
consciousness.
During the first decade after independence, the Malaysian economy grew, diversified and
modernized. In the 1960s, the contribution of manufacturing to GDP grew from 8.1 percent to
13.4 percent (Linneman et al. 1987, p.365). Before independence, rubber and tin had
accounted for 85 percent of Malay exports earnings (Drabble 2004). In the decade after
independence, the economy strongly developed a raw material processing industry in palm oil
and timber and a manufacturing industry to serve as import-substitution of consumer goods.
In 1958 the Pioneer Industries Ordinance was established which gave tax incentives and tariff
protection to selected pioneer industries (Tsai & Tsay, 2004). The activity of trade unions in
these sectors was restricted (Wood 2005, p.23). Despite such interventions, the economic
growth of the 1960s was largely market-led. Foreign-owned and Chinese companies, who had
run the most important sections of the Malay colonial economy, owned almost all economic
assets. Half of the investment came from abroad. At first, this arrangement was acceptable to
Malay elites because it was balanced out by their dominant position in the bureaucracy. From
16
Historical information in this section is largely based on Crouch (1996) unless otherwise indicated. 17
The 11 states in the Malayan peninsula were called ‘The Federation of Malaya’ until 1963. Only after 1963
was the term Malaysia officially adopted. To avoid unwanted complexity and confusion in the narrative, I will
use the term ‘Malaysia’ to designate the Federation of Malaya in the period 1957-1963.
21
this position they could work on development of the rural areas, where their electorate was to
be found, while leaving the urban commerce to the free market and reaping the fruits of a
growing economy. Indeed, in the 1960s, school enrolment increased 97% in the peninsula,
and 217% in East Malaysia (Wood 2005, p.7). In this way a rather clear division of tasks
within the ruling elite developed: Malay elites in bureaucracy, Chinese elites in business. This
division was also reflected in the way ministerial posts were divided among Malay and
Chinese members of the Alliance. The division of roles between the ethnic groups, mediated
through the Alliance dominant coalition was a leading motive in economic development
policy in the post-independence decade. According to Bowie, ‘the constraints inherent in the
interethnic settlement and in the nature of political relations between ethnic groups militated
against the Alliance government adopting anything other than a market-led approach to
industrial development’ (Bowie 1991, p.76). In fact, this meant that, due to the initial
differences, the Malay majority retained its dominance in the state, while the Chinese majority
retained its economic dominance.
Soon it turned out that, in the condition of social and ethnic inequality, open access
democracy was a difficult game to play. A first problem to Malaysia’s democracy was the
powerful position of the UMNO. In the post-independence decade, periodically elections were
held. These elections were fair and competitive, but everyone understood that it would be
impossible to challenge the ‘ethnic bargain’ between the Malays, the Chinese and to a lesser
extent the Indians. The UMNO represented a majority constituency, so that other parties could
impossibly win elections without its support. According to Crouch, elections were
‘meaningful’ but highly ‘skewed’ towards the incumbent Alliance coalition, and especially
the UMNO (Crouch 1996, p.56). The post-independence constitution was modeled on British
democracy, but it was weak and could easily be – and has often been – amended by a two-
third majority, which was retained each election by the dominant coalition until 2008 (Crouch
1996, p.138). The insurgencies that had threatened post-war Malaya, had justified the
adoption of emergency powers clauses in the constitution. When the emergency resulting
from the communist insurgency was lifted in 1960, the emergency powers were formalized in
the Internal Security Act (ISA).This act has been used to detain more than 3000 people
between 1960 and 1981 alone, among which were people who were allegedly communists,
threatening state stability and ordinary criminals, but also critics of the coalition and
dangerously popular opposition members (Crouch 1996, p.13). As NWW hypothesize, a truly
open access system could not be achieved in such conditions where rule of law for elites was
not firmly established: elites had the power to constrain competition and extract rents.
A second problem facing Malaysia’s democracy was the representation of constituencies.
Throughout the 1960s, the Alliance was successful, but was also challenged by opposition
parties such as the Chinese Democratic Action Party (DAP) and the Pan-Malayan Islamic
Party (PAS). The parties in the dominant coalition did not draw their legitimacy from their
ideological views, but from the material representation of ethnic and regional groups (Crouch
1996, p. 42). The only way to retain popular support for the dominant coalition was by
delivering prosperity and progress to the respective ethnic constituencies supporting the
UMNO, MCA and MIC. Often, support could easier be gained with patronage than with
democratic strategies. While elite relations in the alliance were generally good, the
22
cooperation made interest representation more difficult. As the MCA and MIC were in a
minority position, representation of the interests of the Chinese and Indian constituencies was
highly problematic and led to increasing challenges, especially of the MCA (Crouch 1996,
p.33). Because the alliance with the UMNO severely restricted the possibilities to protect non-
Malay interests, Chinese leaders were accused of selling out to Malay demands and to offer
patronage to business interests while offering few benefits to lower-level supporters (Crouch
1996, p.13). The main problem for the UMNO was the realization that market-led
development resulted in economic growth and expansion of rents ending up in foreign and
Chinese hands, as had been the case before independence. Some measures were taken to
increase Malayan economic activity and to develop the rural areas, such as the establishment
of the Bank Bumiputra and the Federal Land Development Authority (FELDA) to stimulate
bumiputera entrepreneurship (Owen 2005, p.414) but the role of ethnic Malay in the economy
remained marginal. If we apply the logic of the natural state to this second problem, we could
argue that the open access method of achieving representation through policy and
compromise between different groups on the political level turned out to be inadequate and
the LAO mechanism of representation through patronage gained the upper hand.
A third and most serious problem facing Malaysia’s democracy was the existence of
simmering ethnic tensions. The UMNO represented a largely unified Malay front, which
rather focused its discontent on the economically dominant Chinese minority than its own
elites. According to Bowie (1991), ‘[after independence] leaders of each community,
especially those of the majority Malay community, have been very conscious of the
possibility that imposition of one community’s views might precipitate ethnic violence’
(Bowie 1991, p.13). The ethnic tensions breeding in Malaysian society came to the fore
during the brief inclusion of Singapore in the Federation. In the early 1960’s prime minister
Tengu Abdul Rahman proposed the unification of the Federation of Malaya with Singapore
and the Borneo territories, including Brunei. In 1963, this new state was founded; without
Brunei which opted out. The entrance of Singapore was opposed in Malay public opinion due
to the large numbers of Chinese living there, but it was counterbalanced by the bumiputera –
or ‘sons of the soil’, contrasting with the foreign Chinese – in Borneo, who were expected to
ally with the Peninsular Malays. After becoming part of the Federation, Singaporean Chinese
began to demand for ‘a Malaysian Malaysia’, which implied more Chinese involvement in the
running of the state. Such demands did so severely destabilize the division of tasks between
ethnic elites agreed upon in the Alliance, that Singapore was expulsed from the nation in 1965
(Owen 2005). Minor ethnic violence had taken place in 1964 and 1967 (Crouch 1996, p.23).
How big the tensions were, however, became fully clear in 1969. During elections, the
Alliance saw its popular vote falling under 50% for the first time, mostly because many
Chinese gave up their support for the Alliance MCA party, now voting for the opposition
DAP. The 1969 election challenged the ‘ethnic bargain’ that underpinned the logic of the
post-independence ruling coalition. The increased number of Chinese in state assemblies and
parliament that resulted from the DAP victory led to Chinese demonstrations demanding a
renegotiation of power in the dominant coalition favoring Chinese interests. These
demonstrations, in turn, caused Malayan outrage and large scale demonstrations by UMNO
supporters. The ethnic clashes of ‘13 May’ resulted in outbreaks of violence on the streets of
Kuala Lumpur leaving at least 196 people dead (Bowie 1991, p.82).
23
3.5. The state intervenes: the New Economic Policy (1970 – 1990)
The crisis legitimated measures impacting both economic and political access. As a result of
‘13 May’, a state of emergency was declared and parliament replaced with a National
Operations Council (NOC), which consisted of eight party leaders from the Alliance, six
Malay, one Chinese and one Indian. The NOC devised a plan to respond to the increased
dissatisfaction in the Malay community.
First of all, the Alliance partners increased the role of the state in steering the economy. The
most significant measure taken in 1970 was to announce the New Economic Policy (NEP), an
economic plan devised to eradicate poverty as well as economic inequality between Chinese
and Malay. Yusof & Bhattasali (2008, p.4) characterize the period of the NEP as the
‘distributional epoch in modern Malaysian economic history.’ Characteristic of this period
(and subsequent Malaysian economic policy) was the attempt to achieve both growth and
redistribution. When applying the theoretical concept of the double edged sword of the natural
state to this situation, it becomes clear that an optimal growth strategy (requiring competition)
and a credible commitment to distribute access to rents among the different elites representing
parts of the Malaysian population (requiring limitation of access) cannot easily be reconciled.
Indeed, the ruling coalition had to balance between the two strategies to achieve redistribution
while also expanding the total size of the ‘economic pie’ from which everyone could profit.
Contrary to the policies of the 1960s, the NEP favored state intervention to develop the
commercial and industrial sector, and to increase bumiputera ownership of assets. Concretely,
the affirmative action aim was to drastically change the proportion bumiputera : other Malay
: foreign of corporate equity ownership – from 1.9 : 22.5 : 60.7 percent in 1970, to 30 : 40 : 30
percent by 1990 – through legislation and other state actions (Owen 2005, p.418). In practice,
this meant that quota of 30 percent bumiputera equity ownership were imposed upon
businesses. On the other hand, the goal of the NEP was not to fully and hastily redistribute
existing corporate equity, but to develop a credible plan that would achieve redistribution
through the guided opening up of economic access, mostly favoring the ethnic Malay part of
the population. Free Trade Zones were created where foreign capital could continue to flow
without too much regulatory restrictions. The affirmative action quotas were enforced
leniently and property rights of Chinese businesses were respected (Yusof & Bhattasali 2008,
p.45). The NEP was a reaction to problems that surfaced in a condition that can be well-
described as in accordance with the concept of the natural state. By increasing the reach of the
state, the dominant coalition attempted to design an institutional framework that was able to
convince powerful and possibly violent groups that the current coalition was capable of
distributing wealth and power in an acceptable way.
The NEP was successful because it achieved increased stability without destroying the
economic infrastructure necessary for future economic growth. Tension between the different
development goals in the NEP, however, soon surfaced. During the mid-1970s, elements
within the UMNO voiced their criticism that the NEP had not yet succeeded in reaching its
targets to increase Malay economic ownership and participation. The large scale ‘affirmative
24
action’ operation involving the NEP was especially hard to implement since the Malay
community did not have an extensive tradition of entrepreneurship. As a result, the access to
key rents needed to be further limited and put under the control of the state. In 1976, Minister
of Finance Tunka Razaleigh introduced the Industrial Coordination Act (ICA), making it
mandatory for all industries to increase Malayan participation. The ICA also led to the
establishment of numerous state-owned companies to stimulating Malayan ownership and
participation:
state enterprises were to operate on behalf of the Malay community until such time as individual
Malay entrepreneurs were experienced enough and numerous enough to present a real challenge
to Chinese, Indian, and foreign entrepreneurs in the marketplace. (Bowie 1991, p.95)
The ICA designated preferred industries in which the government invested heavily. Between
1970 and 1981, the public sector’s share of GDP had risen from 29.2 percent to 58.4 percent
(Jomo & Gomez 2000, pp.288-89). In 1980, the Heavy Industries Corporation of Malaysia
was founded, which stimulated large public-sector investment in heavy industrial projects in
iron and steel, automobiles, cement, internal combustion engines. Projects were set up as joint
ventures with (largely foreign) capital.
In practice, the new state-led ventures closed off economic access to large parts of the
population. The simultaneous limitation of political and economic access seems to support the
expectations following from the NWW framework. The state designated focus areas for
investment and production (Bowie 1991, p.111). Private sector parties, in Chinese hands,
were often ignored in the projects (Bowie 1991, p.134). The ICA was strongly opposed by
Chinese businessmen in the private sector. As a result of the act, domestic private investment
in the commercial and industrial sector declined. Not only did the act largely close off access
to entrepreneurs other than well-connected Malays, it is also argued that the act also increased
inefficiency and rent-seeking. The licensing arrangements, encouraged discrimination not
only in favor of Malays in general, but also of those who were willing to give political support
to, and share profits with, the ruling elite. These dynamics indeed led to the development of a
Malayan economic elite. As a result, inequality within the Malay ethnic community increased
(Bowie 1991).
The industrialization policy boosted the public sector, and created new opportunities for rent
capture. When Mahathir Mohamad became prime minister in 1981, he stepped up the
government industrialization project, with the introduction of a Heavy Industrialization
Scheme. Mahathir adopted a ‘Look East’ policy, inspired by the paths of industrialization of
Japan and South Korea. He pressed for public-private cooperation and the spirit of Malaysia
as a developmental state; ‘Malaysia Incorporated’. Observers generally agree that the heavy
industrialization policy was not very successful (Jomo 2002; Jomo & Gomez 2000). Although
general economic malaise in the 1980s contributed to this failure, observers also point at the
fact that industrialization was more about political support and social development than
economic growth.18
UMNO members profited greatly from the state owned enterprises, as
18
Although the industrialization policy was certainly also an attempt at a new phase of ‘import substitution
industrialization’ to boost the stagnating structural development of the Malaysian economy away from
agriculture and towards manufacturing and industry (Yusof & Bhattasali 2008)
25
owners or board members, and investors were increasingly seeking ties with politically
influential Malays. This created further opportunities for rent seeking through special
preferences in government allocation and opportunities and did not always promote the most
efficient companies to grow.
[The] rapid growth [of the SOEs] has … involved generally inefficient state intervention, almost
singularly committed to inter-ethnic wealth distribution, ostensibly favouring the politically
dominant but economically deprived indigenous community. In effect, however, such
intervention has primarily advanced the interest of self-aggrandizing, politically influential
rentiers including some non-indigenes, rather than genuine entrepreneurs, thus pre-empting
achievement of industrial policy objectives. (Jomo & Gomez 2000, p. 289)
Not only in economic affairs did the role of the state increase after 1969. On the political side,
the dominant coalition also tightened its grip on power. The post-independence consociational
democratic arrangement was not deemed fit to create an atmosphere for growth and stability
(Yusof & Bhattasali 2008, p. 26). On the one hand, the dominant coalition began to close of
access to politics op opposition parties and increase the power vested in the executive. When
the parliament was reinstalled in 1971, ‘sensitive issues’ were banned from politics with the
sedition act (Crouch 1996, p.30). This measure and other measures of ‘discipline and
stability’ (Yusof & Bhattasali 2008, p.26) were presented as necessary to save Malaysia’s
culture of consensus building from the dangers of ethnic strife and popular unrest. The
dominant coalition’s repertoire to close off political access expanded, and included corruption
in election committees, gerrymandering of constituencies, disqualification of opposition
candidates on contestable counts, promises of development project allocation connected to
votes and party propaganda through party-owned media (Crouch 1996, pp. 58-63). In
combination with the deeply ingrained patronage arrangements, and the difficulty for
opposition parties to build an agenda that would be powerful enough to beat the incumbents,
these mechanisms ensured lasting dominance of the UMNO-led coalitions. On the other hand,
the coalition became more open to new parties that were willing to become part of the elite
arrangement. In return for their support, these parties would gain access to rent opportunities.
In the early 1970s, the Alliance was replaced by the Barisan Nasional (National Front, BN).
Parties such as the powerful Malay Islamic Youth Organization (ABIM) led by Anwar
Ibrahim became part of the coalition.
The rising power of the executive is exemplified by the premiership of Mahathir. The BN was
led until 1976 by Tun Abdul Razak (the father of the current Malaysian prime minister), who
after his dead was succeeded by Hussein On. In 1981, Mahathir became prime minister. A
doctor with Indian roots, Mahathir was a controversial figure. He became Malaysia’s first
prime minster without ties to the traditional aristocratic elite. He had earlier been threatened
with jailing under the ISA and had his book, The Malay Dilemma, banned, but he was
rehabilitated in the party. Mahathir is generally regarded a powerful, authoritative leader with
much influence on the course of Malaysia’s development.19
19
Yusof & Bhattasali (2008) emphasize the importance of leadership in Malaysia: ‘Traditional values associated
with Malay leadership include the need to avoid conflict, an emphasis on traditional courtesy and good manners,
wide consultation, and the avoidance of direct confrontation. A test of leadership is whether followers trust a
26
With the rising power vested in the executive, control of the state became increasingly
important to have access to rents. The economic slump of the mid-1980s resulted in the
increasing factional tensions in the UMNO, because patronage was drying up and competition
increasing. These tensions were exacerbated because new groups – including rural middle
classes and bumiputera businessmen – tried to gain access to the benefits of party
connections. The rising competition in the UMNO culminated in the struggle for the party
leadership in the late 1980s. Factional struggle developed for the UMNO’s vice-premiership.
Challengers also tried to beat Mahathir, using formal legal procedures in an attempt to
undermine his legitimacy as leader. Reference was made to clauses in the constitution
inconsistent with the party elections. If the supreme court would accept these claims, the party
elections could be declared unconstitutional. The course of events took an unexpected turn
when not only the elections, but the UMNO itself was declared unconstitutional. Mahathir
managed to restore his hold on power. He quickly found a new party, UMNO Bare, and was
joined by some of his supporters as well as former contesters. Mahathir also acted by sacking
the Lord President and two senior Supreme Court judged in 1988, strengthening his grip over
the judiciary (Yusof & Bhattasali 2008, p.31) Leaders who were inciting ethnic antagonism
were removed. Moreover, amendments were made to the constitution that vested increased
power in the executive (Lopez 2009). In the late 1980s, some of Mahathir’s opponents
founded Semangat ’46 (Spirit of ’46). Semangat ’46 mirrored the UMNO, strategy,
attempting to force a shift in elite relations. According to Crouch (1996, p.114),
The challenge could not easily be repressed by authoritarian means, partly because its leaders
had the same links with the bureaucracy, police, and other constituents of the Malay
establishment as the majority faction in UMNO had.
For the 1990 elections Semangat teamed up with DAP and PAS, forming an alternative
coalition. In the end, the UMNO Baru managed to retain power in the elections. The victory
of Mahathir’s coalition meant that it regained most of its support: villagers, politicians and
businessmen realized that they would need to support the ruling UMNO in order to benefit
from its patronage network (Crouch 1996, p.127).
The consecutive limitation of access in the economic and political spheres, as well as the
tension between stability and distribution on the one hand, and growth and competition on the
other, as described above, are mechanisms which fit the expectations following from the LAO
logic. However, it is remarkable that, despite the limitation of access, Malaysia experienced
strong economic growth between 1970 and 1990. By 1990, the NEP had been successful in
terms of increasing Bumiputera equity ownership ten-fold, to over 20 percent. At the same
time, Malaysia had developed from an economy dependent on primary product exports, to one
in which manufacturing had emerged as the leading growth sector. Compared to 54.3 percent
in 1970, rubber and tin only accounted for a mere 4.9 percent in 1990 (Crouch 1996, p.222).
Urbanization had increased dramatically, from 27 percent of the population in 1970 to 51
percent in 1991 (Owen 2005, p.419). The secondary and tertiary sector now represented 72
leader sufficiently to follow him when he embarks on a difficult and new course of action. A leader, therefore,
needs to instill loyalty, provide tangible material benefits, and to stamp his legitimacy.’ (p. 23)
27
percent of Malaysia’s total added value (Drabble 2004). The share of manufacturing in export
had gone up from 12% in 1970 to 60% in 1990 (Wood 2005, p.16).
How can such impressive growth take place in a LAO context? Malaysia’s strong initial
conditions and high levels of FDI are plausible explanations. However, by making this
conclusion, isn’t the possibility that good state interventions and industrial policy directly
contributed to economic growth cast aside too quickly? The criticisms of Jomo & Gomez
(2000) and Hall quoted above on the role of Malaysia’s state in the economy would justify the
rejection of that argument. However, others, such as Jomo (ed.) (2007), argue that in some
cases the role of the Malaysian state has been beneficial for economic growth (Jomo 2007,
p.xv), not through the indirect effect of creating stability as in the natural state logic, but
directly through ‘developmental state’ mechanisms of selection and promotion of specific
sectors, infrastructure and education. It could even be argued that limitation of access to key
rents, for example when state-enterprises engaged in joint-ventures with foreign companies,
had a direct beneficial effect for economic growth (although Mahathir’s heavy
industrialization plan does not support such a claim). A problematic aspect of the NWW
theoretical framework, in this context, is that it argues, in a neoliberal fashion, that limitation
of access might be a necessary condition in natural state conditions, but that it is still always
bad in terms of economic growth (as it hampers competition). As pointed out by Jomo (ed.)
2007, such a contention, even despite the problems with state intervention in the economy
described above, offers a too one-sided account of the effects of state intervention on
Malaysia’s economic development (Jomo 2007, p.xv).
3.6. Limits to access, limits to growth? (1990 – present)
After the economic and political crises of the 1980s, Mahathir and his successors began to
pursue a policy of liberalization. In 1991, Mahathir announced Vision 2020, an economic plan
to turn Malaysia into a developed nation by the year 2020. The plan involved further
privatization of SOEs and an increase of foreign investment. In the early 1990s GDP growth
rates came close to a yearly 10 percent and incoming FDI soared. Privatization of SOEs was
made a key priority. By 1993 the GDP share of the public sector had fallen to 25.3 percent
(Jomo & Gomez 200, pp.288-89). Although growth was halted by the Asian financial crisis of
1997 and 1998 Malaysia could afford to refuse an IMF bailout. It introduced its own measures
to restore economic growth, limiting currency speculation and adopting a Keynesian anti-
recession policy. Recent growth has been quite strong, with growth resuming with 7.2 percent
in 2010 after a small decline in 2009. Increasingly, however, Malaysia is associated with the
term ‘middle income trap’. During his 2010 budget speech, prime minister Najib Tun Razak
expressed this worry:
‘We are now at a critical juncture, either to remain trapped in a middle-income group or
advance to a high-income economy … We now have to shift to a new economic model based on
innovation, creativity and high value added activities’ (quoted in Hall 2011).
As becomes clear from the prime minister’s words, over the past two decades, creating an
environment for Schumpeterian rents to thrive, has become a key issue on Malaysia’s
28
development agenda. Following NWW, creating an open access economic environment,
conducive to a climate of competition and innovation, would be a necessary condition to
achieve this aim. Moreover, NWW argue, open access would not only apply to the economic
sphere, but also to the political. To achieve that aim, the questions arise: Has Malaysia solved
its problem of violence? And is the country moving towards the doorstep conditions? The
remainder of this section will be devoted to finding an answer to these questions.
First of all, it should be noted that the process of privation in the 1990s involved a further rise
of patronage, rather than increasing competition. Ownership of transportation, utilities and
communications companies often passed ‘directly to well-connected businessmen, mainly
bumiputera, at relatively low valuations’ (Drabble 2004). Opportunities for rent capture
remained high, as monopolies were often retained after privatization. Numerous privatized
companies were later renationalized. According to Malaysian economist Jomo K.S.,
there is now considerable evidence that privatization was an important means for enhancing the
private wealth of the politically influential and well connected, and not just among the
Bumiputera elite. It is not clear whether this was either necessary or desirable for improving
inter-ethnic relations (Jomo unpublished, p.43).
Mahathir was succeeded by Abdulla Ahmad Bawadi in 2003. Despite strong growth in the
1990s, the Malaysian economy still depended on a limited range of manufactured goods, most
notably electronics and electronic components at the turn of the millennium, adding up to 59
percent of exports in 2002 (Drabble 2004). Bawadi pledged to shift the development strategy
from seeking foreign investment to nurturing a domestic manufacturing sector. This would
entail more openness and meritocracy in achieving its affirmative action with the slogan
‘Bumiputera with potential, commitment and good track records.’ This strategy also meant
that patronage in business arrangements would have to be combated (Drabble 2004).
However, years of affirmative action policy has created a significant amount of patronage
which is hard to break through (Hall 2011). So called ‘Ali Baba arrangements’, in which
Chinese businessmen seek patronage from political powerful Malays connected to the UMNO
are still rife. According to the Australian economist Hil Hall (2011),
The programs to advance Bumiputera development have benefited spectacularly the politically
well-connected within this community, through preferential contracts, share allocations, and
general commercial advancement, while all too little has trickled down to the general
community. The programs can hardly be justified as anti-poverty programs when the principal
beneficiaries are already egregiously wealthy.
Transparency International describes the closeness of business and politics as a ‘revolving
door, through which individuals move from government to business, or business to politics,
and back again’ (Transparency International 2009, p.274).
Despite high growth, economic access remains closed off to large parts of the population.
Overall poverty fell to a mere 5% in 2005 (Yusof & Bhattasali 2008, p.5). However, rural
areas remain relatively underdeveloped and low-income (Yusof & Bhattasali 2008, p.44).
Although Malaysia is less unequal than its neighbor Thailand and most Latin American
29
countries in a comparable stage of development, the World Bank warns for the consequences
of persistent inequality in Malaysia, which is shown in the figure below.
Figure xxx Poverty rates (blue; in percentages, left axis) and Inequality (red; GINI coefficient, right
axis) in Malaysia (1970 – 2009)20
Also, the development of Malaysia’s small and medium enterprises (SMEs) is affected by the
affirmative action policy. Most SMEs are owned by ethnic Chinese. Often, they prefer to stay
small, to avoid reaching the threshold above which Bumiputera employment quotas become
mandatory (Hall 2011). Another serious challenge facing Malaysia is the brain drain of
Chinese and Indians, who prefer to leave the country above facing the unfair treatment (World
Bank 2011). FDI has also been declining over the past decade (Athukorala & Wagle 2011).
Whereas attempts are made to expand economic opportunities, the struggle for political access
is tense. While attempting to close off political access, the hold on power of the traditional
system of UMNO-led coalitions has become increasingly difficult to maintain. The economic
growth that Malaysia experienced from the mid-1980s went along with increased competition
for the Malay voters, and challenges to the UMNO hegemony. After the first serious
challenge in 1988, the party increased its powers, which it could formally implement through
constitutional amendments. Some of the measures were the reduction of the role of
constitutional monarchs, restrictions on the independence of the judiciary and media, and
curbing of dissent with amendments to the 1960 Internal Security Act (ISA) (Owen 2005,
p.420). However, opposition to Mahathir’s rule increased. In 1998, deputy prime minister
Anwar openly challenged Mahathir’s handling of the financial crisis. In response, Anwar was
arrested under the ISA and jailed for corruption and sexual misconduct (Owen 2005, p.421).
As a response to the arrest of Anwar, the Barisan Alternatif was founded, a coalition of parties
to challenge the BN. Over the past two decades, this opposition has become increasingly
20
Data and graph based on World Bank (2011)
0,4
0,42
0,44
0,46
0,48
0,5
0,52
0,54
0
10
20
30
40
50
60
1970 1977 1983 1989 1992 1994 1997 1999 2001 2002 2004 2007 2009
30
electorally successful and organized in an alternative coalition: the Pakatan Rakyat or
‘people’s pact’, with PAS and DAP as central parties, and Anwar as its leader.
Ethnicity is declining as the key issue in Malaysian politics, while political access and social
mobility have become key opposition issues. As a consequence, the power of the UMNO
erodes: the party only attracted 29.6 percent of the votes in the 2008 election (Yusof &
Bhattasali 2008, p.29). In that same election, the Barisan National, for the first time lost its
two-third majority (Transparency International 2009, p.271). Most significantly, the alliance
lost its majority in five states, meaning that the opposition is now in control of 45 percent of
the economy, in terms of GDP (Yusof & Bhattasali 2008, p.28-29). Criticism of Malaysia’s
ruling system is growing. A key issue for the opposition is change of the electoral system
which heavily favors the ruling BN. In 2007 large protests took place to fight for more
transparency, one demonstration in Kuala Lumpur drawing over 40.000 participants. Whereas
opposition focuses on exposing corruption, the executive is also challenged from within the
ruling coalition. Before the election, a controversy arose about the Independent Police
Complaints and Misconduct Commission (IPCMC). Civil society activists quoted a senior
police official as having stated that the police would vote for the opposition in the 2008
elections. In 2011, the anti-corruption protest movement is again stepping up its activities.
Some measures are announced by the government to increase its anti-corruption efforts. At
the same time, the government is still in control of much of the media and has access to a
police apparatus that suppresses open protests by the Bersih movement.21
The short survey of the last two decades shows that Malaysia is still coping with some of the
problems that are characteristic for the LAO. Attempts to create a more indigenously run
(rather than FDI-dependent) and competitive economy are counterbalanced by mechanisms of
patronage and a skewed political system. Nevertheless, important forces are at work in
Malaysia’s system, as the opposition is clearly gaining ground. As the doorstep conditions, of
perpetuity of organizations and rule of law for elites especially, have not been met, we might
expect that Malaysia will continue to experience difficulties in upgrading its economy, or to
achieve a fairer and more competitive political system.
3.7. Conclusion
This chapter has zoomed in on Malaysia’s political and economic history, with a focus on the
post-independence period. A number of key issues can be discerned. Firstly, the impact of
colonialism on both political and economic development is large. Malaysia inherited from its
colonial era a strong, centralized state, based on a division of tasks among elites. High levels
of foreign involvement and ownership also date back to colonial times. In the mid-20th
century the legitimacy of the colonial system faltered, due to increasing nationalistic
consciousness and economic change. When the British retreated from the coalition after 1957
a new agreement between the Malay and Chinese elites and their clienteles had to be found.
Overall, Malaysia succeeded in creating a stable, inclusive environment, conducive to growth.
21
Whereas Malaysia has a tradition of a restrained military, the police plays an important role in internal
security, especially intelligence. (Hassan 2000, p. 52; also see Crouch (1996))
31
A strong ethnic consciousness and a strong overlap between social, political, economic and
ethnic roles, however, made internal relations more difficult. As a result, the ruling coalition
stepped up the role of the state in the economy, while increasing its grip on politics. Although
a dual track policy of increasing equality as well as economic growth was hard to follow,
Malaysia has achieved remarkable economic growth over the past 40 years. A stable
environment and high levels of FDI have clearly contributed to this growth. The direct effects
of state intervention on the economy are more ambiguous and contested, as are the future
prospects of Malaysia.
Important aspects of Malaysia´s development can be understood from the perspective of the
LAO framework. The fact that violence was still a factor threatening the country´s stability
contributed to the dissolving of the open access institutions and organizations that Malaysia
inherited in 1957. As a result, the country reverted from a mature limited access order to a
basic access order. The interconnectedness of the political and economic spheres has been
observed in the case of Malaysia. From 1970 onwards, the state increased its influence in
controlling access to both. Notwithstanding the limitation of access, high levels of economic
growth have been achieved. A case can be made that this growth took place despite the
negative economic consequences of limited access, although this case is not fully convincing.
The fact that Malaysia is currently struggling with achieving a more innovative economy,
however, does underscores the limits of economic development in a LAO condition. The
argument by NWW that economic access and political access are closely interrelated is
supported by both the fact that access to key rents is achieved through connections within the
UMNO. Chapter 4 will evaluate the NWW framework in more detailed, and in comparative
perspective with Thailand.
32
Chapter 4: The Case of Thailand
4.1. Introduction
This chapter discusses Thailand’s economic and political development. Thailand’s history has
been organized in five periods, starting with the formation of a modern state, the development
of the bureaucratic polity, the rise of politics, the period leading up to the 1997 crisis, and the
subsequent rise and fall of Thaksin Shinawatra. This historical survey is employed to offer an
empirical perspective to test the NWW theoretical framework. Throughout the twentieth
century, Thailand22
has been going through a tumultuous political and economic
modernization process. Whereas most Southeast Asian countries experienced a relatively
clear break between the colonial and post-colonial period, Thailand experienced an important
break with the overthrow of absolute monarchy in 1932. Most relevant institutional
characteristics of the country have been developed since, but some structures that characterize
Thailand’s social order can only be understood by going back to the 19th
and early 20th
century.
Before moving into more detailed, chronological analysis, a short sketch of Thailand’s
development will be made. Since the 1950’s, economic growth has been impressive. Between
1950 and 2000, Thailand recorded a GDP growth rate of 6.6 percent, resulting in a twenty-
fold increase in total output and a seven-fold increase in per capita GDP (Jansen 2002, p.343).
Thailand´s population grew over fourfold. Poverty has declined from 60% in the early 1960s
(Tsai & Tsay 2004) to a mere 4 percent in the early 2000s (Drabble 2004). Some refer to
Thailand as a ‘growth miracle’ (Jansen 2002). Others are more critical, pointing at the lower
level of economic development compared to, for example, Taiwan and South Korea (Jomo
2002). In the 19th century, some observers even expected Thailand’s economic growth to
rival that of Japan’s Meiji State (Feeny 1998) while subsequently the Japanese and Thai paths
diverged and Japan’s current per capita GDP is still almost four times are large as Thailand’s
(Drabble 2004). Thailand’s growth until 1981 was dependent on the expansion of the
agricultural sector. In the 1980s it developed a dominant industrial sector and embarked on a
strategy of export production. The share of agriculture in GDP declined from 50% in the
1950s to 10% in the second half of the 1990s (Jansen 2002, p.349). The country went through
a severe recession in 1997-98 and had to borrow from the IMF, but growth rates have since
2000 resumed at high levels and the IMF loans were fully repaid by the early 2000s. In terms
of employment and living conditions, Thailand has remained a highly agrarian society. In the
1990s, 60 percent of the population was still living from agriculture (Jansen 2002, p.349).
On the political side, Thailand’s history is characterized by instability: different regimes
tumbling over each other, with key roles for the monarchy, the military, urban business and
rural magnates. Thailand went through several periods of military authoritarianism and
parliamentary democracy. The country’s political instability is illustrated by the fact that both
the number of constitutional overhauls since 1932 comes close to 20 (Hewison 2009).
Moreover, Thailand’s political history has seen numerous insurgencies in its northern,
northeastern and southern provinces. Since 2004, a violent insurgency rages in the most
22
Until 1939 Thailand was known as ‘Siam’. This term will be used to events that took place before this date.
‘Thailand’ will be used for everything after 1939 and for processes expanding both periods
33
Southern area of Thailand, with thousands of deadly victims. With the rise of parliamentary
politics since the 1970s, the urban-rural divide has found a political expression, and patronage
and political corruption have been rife. In 2011, Thailand elected opposition leader Yingluck
Shinawatra to become the country’s next prime minister. These democratic elections should
be seen in the perspective of the recent turbulent past. Mass protests and clashes took place in
Bangkok only one year ago, leaving at least dozens killed and thousands wounded. Only five
years ago a military coup put an end to the rule of Yingluck’s older brother Thaksin – the 18th
(attempted) military coup since 1932. Thaksin himself was a popular and democratically
elected prime minister. Nevertheless, his unscrupulous expansion of executive power, vote
buying and intimidation has been referred to as ‘competitive authoritarianism’ (Levitsky &
Way 2002). Thai populism continues to be challenged by the repeated interference of military
and king in Thai political affairs, justified as ‘Thai style democracy’; a paternalistic,
hierarchical alternative to ‘Western style democracy’, emphasizing morality and unity under
the monarch (Hewison 2009).
Thailand’s current development seems strong but, one has to note, not many observers
expected the booming economy of the early 1990 to collapse as it did in 1997, and few
foresaw that the military would regain a position at the political centre stage as it did with the
military coups of 1991 and 2006. The LAO perspective should be capable of shedding new
light on the capricious development path of Thailand. In this chapter, the story of Thailand’s
development will be investigated in light of the NWW framework.
4.2. State formation (1800 – 1932)
The role of the state is at the centre of many debates about Thailand’s development. The
power of the state has implications for the degree of agency to steer the process of
industrialization, the capacity to act autonomous without too much compromise towards
powerful rent seekers and for the control of and access to violence. Although most observers
argue that the Thai state has been weak (Ingram 1971), others question this contention (Pasuk
& Baker 1998, Jomo 2002). In order to understand the forces that define the nature of
Thailand’s state, one has to back to the conditions that impacted on the process of state
formation in the 19th
and early 20th
century, most importantly the socio-economic structure of
the country, and the role of external colonial forces.
Production of rice and other primary agricultural products was central to the Thai economy,
and remained so up until the 1980’s. Currently, rural farmers still make up the majority of the
Thai population. Agriculture was an important force driving the foundation of a modern Thai
state. Traditionally, agricultural products were used to feed the Siamese population. While
Siam consisted largely of uncultivated swamp land in 1820, peasants gradually cultivated the
lands, especially after 1870, when population density was on the rise.23
Agricultural products
also increasingly began to serve as export commodities. Stepped up export throughout the 19th
23
An important consequence of land abundance, as Pasuk & Baker (1998) argue, was that farmers rather chose
to explore new areas for cultivation, than to increase their factor productivity. The ‘natural resource curse’
argument that ‘resources postpone the imperative to industrialize’ (Jomo 2002, p. 10), or in this case increase
technology, seems to fit the Thai pattern.
34
century earned Siam the position of the major rice producer of Southeast Asia. Chinese
immigrants, who arrived in high numbers in the 19th
century – around 1900, 1 out of 7 people
in Siam had Chinese roots (Owen 2004, p.95) – also introduced new crops, such as sugar, teak
and rubber, which could be used to trade, for example for North American armaments (Owen
2004, p. 95). In this period, the Thai state introduced tax farming to achieve an orderly,
centralized extraction of agriculture rents. The levying of these taxes was contracted out to
outsiders: private individuals, who were often recent Chinese immigrants. The new system,
however, was only capable of capturing a part of the rents. Some elements of the old (rural)
nobility, who had lost their personal control of manpower, resisted this system by hiring large
amounts of debt-slaves. By 1850, about half of the Siamese population was in such a position
of ‘voluntary servitude’ (Owen 2004, p.96).
Siam is the only Southeast Asian kingdom that managed to escape colonization. Since the
mid-18th
century, Siamese territories were ruled by the royal court in Bangkok. However, the
threat of colonial control was always present. Thailand’s independence depended on skillful
political management and diplomacy, modernization of the bureaucracy, and far-reaching
concessions to the British and French colonial powers who dominated the western, southern
and eastern borders of the kingdom. The influence of colonialism in Southeast Asia on the
formation of Thailand’s state was profound and multifaceted. On the one hand, colonialism
drove the establishment of a rationalized, centralized bureaucracy: colonial pressure forced
the Thai state to collect the resources necessary to defend itself. Competition over Siam’s
peripheral areas led the court to define the kingdom’s diffuse borders and develop an effective
centralized bureaucracy to control and defend its territories (Jansen 2002, p.354). To
counteract the increasingly assertive French, King Chulalongkorn stepped up the process of
nation building in the late 19th
century, instituted a system of universal education and
established a modern, professionalized military. Chulalongkorn rationalized the ministerial
system, balanced the state’s budget, and increased the court’s control over the provinces by
installing governors with strong ties to the Bangkok elite. In terms of the NWW framework,
Siam established a basic natural state in this period: the state improved its mechanisms of rent
extraction and distribution, while all major activities took place in the direct orbit of the state.
As a consequence of the reforms, peasants were subdued to a centralized system of taxation.
Rebellions began to break out in the north, northeast and south of the country in 1902 (Owen
2004). The antagonism between the Bangkok elite and peasants and local elites in peripheral
regions is still deeply present in Thai society and politics.
On the other hand, the powerful colonial forces limited the establishment of a strong state, by
inhibiting the Siamese state to reap the full benefits of production and trade. As a
consequence of this limitation, the amount of rents available for distribution among elites was
limited. British diplomats pressed not only for extraterritoriality for British subjects in Siam,
but also for free trade at nominal duties and the abolition of government monopolies.
Moreover, the British inhibited the establishment of high import duties that could have
created a market for domestic industry (Jansen 2002, p. 344). Despite the fact that British
demands had negative consequences for the rent opportunities of the Thai elite, officials of the
court signed numerous treaties with the British from 1855 onwards. Making considerable
concessions, they managed to maintain independence but risked internal instability. The
35
modernization of the state drove the ambitions of Thai elites and the competition for access to
the state. A new class of civil servants with western education was on the rise. They became
increasingly dissatisfied with the lack of opportunities and the weakness of the Thai state in
the face of overruling colonial powers, as well as the rising power of Chinese private
entrepreneurs. Only through the establishment of government monopolies on opium,
gambling, lottery and alcohol, and by the multiplication of total trade volume could the
pressure from local elites be satisfied, and revolutionary tendencies temporarily forestalled
(Owen 2004).
However, increasingly the growing bureaucratic and military elite began to press for reform
of the stagnating economy. A stronger nationalistic identity was promoted, and Chinese
overrepresentation in business attacked.24
Although king Vajiravudh tried to accommodate to
these new sentiments, a group of young army officers made a failed attempt at a coup d’état in
1912. Despite this initial failure, the new military elites continued to press for more power,
and anti-royalist sentiments grew during the 1920s and 1930s. These sentiments were
amplified by the traditionalism of the new king Prajadhipok and the contraction of rents when
the 1930s depression severely impacted Siam’s rice economy (Jansen 2002, p.354). As NWW
hypothesize, in the wake of declining credible commitment of the state to distribute rents,
instability ensued. The revolution that followed on 24 June 1932 signified the culmination of
discontent, but was bloodless and without much violence (Owen 2004, p. 353).
4.3. Contestation for access to the state and the bureaucratic polity (1932
– 1968)
After the revolution and in the dynamic context of the 1930s depression, Japanese
imperialism, communist threat and American intervention, relations within the Siamese elite
had to be redefined. The monarchy had lost its legitimacy as head of the dominant coalition of
elites, but new institutions and organizations to establish credible commitment among elites
needed to be established. An early experiment with parliamentary democracy took place, but
in the decades that followed, the military came out on top, leading a dominant coalition in
cooperation with powerful bankers and working with a suppressed but not fully abolished
parliament. Although businessmen were powerful, and ran their businesses as private
enterprises rather than state-owned enterprises, economic access was restricted to a tight
coalition of military and economic elites, backed by American aid.
In the direct aftermath of the revolution, access opened up to a variety of new elites with
different views and interests. As NWW hypothesize, the lack of an institutional and
organizational framework that could work as a mechanism to distribute power and rents
among elites, led to instability. At first, a democratic constitution, people’s assembly and
judiciary system were established, and a prime minister was elected. However, soon after the
revolution, disagreement arose among elites about the future course of Siam. No agreement
could be reached on a strategy of economic reform. Factional struggles among sections of the
elite emerged. This lack of a coherent and widely accepted new arrangement among elites led
24
Chinese and foreign merchants often exported their profits, so that the Thai state could hardly profit from their
entrepreneurial activities and the capital accumulation necessary for economic investment did not take place.
36
up to the first successful military coup in Thai history, in 1933. The military leaders dissolved
the constitution and the legislature and forced out the prime minister. They defeated a royalist
countercoup and gained tight control over the Thai state, establishing, in the words of NWW,
a new basic natural state. In the years before World War II, the military greatly profited from
its newly acquired power, and its budget tripled.25
Segments of the military were captured by
the fascist Zeitgeist and, inspired by Imperial Japan, began to cherish pan-Thai ambitions.
A new, tightly knit ruling coalition developed in the 1930’s, balancing the interests of
political, military and economic elites. Economic interests within this coalition were
represented by assimilated Chinese – or ‘Sino-Thai’ – merchants and bankers. The revolution
and military rule had somewhat restricted the opportunities for Chinese entrepreneurs, but, by
buying support from high military officials, they could generally continue to run their
business affairs (Jansen 2002, p.354). Different from Chinese minorities in many surrounding
nations, they were not denied access and excluded from the coalition but became part of the
dominant coalition as providers of capital and entrepreneurship. By co-opting a class of
productive economic elites into the ruling coalition – rather than expulsing them and
monopolizing the economy – the dominant coalition in control of the state not only increased
its own wealth and power, but also bolstered economic growth. The alliance between
indigenous military-bureaucracy and Sino-Thai business despite cultural and ethnic
differences cannot be ignored as a contributing factor to Thailand’s economic success.
Imperial Japan invaded Thailand in 1941 and forced it to take its side in fighting ‘Western
imperialism’. The war had an important influence on the economic development of Thailand.
Because the country was cut off from its manufacturing import from the West, a small
domestic manufacturing industry had the chance to develop. Those who set up businesses in
this period, would later become some of the most powerful and influential businessmen in
Thailand (Pasuk & Baker 1998, p.18). This was also the period when family banks were set
up that would play a central role in post-war Thai development. When, after the war, Thailand
came under allied control, the collaborating army was discredited, and, as a consequence, the
relative bargaining power of non-military elements in the elite increased.
After World War II, the military elites managed to reestablish their dominant role in the Thai
state. Their rule was predicated on foreign aid, stability and economic growth. Foreign
pressures deeply impacted developments in Thai economics and politics in the decades to
come. In the period following the defeat of Japan and the collaborating Thai regime, the allies
pushed for an increased role of parliament in Thai politics. However, when Western
expectations shifted from a focus on establishing democracy to a focus on the containment of
communism, the dominant role of civilian elites soon began to fade and the military could
regain its dominant position. In 1948, Marshall Plaek Pibulsongkram (Phibun) – who had
ruled Thailand from 1938 to 1944 – regained power after a military coup. The power of
military rulers in the decades to follow highly depended on foreign backing. Between 1951
and 1957, the United States made vast investments in infrastructure and the military and
25
Despite military dominance, the People’s Party that had come to power after the revolution remained an
important force in the Thai political landscape. The parliament was restricted but cooperated with the ruling
generals to implement reforms in social welfare, education and public health. In return, the Parliament supported
the large military budgets.
37
police apparatuses. Phibun himself was deposed by his major competitor in the army, General
Sarit Thanarat, after a coup that took place in 1957 with U.S. support (Darling 1962, p. 93).
Sarit dissolved what was left of the parliament and re-imposed full military rule. Sarit was
succeeded by another general, Thanom Kittikachorn in 1963. In early 1960s the Vietnam war
had a high impact on Thailand. Vietnam further intensified American involvement in
Thailand. Thailand provided bases from which Vietnam could be bombed and also sent troops
to fight against the Viet Kong. Forty thousand American troops were stationed in Thailand
which provided for a boom in the Thai service sector in both Bangkok and the countryside
(Owen 2004, p.358). During the Vietnam war, the United States continued to finance the
consolidation of military power, giving a total of two billion dollar of aid to the regime in the
1960s (Pasuk & Baker 1998). With US aid, roads were constructed into the countryside which
opened remote areas for intensified agricultural activity.
In contrast to British and French colonial pressures during the 19th
and early 20th
century,
American external influence on Thailand increased the credibility of commitments that the
state could make to dominant elites, since it provided for stability. Sarit was a capable
manager of interests within the elite. He respected the interests of the military, the
bureaucracy and established business circles. He acted strongly against communist insurgents
in the north, northeast and south of the country, but also introduced welfare and educational
policies to reduce the appeal of radical movements. This stable institutional climate fostered
economic growth. The concept of stability as a necessary condition for growth is not a recent
academic invention: the central argument to justify the rule of Phibut, Sarit and Thanom and
their allies in the military and police revolved around the contention that they could maintain
stability in turbulent times. Whereas, as they argued, generals and bureaucrats acted in the
best interest of the country, civilian politicians were by nature selfish and corrupt and
therefore ‘unfit to rule’ (Pasuk & Baker 1998, p.220). Generals and bureaucrats in the
dominant coalition had strong incentives to maintain the status quo. They could not only
satisfy their personal clientele circles, but also personally profited from the expanding pie of
wealth. Military men often had high personal shares in the enterprises and could capture
significant rents (Jansen 2002, p.344). When Sarit died while still in office, he had not only
strongly consolidated military control over the state, but had also built up an immense private
fortune of 2,8 billion baht, a large part of which he acquired during his political tenure (Pasuk
& Baker 1998, p.220). Sarit and Thanom also revived the position of the monarch as the head
of state by encouraging King Bhumibol Adulyadej, who had accessed the throne in 1946, to
play a more active role in public life (Owen 2004, p.357). Military rule and royalty became
the two key ingredients of what became known as ‘Thai style democracy’. Fred Riggs (1966)
famously termed the elite arrangements struck in this period as Thailand’s ‘bureaucratic
polity’
An interesting trend that seemingly contradicts the NWW prediction that political and
economic access are deeply intertwined took place in the period of military rule. While the
military maintained tight control over political access, the economy was liberalized and
economic power was largely in the hands of a non-bureaucratic business class. The United
States gave their financial and military support to the military regime on the condition that the
military leaders gradually liberalized the economy. From 1950 onwards, the World Bank
38
pressured Thailand to abolish its state-led growth strategy and privatize state agencies (Jansen
2002, p.354). Compared to other developmental states, the Thai economy had a large private
sector which seemed to operate relatively independent from the state. Economic development
plans were formulated, but the role of the government was largely limited to establishing
stable macroeconomic conditions. Thailand has been praised by the World Bank and other
western development institutions for its emphasis of market-led growth. It thus seems that
economic access, through the mechanisms of the free market, is open, while political access is
strictly limited.
A closer look at Thailand’s economy, however, shows that, in practice, the Thai business
class did not operate independent of the state. Although Ingram (1971) argued that the role of
Thailand’s government in economic affairs was limited, Pasuk & Baker (1998) disagree and
point out that the military rulers were actively involved in the development of the Thai
economy. Sarit pushed for development, or phatthana, to save Thailand from communism
(Pasuk, & Baker 1998, p.60). The state managed the economy by setting overall
macroeconomic conditions, while letting the private sector determine more specific, sectoral
policies (Jansen 2002, p. 358). The state also acted by making an active promise not to
nationalize banks (Pasuk & Baker, p.61). These seemingly open access institutions, however,
were established in a limited access economic system. A key force in the economic growth of
Thailand was a limited number of large business conglomerates, built around Chinese
immigrant families. Thirty such conglomerates existed, with stakes in approximately 800
companies. They focused on import substitution and agribusiness, in line with the strategy
which the military bureaucracy was expected to follow. The conglomerates were an important
factor in Thailand’s economic growth in the 1960s and 1970s. Clusters of businesses formed
around the banks which had the money they needed for investment. These banks were
protected from competition, both domestic and foreign (Pasuk & Baker 1998, p. 91). Public
agencies, such as the Bank of Thailand, worked in close cooperation with commercial banks,
operating under the Thai Bankers’ Association. The limited access banking framework
generated the institutional climate for competition and growth at the lower entrepreneurial
level. As soon as new ventures became more successful, the generals found their ways into
getting a share of the success.
The bargain between the military and the financial elite long remained an important force in
Thailand’s development. Numerous academics formulate their view on this particular
institutional arrangement and its consequences for Thailand’s economic development.
According to Pasuk & Baker (1998, p. 21):
[The] marriages of convenience between generals and bankers] had to be adjusted from time to
time to reflect the fortunes of competing military cliques, but this politico-financial axis
dominated until the mid-1970s. The Generals skimmed revenue from rising business profits to
build their personal fortunes and their political careers. In return, the bankers and their friends
obtained privileges and favours which could be critically important in business competition.
Despite limited access characteristics, such as widespread patronage and corruption,
Thailand’s economy grew with an impressive 8.3 percent in the 1960s (Tsai & Tsay 2004).
Apparently, growth and limited access could go hand in hand. In the words of Doner (2009,
p.101), ‘the political-military elite was factionalized when it came to the pursuit of economic
39
rents but unified behind the country’s economic and political strategies.’ Pasuk & Baker
(1998, p. 62) argued that business, banks and bureaucracy worked together to develop their
strategy of growth throughout the 1960s, while they also formed interested coalition headed
by
the Finance Ministry which became hooked on the proceeds of the tariffs [followed by] the
Board of Investment and other pockets of officialdom which lived off the grant of licences and
privileges […], the businessmen who profited from protection and […] the generals making a
bit on the side.
Jansen (2002, pp. 354-55), shows how the arrangement could lead to economic growth:
The accommodation found between the business class and the state gave (Chinese) business
groups a free hand in running their business in exchange for perks for the state elite. The state
provided sound macroeconomic policies, investment in education and infrastructure, control of
labour and low prices of food and thus created the favourable conditions for private business to
invest and expand.
The above perspectives indicate that the idea that the military was in charge of politics, while
the free market ruled economics is incorrect. Rather, the military based its rule on
guaranteeing the stable environment that was necessary for both the expansion of the
economic pie as well as a predictable distribution of rents. They achieved this aim not by
incorporating business activity into the state, but by establishing a firm stake and high
influence in the business sector, and especially the banking sector on which entrepreneurs
relied. The fact that such an arrangement increased stability and averted the use of violence
among actors with high violence potential (e.g. generals), fits the logic of the natural state.
This stability, in turn, can be proposed as an explanation of Thailand’s economic success
during the 1950s and 1960s. The ‘double-edged sword’-argument of NWW posits that elite
rents are inefficient economically but necessary to achieve a more fundamental condition of
stability. The story of Thailand’s financial-military elite arrangement, however, suggests that
there is another factor at work here as well: the generals had a stake in the expansion of the
economy and worked to achieve such expansion by establishing the necessary
macroeconomic conditions and supporting successful new ventures. The elite rents, thus,
functioned as an incentive for elites to set the conditions for economic growth. These are
characteristics of a developmental state. Perhaps, a truly open market system, supported by a
democratically elected government could not have achieved the degree of coordinated policy,
as praised by the World Bank. While NWW point us as the political strengths of a
developmental state, but fail to acknowledge the potential economic advantages – centralized,
coordinated policy – of such a developmental state over the forces of competition.
4.4. The rise of politics and Thailand’s developmental state (1968 – 1988)
The economic growth under military rule increased the aspirations of larger groups in Thai
society to gain access to the expanding political and economic opportunities. On top of that,
the high growth rates and expansion of the private sector in the 1960s strengthened the
position of economic elites in Thailand’s dominant coalition in relation to that of military
elites. As a result, economic elites began to question the idea that profits had to be shared with
40
the military elite (Pasuk & Baker 1998, p.222). The educated, urban middle classes also began
to press for more representation and openness in politics. At the same time, Thai peasants
were becoming increasingly confident and aware of their collective power. Although
dispersed and working with uncoordinated local agendas, pressure for reform was rising in the
rural areas of the north, northeast and south, whose inhabitants were hardly benefiting from
the recent growth (Pasuk & Baker 1998). Sarit and Thanom had invested in rural development
to maintain political stability. Nevertheless, the appeal of communist insurgency movements –
capable of using violence – was on the rise. These movements attracted peasants who resisted
the growing involvement of government and business in their communities, claiming that
peasants were the true heirs of Thailand and that their productivity was the backbone of Thai
development (Pasuk & Baker 1998, p.190).
The highly limited access of Thailand’s political organizational framework did not suffice to
deal with these new groups and interests. A new set of political institutions needed to be
developed. However, still clearly exhibiting the key characteristics of a natural state, Thailand
could not easily cope with these fundamental social, political and economic changes. As
predicted by NWW, instability ensued. In reaction to the pressures for more political access,
Thanom promulgated a new constitution in 1968 which established an elected lower house of
parliament. After a short period of democratization, however, military dictatorship was
reestablished in 1971. While the Southeast Asian region was struck by communist victories in
Cambodia, Laos and Vietnam, and export markets collapsed due to the oil crisis of 1973, the
divisions in Thai society came into the open. These internal and external events triggered
large scale student protests in Bangkok in October 1973. King Bhumibol had been a
proponent of the liberalization that the 1968 constitution promised, but he did not resist the
military’s return to authoritarian rule (Hewison 2008, p.197). The situation became very
explosive and violent. Large sections of the military refused to use violence against the
protestors. Thanom lost his support and had to flee the country. A period of democracy
ensued, but it was a period of extremes rather than stability; a ‘frantic anarchy of political
parties, demonstrations, strikes, debates, activism, and turmoil’ (Owen 2004, p. 358). The end
of military rule and the newly institutionalized democratic system meant that relations within
the elite had to be renegotiated, and that a wide range of new groups could enter the political
arena. The revolutionary events of 1973 were staged by elements outside of the ruling elites,
especially radical students and peasants. During the democratic elections of 1975, a total of 42
parties participated, reflecting the wide variety of interests that were looking for
representation in the parliament.
NWW predict that a LAO cannot sustain open access in politics as long as economic interests
can capture the state and use it to limit competition. Indeed, a truly open and competitive
democratic system did not develop in Thailand in the mid-1970s, and rent-seeking soon
gained the upper hand in politics. Whereas during the 1950s and 1960s generals had played a
key role in business, the tables had turned by the mid-1970s and businessmen found their way
into politics. Businessmen were involved in the founding of three major parties: The
Democratic Party, Social Action and Chat Thai. These parties were ‘a mixture of the
traditional authority of royalists, bureaucrats, and generals along with the new wealth and
assertiveness of business’ (Pasuk & Baker 1998, p. 223). The Chat Thai party, for example,
41
consisted of a military faction that had lost some of its powers during the Sarit-Thanom rule
and had developed extensive business interests in textile and the agribusiness sector. The
civilian politician Kukrit Pramoj, leader of Social Action, became prime minister in 1975,
supported by powerful businessmen as well as future prime ministers Chuan Leekpai and
Anand Panyarachun. In the countryside, a new class of rich provincial magnates developed.
These magnates drew revenues from construction and rural development, but also from illegal
gambling and marijuana smuggling. In Thai, the rural magnates are often referred to as Chao
Pho, or godfathers. The magnates used their wealth to build clienteles within their provinces;
building schools and health care facilities, and handing out cash and making promises during
elections. Often, they operated in a mafia-like way and held connections to local militia’s and
military factions. By the mid-1970s, the big Bangkok based parties began to build alliances
with these provincial magnates, who would support their campaign in the countryside while
getting favorable contracts and privileges in return (Pasuk & Baker 1998, p.226).
As a political environment developed in which old and new groups attempted to skew
political access to their advantage, political contestation degenerated into violence and chaos.
In response, the military leadership regained power and actively limited access. The
communist victory in Indochina in 1975 and the retreat of the United States from the region
heightened the fear of a communist victory in Thailand. This fear again legitimated a shift in
the balance of power back towards military dominance. In 1976, the military violently
cracked down on student protestors. On 6 October this culminated in an ‘orgy of violence’ by
right wing elements against students at Thammasat University in Bangkok. The military
restored order by imposing an authoritarian regime and harshly suppressing communist
tendencies. All forms of social and political organization were put under state supervision and
media was tightly controlled (Pasuk & Baker 1998, p.224). Despite the return of military rule,
the experience of political openness and contestation had profoundly changed Thailand’s
political culture. In the terms of NWW, Thailand experienced a process of maturation of the
limited access social order. Back in control, the military soon began to fare a more inclusive,
conciliatory course, and access to politics was more open that it had been before 1973.
Communist youth, who had fled the forests in the mid-1970s, were allowed to return into the
cities and the communist insurgency died out, although the structural discontent of the
peasants was not resolved and would resurge in the 1990 and 2000s. The increased power of
business interests was institutionalized through increasing business influence on government
policy, in parliament, ministries and technocratic institutions. The military itself became more
factionalized. Power struggles developed between two cliques of graduates from the Thai
Chulachomklao military academy. Kriengsak Chomanand, who held the prime ministership
in the late 1970s, was part of ‘Class 5’. In 1980, General Prem Tinsulanonda who was a
member of rival ‘Class 7’ came to power.
General Prem laid the foundations for the economic boom of the late 1980s and early 1990s.
Economic access expanded during this period. The Thai economy started out on a trajectory
of export manufacturing, and economic opportunities were opening up to domestic and
foreign entrepreneurs and investors. A large agribusiness sector could develop in the
countryside, benefiting from the American infrastructural investments of the 1960s and 1970s.
Thailand’s small clique of bankers and bureaucrats was broken up and new elites captured
42
their share of the economic growth. As NWW argue, increasing access in a maturing natural
state requires new, impersonal arrangements among elites to manage relations. Indeed, a well-
designed macro-economic policy infrastructure was built, including the Bank of Thailand, the
Ministry of Finance, the Board of Investment, the National Economic and Social
Development Board, and the Budget Bureau, focused on creating the proper financial
conditions for business to prosper. The parliament became more important as a platform for
bargaining among the state and business elites.
Figure 1. Transformation of the economy: Total Thai exports organized by sector (1970 – 2004),
based on data by Doner (2009).
Politics also became more open, but access was still deliberately managed and limited. Prem’s
rule was predicated on a skillful management of elite interests, the success of which
contributed to Thailand’s growth. His military allies occupied the ministry of Defense,
Interior, Finances and Foreign Affairs, while the three business-dominated political parties
established control of the ministries of Industry (Chat Thai), Commerce (Social Action) and
Agriculture (Democrats) (Pasuk & Baker 2008, p. 225). Prem ruled in close cooperation with
the king, whose extensive economic interests were also looked after (Hewison 2008, p.198)
The logic of this ruling coalition, called ‘Thai Style Democracy’ or ‘semi-democracy’ was
different from that of the earlier decades. Business-bureaucracy cooperation depended on a
‘share-out’ of ministerial posts and a more assertive role of business in politics. The dominant
coalition captured rents from new enterprises with permits and licenses, over which the line
ministries had authority. Often, the ministries of Industry, Agriculture and Commerce
competed over such authority. This competition did not fully dissipate rents, but made it
easier for new companies to find a patron. Doner & Ramsay (2000) term this specifically Thai
mechanism ‘competitive clientelism’ (Doner & Ramsey 2000, p.159).
Access to the parliament opened up to new groups, but, as could be expected from a natural
state perspective, remained a platform for distribution of rents. Especially the new rural elites
profited from their position in the parliament to gain a share of the state’s rent capture. The
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1970 1975 1980 1985 1990 1995 1999 2001 2002 2004
Re-Exports
Other Goods
Mineral Products
Agricultural/Fishery Products
Manufactured Products
43
wealth and power of provincial magnates grew with the expansion of the agribusiness and
manufacturing sector in the countryside. These magnates had previously allied with the
generals, but now they began to defect from the old coalitions. Instead of supporting
candidates from the bureaucratic establishment for the parliament, they fielded their own
candidates. This development began to undermine the credibility of commitments among
elites. The role of traditional, Bangkok-based bureaucrats who could profit from their share in
business profits eroded. Elements of the military began to look for other ways to retain their
position. Exploiting their violence potential and to maintain patronage networks, some went
to the countryside to ‘buil[d] reservoirs, distribute water jugs, establish buffalo banks, and set
up village ‘self-defense’ squads’ (Doner 2009, p.113). At the same time, this development
undermined Thailand’s developmental state and its ability to actively manage and promote
economic growth. According to Jansen (2002), the provincial magnates were hardly
concerned with collective growth, but rather focusing on ‘patronage, short-term profits, and
capturing rent-incomes’ (Jansen 2002, p.356).
Not all groups could find their way into the wider-, but still limited, access, political arena
where economic privileges were distributed. As is shown in Figure 2., poverty hardly declined
during Prem’s rule, while inequality rose sharply. To illustrate the relative backwardness of a
large section of the population: in 1986, secondary school enrolment stood at only 29 percent,
compared to 60 percent for Malaysia (Jansen 2002, p. 350). The urban middle classes had a
hard time to find their way into politics. The socio-economic landscape of Bangkok had
changed during the 1980s, with the development of a large suburban middle class. The middle
class remembered the political events of the mid-1970s and strived for a modernized Thai
polity. However, attempts to form political parties and gain a position within parliament failed
due to lack of numerical voter support, money and cohesion. Politics remained largely the
terrain of moneyed interests, but ‘the new middle class played politics nok rabop, ‘outside the
system’, through [non-governmental] organizations, agitations, and especially through the
press’ (Pasuk & Baker 1998, p.235). A central point on the agenda of the middle class
movement was to expose the widespread rent-seeking, especially by the rural magnates. An
important proponent of the middle class was Chamlong Srimuang, a dissident soldier – who
still had close connections in ‘Class 7’ of the Thai military academy – turned reformist
Buddhist. Chamlong himself became major of Bangkok in 1985 on a platform of anti-
corruption. He established a political party, Palang Dharma (moral force) which consisted of
Buddhists, ex-soldiers and businessmen that became a significant political force in the urban
politics of Bangkok.
4.5. Money politics and collapse (1988 – 1997)
After twelve years of cooperation between the military rulers and businessmen-politicians in
parliament, the role of the parliament further expanded and a new political logic crystallized.
This new logic was still governed by attempts to limit access and seek rents, rather than open
access and competition. In 1988, Prem stepped down to have democratic elections for the
prime ministership. The elections were won by Chatichai Choonhaven, the Chat Thai leader.
Chatichai was the first leader in a new tradition of ‘money politician’ cabinets. A retired
general, Chatichai had extensive business interests in Bangkok as well as close connections to
44
provincial magnates in the northeast (Pasuk & Baker 1998, p.228). Thirty-nine of his forty-
five cabinet members were businessmen. In the context of a booming economy, these money
politicians made huge profits, using their political power and connections to their personal
advantage. Strategies varied from trying to take control of, or sideline, Thailand’s institutions
for macroeconomic management, buying up technocrats – a strategy pursued by the
telecommunications firm owned by Thaksin Shinawatra – or seeking deals with corrupt
bureaucrats and parliamentarians to profit from government licenses, contracts and
concessions.
During Chatichai’s tenure, the Thai economy kept expanding rapidly. GDP growth came
close to a yearly average of 10 percent. Foreign investment increased ten times, from $150
million in 1970 – 1985 to $ 1.4 billion in 1986-1994 (Doner 2009). Trade boomed (Pasuk &
Baker 1998, pp.78-79). At the same time, rural masses hardly profited from the wealth.
Farmers were often displaced as their lands were exploited for manufacturing and
agribusiness operations. The wage gap that had started to increase in the early 1980s, further
widened. Secondary education was still lagging. Traditional agriculture was stagnating. The
value added per worker in agriculture had slipped from 50 percent of the national average in
1960 to 25 percent in 1991 (Jansen 2002, p. 363).
Figure 2. Poverty rates (blue; in percentages, left axis) and Inequality (red; GINI coefficient, right
axis) in Thailand (1962 – 2002). Data from Somboon Siriprachai (2009), except for inequality data
from 1962 – 1975 from Jansen (2002).
As NWW predict, the ‘natural state style’ elections for the Thai parliament were not so much
about genuine policy agendas, but rather about trading votes for privileges. Disadvantaged
rural workers were susceptible to vote buying, thereby empowering the often unscrupulous
rural magnates. Thailand had always fared a conservative fiscal and monetary strategy in
which urban business profited from the surplus extracted from the countryside (Pasuk &
Baker 1998, p. 92). Now, the increasing elite competition for rents corrupted the
macroeconomic policies. The fact that politics were used as a platform for rent-seeking was a
key concern of the Thai middle classes. Numerous NGO’s were founded in the 1990s to
0,4
0,45
0,5
0,55
0,6
10
20
30
40
50
60
70
80
90
45
expose corruption, including Transparency Thailand, the Anti-corruption Network and the
Foundation for Clean and Transparent Thailand (Mutebi 2008, p. 163).
The role of the military was all but eliminated after 1988. Factions of the military benefited
greatly from the rise of business. They had connections in the stock exchange, arms trading
and real estate, and also with influential members of the cabinet (Ukrist 2008, pp.125-26).
However, the empowered business interests began to challenge the interests of the traditional
bureaucratic establishment, which included the monarchy and the formerly dominant military
factions. The extensive military budgets which, up until 1988 had been the unquestionable
advantage which the military had retained for their support of the ruling coalition, were
attacked. The response from the military and bureaucracy was to lay bare the corruption of
Chatichai’s ‘Buffet Cabinet’ and to proof their old adage that businessmen were ‘unfit to
rule’.
While different forces were gathering against Chatichai, a large military faction acted to
regain control over the state, reign in the recalcitrant new elites and preserve its own interests.
In the context of rising criticism of Chatichai’s corrupt rule, the military staged a bloodless
coup in February 1991. After the coup, the military began a strategy of compromising with
rural and urban businessmen. They installed the widely respected Anand Panyarachun as
prime minister to implement reforms. At the same time, they attempted to appease the
provincial magnates who were willing to take part in the new coalition and suppress dissent.
The constitution was replaced by an older, 1980s constitution, decreasing the influence of the
parliament. Applying the NWW perspective, the military coup can be explained as an act by
the military to re-impose limited access institutions and restore the function of the state as
mechanism for credible commitment among elites. This point, following from NWW’s
theoretical framework closely resembles the military’s conservative philosophy. Instead
according to Pasuk & Baker (1998, p.230), the central motive of those who committed the
coup was to increase their share in the expanding economic pie, rather than to stop corruption:
it was the shift of power and corruption revenue that was at stake rather than the issue of
corruption itself. The coup was a last-ditch attempt to defend army and bureaucracy against the
growing power of parliament.
In the period after the coup, it turned out that military dominance was much more contested
than it had been in earlier decades. Although a return to parliamentary politics was promised,
General Suchinda Kraprayoon was put forward as prime minister by the coup group. Protests
broke out, resulting in at least 50 deathly casualties. The Thai economy suffered from these
post-coup events. Large sections of the military refused to crack down these demonstrations
and large factions in business and the military took the side of the protesting students. The
generals had overplayed their cards. Finally, King Bhumibol intervened by appointing Anand
for a second term as interim prime minster. Anand again modified the constitution and called
for elections in September. During the heated campaign, two factions fought over political
control. Elite factions – businessmen, intellectuals, military men – who had sided with
Suchinda were referred to as ‘devils’, those who had opposed him ‘angels’. In the end, the
‘angel’ Democrat Party came out as the biggest party with only a tiny margin over the ‘devil’
Chat Thai.
46
The distinction between ‘devils’ and ‘angels’ perhaps signified the importance of rhetorical
campaigning language more than it reflected a fundamental difference in approach to politics.
Halfway the 1990s, Thailand’s nascent democracy had been captured by opposing interests
seeking access to rent opportunities. Two opposing camps were emerging, along a rural-urban
divide. Urban interests were represented by the Democrats. Rural interests were represented
by the Chat Thai party. Attempts to eradicate corruption were frustrated from all sides, inside
and outside the ruling coalition. Consecutive government could not keep their promises of
reform. Numerous corruption scandals surfaced. Formerly well-governed organizations like
the Bank of Thailand became corrupt. At stake in parliamentary politics were the
approximately forty cabinet positions that were recruited from the 200 members of
parliamentary who had formed a majority coalition. Not much legislation passed the
parliament; power was vested in the executive, so that cabinet members could use their
position to satisfy their own interests and that of their clientele (Pasuk & Baker 1998, p.249).
Rather than for law making, the parliament was used to file no-confidence motions so that
parties who were in the opposition or who felt they had not gained enough influential
positions, could gain a more favorable position in the dominant coalition. Parliamentarians
frequently moved from one party to the other to stay within the ruling coalition. According to
Mutebi (2008, pp.153-54)
The fluidity and instability of the national politics meant that political actors were unable to
guarantee the survival of many policy arrangements beyond the life-span of a particular
government. Changes in government would be followed by scrutiny of major infrastructure
contracts and government concessions handed out by previous governments to connected firms
and individuals.
4.6. The rise and fall of Thaksin Shinawatra (1997 – present)
After years of growth and expanding rent opportunities, Thailand went into deep recession. In
July 1997, the Thai economy collapsed. Banks and property companies failed. Foreign
investors fled the country. The crisis impacted all Southeast Asian economies, but the crash in
Thailand came first and was particularly severe. After having been one of the world’s most
rapidly growing economies for ten years, the growth had stagnated in the mid-1990s and now
the bubble burst. Part of the crash can be explained by the stagnating economy in Japan, and
the rise of new, low-wage competitors such as Vietnam. The most important reason, however,
seems to have been Thailand’s failure to upgrade its economy. The boom was financed
largely on foreign money and speculation. Wages had risen during the boom, but Thailand
had not used its window of opportunity to move up the value chain, by investing in integrated
supply chains, domestic innovation, quality products and higher productivity. Thai-owned
companies were relatively weak and dependent on imported technology. Weaknesses in the
Thai economy also stemmed from failing macro-economic policy, the pressure and regular
interventions of self-interested members of the elite (Doner 2009).
One effect of the crisis was the development of a consensus view that serious measures should
be taken to combat endemic corruption. A new constitution was adopted in 1997. The
constitution founded numerous organizations to function as checks and balances governing
47
elite relations. These organizations included a Constitutional Court, Administrative Courts,
and a National Committee on Human Rights, a State Audit Commission, an Ombudsman, a
National Election Commission, and a National Counter Corruption Commission (Mutebi
2008, p.158) The constitution required elections for both houses of the parliament and
members of parliament had to pass an examination of their financial involvements. The
constitution also required members of parliament to have at least a bachelor’s degree, to reign
in the power of provincial bosses and their patron-client politics. The number of cabinet seats
was cut from 49 to 35 to limit the opportunities for rent-seeking in the parliament.
Another, quite different effect of the crisis was that it stimulated the sentiment that a strong
leader should put Thailand back on track on a course of economic growth. After the collapse,
Thailand had to cope with the stringent terms of a $17 billion IMF bailout. 56 failed financial
institutions were closed down. The exploitation of oil reserves, population control and
diversification of the economy had to pull Thailand out of the recession. However, growth
was relatively slow. The IMF terms were highly unpopular (Pye & Schaffer 2008, p.46) A
‘powerful nationalist alliance’, consisting of the king, businessmen, intellectuals, workers and
NGO’s organized against the IMF policies. It was hoped that a strong business leader could
find a way out of the crisis. According to Hewison (2008), ‘the political outcome [of the
opposition to the IMF terms] was to cede political leadership to the domestic business elite
that wanted direct control of the state’ (Hewison 2008, p.201). This sentiment propelled the
political rise of telecommunications tycoon Thaksin Shinawatra. The willingness of large
sections of the Thai population to secede power to a strong leader reflects the view of NWW
that, in natural state conditions, stability has priority over impersonal arrangements and open
access, especially in the face of a crisis of the proportions experienced by Thailand in 1997-
98. The power of Thaksin to ignore the rule of law became clear when he was on trial for
corruption in 1997 and ran a ‘campaign’ against Thailand’s Constitutional Court. Thaksin
traveled through the country to tell his voter base that he would make Thailand prosperous.
According to Mutebi (2008), ‘the implication was that, were court to rule against him, his
voters should not stand for it. Indeed, some in his TRT party even warned of mob violence in
the event of a guilty verdict’ (Mutebi 2008, p.156). As leader of the ‘Thai Rak Thai’ (Thai
love Thai) party, Thaksin campaigned on a message of national unity. He appealed directly to
the rural voters by promising welfare programs and debt forgiveness schemes. He was
immensely popular in the countryside and easily won the election. During his first term,
Thaksin turned into a popular hero. ‘Thaksinomics’ brought Thailand 22.2 percent GDP
growth during Thaksin’s first term. The TRT won a landslide reelection in 2005.
Although the new constitution had designed a new framework with impersonal rules, checks
and balances, the practice of using politics to limit access and distribute rents remained
widespread. Corruption was rife during Thaksin’s tenure. Thaksin himself did not shy away
from blatantly furthering his own business interests. In the first four years of his prime
ministership, 8 cabinet reshuffles took place, and 55 individual new appointments to the
cabinet took place. The number of ministries expanded from 14 to 20, and the number of
government departments from 126 to 143 (Doner 2009). Thaksin manipulated military
appointments to get his supporters and family members into powerful positions (Kharabi
48
2011, p.22). He placed officials from his own party circles at the head of agencies that had
been set up as independent watchdogs under the 1997 constitution.
At the same time, however, large sections of the population began to question the legitimacy
of Thaksin’s governing methods. During his second term, criticism of Thaksin began to rise.
The nationalistic coalition that had come out of the 1997 was dissolving, especially as
Thaksin began to steer a new course, considering himself a CEO and Thailand a business (Pye
& Schaffar 2008). Thaksin was attacked for his self-interestedness, serving his own major
business interests as prime minister. There was also outrage about his arrogant rule, reflected
by his harsh response to drug crime and brutal efforts to control the insurgencies in the
southern, Islamic, part of Thailand. His authoritarian tendencies were exposed when he took a
television program of a critical opponent off the air. Thaksin was also criticized for his lack of
respect for time-honored Thai traditions, such as the monarchy. The sale of his family’s Shin
Corporation for $1.9 billion to a Singaporean state enterprise, for which no taxes were paid,
brought the outrage to a boiling point. While different forces were gathering against Thaksin,
again military men determined the course of events. In opposition to Thaksin, an unlikely
coalition of political activists, royalists and rightists developed, organized in the People’s
Alliance for Democracy (PAD) (Pye & Schaffer 2008). As opposition grew, Thaksin lost the
essential support of the King and the military. Army Commander General Sonthi, also under
pressure of Prem who served as advisor to the king, reposted 129 middle-ranked officers of
‘Class 10’, loyal to Thaksin, to positions without control over military fighting units (Ukrist
2008, p. 129).
The 2006 coup provoked different responses. In September 2006, Thaksin was overthrown by
a military coup and sent into exile. Soon after the coup, a new constitution was put up for
popular referendum and ratified. Two elections were won by Thaksin supporters, but
annulled. Finally, Democratic Party leader Abhisit Vajjajiva was elected by a special
parliamentary vote rather than democratic elections. The coup was presented by an uneasy
coalition of royalist military junta and liberal reformers as a ‘good coup’, to stop Thaksin’s
increasingly authoritarian rule. Thaksin’s supporters were outraged by the way in which their
leader had been disposed by what they viewed as the traditional urban bureaucratic elite. Thai
society slowly drifted apart into two groups, the royalist ‘yellow shirt’ PAD and the ‘red shirt’
Thaksin supporters. In 2010, during mass protests in Bangkok by Thaksin supporters dozens
were killed and hundreds wounded. In July 2011, Thaksin’s younger sister Yingluck
Shinawatra was elected to become Thailand’s new prime minister.
The history surrounding Thaksin is still highly controversial and contested, both in the
academic community and in Thai society. Some conclusions can, however, be drawn. On the
one hand, it shows that Thailand has not yet achieved a body of law strong enough to
withstand both Thaksin’s authoritarianism and the military’s non-democratic response.
Corruption remains a key problem of Thai politics. The assertiveness of military factions
shows that civilian control over the military is far from established. The scale and intensity of
popular mobilization on both sides signifies the fact that Thailand has not yet overcome its
deeply rooted urban-rural divide and high inequality. On the other hand, the mobilization
shows that civil society and political consciousness have risen to unprecedented levels and
that formerly less controversial practices and unequal access are no longer accepted. In a
49
situation where Thailand’s economy faces new competitors on the low end, such as China,
India and Vietnam, there is a need to upgrade its economy to avoid a ‘middle income trap’.
Especially, a strategy is needed to increase the skill-level of labour (Jansen 2002, p.356;
Doner 2009). The LAO lens is particularly instructive in understanding Thailand’s current
challenges. From the perspective of the LAO, how these challenges can best be met in the
current political and social climate depends, on the question if Thailand has solved its
problem of violence and is ready to open access. This implies that the dominant coalition of
elites should find it in its interest to establish and respect an impersonal body of law and
achieve consolidated control of the military. The fact that Thai society is divided in two
opposing camps, both striving for the achievement of the one factor while refusing to abide by
the other (Thaksin’s camp seems not deeply committed to the rule of law, the PAD camp
argues that it needs the military as a trump card against Thaksin-style authoritarian rule)
complicates the achievement of these two essential conditions for open access.
4.7. Conclusion
This chapter has traced Thailand’s recent political and economic history. Some key issues run
through the narrative. First of all, we have seen that, in the absence of a colonial ‘design’,
Thailand’s state has been subject to constant competition between different interests. While
the argument that the Thai state is ‘weak’ is not fully convincing, it seems clear that processes
of economic policy and rent distribution take place among a circle of elites that is connected
to the state but which does not equal the state (as is the case in Malaysia). The cooperation of
economic and political elites contributed to Thailand’s development achievements. Secondly,
Thailand experienced episodes of democracy relatively early in its developmental history
(1932-33, 1973-76). Democratic institutions, however, were instable and often captured by
moneyed interests. Thirdly, the military has played a key role in Thailand’s history. Although
military intervention in politics has become more controversial and contested, violence
remains dispersed and consolidated civilian control over the military is not achieved. Finally,
Thailand is characterized by high levels of inequality, which coexist with a tradition of
antagonism between the urbanized centre and the rural provinces.
In terms of the LAO framework, Thailand should be characterized as a natural state, which
has matured over the past century, and especially since the 1980s, but has also been
characterized by episodes of fragility and relapses. Violence and instability are important
factors informing Thailand’s political system. The limitation of access to establish credible
commitments among elites has been observed in several episodes of Thailand’s history. Elites
with economic interests have been observed to seek access to violence to increase their
bargaining power and political influence. A high number of actors is involved in the struggle
for access to the state. Disparity between those who have access and those who don’t can
clearly be distinguished. Moreover, political and economic access have seen to be deeply
intertwined. Despite these limited access characteristics, Thailand has achieved considerable
economic development. The fact that much of this growth took place in periods of relatively
little economic access, such as under the rule of the generals in the 1960s, in the decade
50
before the crisis,26
and under Thaksin in the 2000s, while much of Thailand’s economic
weaknesses are attributed to expansion of access to a higher number of rent-seekers, raises the
question whether the limitation of access was only necessary to achieve stability, or if the
limitation of access was also directly conducive to growth (rather than being the ‘dark side’
of NWW’s double edged sword as discussed in Chapter 1). The following chapter will discuss
the merits of the NWW framework in more detail, and in comparative perspective with
Malaysia.
26
Although access was relatively open in this period, much of the growth dissipated after the economic collapse
in 1997. Therefore, the significance of the relation between open access and economic growth in this period can
be questioned.
51
Chapter 5: Empirical evaluation of the framework
5.1. A confrontation of cases and theory
The preceding chapters have given a survey of the recent development histories of Malaysia
and Thailand, and have attempted a first confrontation of the conceptual framework with the
empirical cases. This chapter will discuss the findings of the preceding chapters in a more
systematic way, in light of the research question and sub-questions as formulated in the
opening chapter. In the next sections, these findings are discussed in a comparative
perspective, and the implications of the empirical investigation for the general conceptual
framework are investigated.
Sub-question #1: Is competition and organization outside the orbit of the state (i.e. civil
society) restricted?
As the LAO logic suggests, we should look at dynamics in Malaysia’s elite to understand the
development of the country’s political and economic access. Malaysia’s relatively small and
stable dominant coalition, centered on the UMNO, shaped access to politics and economics,
especially after 1969. Malaysia inherited open access institutions from its colonial past: a
British-style constitutional monarchy, and an open economy. Some of these institutions
persist, but overtime access has been limited. The episode of ethnic violence in 1969 led to
increased state control of the economy (e.g. New Economic Policy) and public debate (e.g.
Internal Security Act). The limitation of access was both formal (through laws such as the
ICA) and informal. The dominant political coalition increased its power by opening up rent
opportunities in their patronage circles (e.g. share in privatized SOEs). Due to the dependency
of constituencies for patronage opportunities on the dominant coalition, as well as
intimidating tactics and unfair election proceedings, it has become more difficult to win
elections for political parties outside the dominant coalition. To maintain its rule, the
dominant coalition manipulated the constitution and interfered with the judiciary. Civil
society efforts (e.g. Bersih) calling for an increasing accountability of the elites have been
suppressed.
Thailand’s elite relations are characterized by competition and strife. Since the 1970s, no
dominant coalition seems to have been capable to fully and persistently control political and
economic access. Whereas Malaysia inherited ‘designed’ open access institutions from it
colonial past, Thailand’s process of state formation was characterized by a gradual process of
elite competition for access to politics. A constant, recurring pattern is that, despite efforts to
establish rule of law with parliamentary politics and new constitutions (e.g. in 1932, 1973 and
1997), dominant elite coalitions – a shifting blend of generals, businessmen and rural
magnates – in practice recurrently took control over the state and used its position to limit
access. The methods to limit access, and the degree to which it succeeded, however, changed
overtime. In the 1950s, and 1960s, the coalition of generals and bankers – supported with
foreign aid – exchanged privileges to reap the profits of effective macroeconomic
management and the expanding private sector. The increased power of business prompted a
52
shift in the dominant coalition, and the development of a more formal body of laws and rights.
Nevertheless, high levels of corruption indicate that personal elite connections still mattered.
The Chatichai ‘buffet cabinet’, and Thaksin’s interlaced business and political interests testify
to this conclusion. The most recent military coups (1991 and 2006) seem to signify attempts
by sections of the Thai elite (military and king) to renegotiate relations and privileges. Even if
it remains unclear if this is an attempt to save Thailand from predatory capitalists, or rather to
promote their own personal interests, military intervention has certainly taken place at the cost
of rule of law (e.g. abrogated parliaments and constitutions). Since the mid-1970s, Thai elites
are characterized by high levels of incoherence, instability and polarization. This fact helps to
explain the fact that Thailand’s civil society suffers restrictions (e.g. ‘Lèse-Majesté’ laws) and
intimidation but nonetheless manages to prosper.
Sub-question # 2: Is access to economics and politics restricted simultaneously?
While Malaysia’s political system remains largely closed, increasing economic access drives
social change. After 1969, the Malaysian state stepped up its efforts to control economic and
political access. While access to the political system has been increasingly restricted,
Malaysia experienced high and (almost) continuous economic growth. As argued before, it
would be a mistake to substitute the high growth experienced by Malaysia for high levels of
economic access. Although high levels of foreign investment and decreasing inequality levels
indicate that entrepreneurs outside the direct orbit of the state were able to find access to the
market, access to some key economic sectors (e.g. privatized SOEs) is limited. These sectors
are characterized by LAO mechanisms such as patronage and personal connections. The
rather successful economic development of Malaysia shows that growth could take place
despite this limitation of access. More recently, policymakers have called for more openness,
and for meritocracy among bumiputera entrepreneurs, indirectly attacking the privileges of
rent-seeking elites. This seems to indicate that, as predicted by the LAO framework, there are
limits to Malaysia’s growth in the current state of the social order.
In Thailand, political access develops in a capricious manner but has expanded significantly
overtime. Further opening up of political access, however, seems to be hampered by
tendencies by elected politicians to limit economic access. Thailand’s turbulent history
testifies to the contested nature of political access. Each time the political process opened up,
elite forces gathered to commit a coup d’état and limit access. Despite these periodic changes
of fortune, a trend towards an increase of political access between the 1950s and present can
be clearly distinguished. Parliament became more important, while the legitimacy of military
rule declined. More political access, however, implied more competition for rent
opportunities. In a booming economy, the rise of parliamentary politics indeed resulted in
increasing opportunities for urban businessmen and rural agribusiness magnates to profit from
their connection to the state and parliament (‘money politics’). These new elites used these
connections to limit further expansion of market access, as signified by the high levels of
corruption under civilian leaders. Large sections of the population have remained outside the
circles of economic access and dependent on patronage politics. Money politics threatened the
interests of the traditional elites, occasioning military coups to reign in such practices.
53
Sub-question #3: Is limitation of access connected to the necessity to achieve stability?
Stability has been an important concern for Malaysia’s elites. External shocks have resulted in
instability and conflicts among elites in Malaysia. These shocks have not led to much actual
violence but did occasion intimidation and centralization of power. Three substantial shocks
confronted by post-independence Malaysia serve to illustrate this conclusion. First and
perhaps most crucial was the May 13 ethnic riot in 1969. The results of the election and the
riots that followed threatened the ethnic bargain that held Malaysia’s system together. Elites
reacted to the event by limiting access in order to prevent a shift in the distribution of rents. A
second shock that impacted elite relations was the leadership crisis in the mid-1980s. In the
years before the crisis, economic stagnation had affected the distribution of rents. Key
members of the UMNO party began to defect and challenge the rule of Mahathir. The crisis
did not lead to military intervention but to judicial trickery and extension of executive power.
The restrained position of the Malaysian army probably contributed to this outcome.
Mahathir’s leadership skills and use of intimidation should not be left unmentioned as another
explanation for why no violence erupted. A third shock that sparked destabilization in the
dominant coalition occurred in the aftermath of the 1997 financial crisis. Finance minister
Anwar Ibrahim supported an IMF bailout. He then faced charges of sexual misconduct and
was expulsed from the dominant coalition. Again, Mahathir came out on top after the crisis
and the patronage structures surrounding the UMNO were retained. In conclusion, the
Malaysian dominant coalition has largely managed to deliver an institutional framework to
distribute rents among powerful elites. As follows from the NWW framework, this success
contributed to the absence of violence and instability and to rather successful development
within a LAO context.
In Thailand, external events that decreased the credible commitment of the dominant coalition
to distribute rents on several occasions have contributed to instability and conflict. Two
examples illustrate this point. Firstly, Thailand experienced a period of fragile democracy
between 1973 and 1976. The shifts in social relations that this period brought about where
exacerbated by an economic downturn. The competition over political access and resources
ended in an episode of extreme violence from right-wing military factions, directed at
civilians, and the re-imposition of military rule to stabilize the situation. Thaksin’s rise to
power serves as a second example. The financial crisis deeply impacted the opportunities for
elites to capture rents. Thaksin used this situation to mobilize his military connections and
voter base to press the court to drop an allegation of corruption. In general, access to violence
has been an important force in Thai politics. Whereas Malaysia is characterized by a
restrained role of the military in internal affairs, Thailand’s military men played a key role.
Provincial bosses, often supported by military factions, also used threats of violence to
increase their power on a local level.
54
Sub-question #4: Is the fate of ‘open access’ organizations dependent on a fulfillment of the
doorstep conditions of rule of law for elites, perpetual organizations and a military under
consolidated civilian control?
Several episodes in Malaysian history illustrate the point that truly competitive economic and
political organizations cannot function in an environment where relations are personal rather
than impersonal and where rule of law is not strongly embedded. The fate of the open access
institutions in the post-independence decade has already been discussed above. More recently,
the challenge for Malaysia to make the economy more innovative and technology-intensive,
as well as the declining legitimacy of the UMNO-led coalition can be understood from the
perspective that doorstep conditions must be fulfilled. Rule of law for elites and perpetual
organizations play an important role in both the economic and political issue. A future shift of
power on the federal level will be a serious test, as will be the increasing concern that
Malaysia faces a middle income trap.
The Thai case also illustrates how open access organizations have failed in a LAO context.
Already discussed have been the episodes of democracy in the 1930s and the 1970s, and the
corruption of democratic institutions over the past decades. A lack of all three of the doorstep
conditions seems to have played a role. Over the past years, the situation has become more
complex, as different groups, gathered around different priorities for reform, have polarized.
The ‘red shirts’ have called for a more restrained role of Thailand’s military, while the
‘yellow shirts’ emphasize the importance of impersonality and rule of law.
5.2. A comparative perspective
As discussed before, both Malaysia and Thailand have achieved considerable economic
development over the past fifty years. In terms of GDP per capita and also considering equity
(decreasing Gini-coëfficient) Malaysia has been more successful than Thailand. Both the
success of Malaysia and Thailand (in comparison, for example with other Southeast Asian
countries including Vietnam, Indonesia, Burma or the Philippines) and the lack thereof (in
comparison with Singapore, Hong Kong, Taiwan and South Korea) require explanation.
Existing explanations consider the colonial legacy, levels of foreign investment, resource
abundance, liberalization and privatization as causal factors. Problematic about these
explanations is the fact that they are incapable of simultaneously explaining the success,
failure thereof, and differences between the two cases. The NWW framework offers the
promise to build a nuanced and inclusive assessment of development in Thailand and
Malaysia. Its key innovation revolves around its explanation of the role of the state, and the
nature of the process of opening up access.
NWW argue that success of the LAO depends on increasing the capability of the state to offer
an institutional environment for credible commitment to a distribution of rents among elites.
Only if powerful elites ‘sign on’ to this arrangement will they refrain from using violence.
This allows for the possibility to increase the institutional capacity of the state, incorporate
new elites (‘marginal increase’) and formalize elite privileges. In Malaysia, this process has
taken place in a gradual fashion, allowing for a gradual but steady extension of access, and
55
expansion of political and economic activity. The core of the elite never changed drastically.
This steady development explains Malaysia’s relative success compared to Thailand, but it
does not explain the relative lack of success compared to South Korea or Taiwan. This lack of
success, however, can be understood if the doorstep conditions and transition process are
taken into consideration. Although Malaysia managed to upgrade its LAO institutional
capacity, it failed to make the transition to open access. Instead, the dominant elites yet
manage to hold on to their LAO privileges. Although the reasons for this have not been
investigated in depth in this paper, the ethnic tensions seem to be a likely explanation.
Thailand’s initial conditions promised a bright economic future, which has only partially been
achieved. The lack of a stable state structure, committing elites to a stable and peaceful
negotiation of rents, has contributed to this relative lack of success. Especially during the
1970, after military rulers had lost their foreign backing, and in the years around the 1997
crisis these problems of instability manifested themselves. The Thai state never consisted of
an institutional structure that was capable of committing all elites with violence potential. The
process of opening up access involved instability and violent episodes. On the other hand,
Thailand never plunged into civil war and anarchy. The state was instable and subject to
competing rent-seekers, and power decentralized and fragmented, but sustained economic
development took place nonetheless. Foreign aid in the time of the bureaucratic polity, the
relative strength of the army, effective macroeconomic policy, the binding role of the king
and the more inclusive political arrangement under Prem’s developmental state and after
contributed to this economic development. Arguably, the competitive nature of Thailand’s
patronage system also contributed to its success. In conclusion, Thailand’s lack of success can
be more easily explained from the NWW perspective than its success, but both still fall within
the LAO. Arguably, therefore, building a stable and inclusive state should have higher priority
in Thailand than placing the military under consolidated civilian control, or to build a rule of
law framework. The decentralized, factionalized nature of Thai society (with a large role for
rural elites) makes this process more difficult.
A comparative empirical perspective brings dimensions to the fore which would have escaped
notice if the cases would have been discussed in isolation. It shows that the power of the state
to build an institutional framework to credibly commit elites to a distribution of rents is highly
dependent on particular characteristics of the society involved. Not only the structure of rents,
but also the specific social and political structure of a society, and thereby also the nature of
elites (a relatively small and coherent post-colonial elite in Malaysia, or decentralized and
fragmented elite in Thailand) is an important ‘input’ into the violence and social orders
framework, which has a large impact on the outcome.
5.3. Fundamental criticisms of the conceptual framework
The goal of this paper is to evaluate the conceptual framework of NWW on the basis of the
two case studies of Malaysia and Thailand. Now that some issues concerning the framework
arising from the individual cases and the comparison have been discussed, this section will
extrapolate some of the problematic aspects to a more fundamental, theoretical level.
56
A first criticism concerns two shortcomings of NWWs definition of rents. NWW divide rents
in two categories: Schumpeterian and non-Schumpeterian. They rely on the neoliberal
contention that permanent (non-Schumpeterian) rents are bad for economic growth, but argue
that in a LAO context, they are (from an economic perspective) a necessary evil to achieve
and maintain stability. Two problems with this approach arise.
The approach draws our attention away from the possibility that rents themselves can be
directly favorable for economic growth, especially for a relatively underdeveloped country.
Rather than being wasteful, rents can be used by developmental states to create productive
economic incentives and steer the energy of entrepreneurs towards a common direction,
stimulating quick development (think of specific agribusiness or manufacturing sectors). The
power of such a consorted effort is hard to achieve in a context of open access and
competition, as markets are not by themselves proactive agents for development. This
necessity to ‘jumpstart’ economic growth by deliberate government policy is especially
relevant considering the unequal international economic relations that many developing
countries have to face. Examples of countries that used limitation of access and (monopoly)
rents to achieve development are Taiwan and South Korea. Without the proactive limitation
of access and stimulation with specific rents, these formerly developmental states might
otherwise never have achieved their current level of economic development. To a lesser
extent, these dynamics have also been observed in the cases of Malaysia and Thailand
(Gomez & Jomo 1999; Jomo 2002). NWW hardly pay attention to the international context
that current day LAOs have to face and thus miss out on this important issue on the minds of
elites in LAOs.
The NWW approach to rents is inconsistent with empirical reality in a way that is quite
opposite from the first problem outlined above: rents can not only be functional for
development, but also detrimental while also being unnecessary to achieve stability. While
elites can be motivated by developmental goals, they can also be motivated by predatory self-
interest. The idea that actors use rents to solve a problem of violence would in many cases not
do justice to the actual state of affairs. To summarize this criticism: NWW argue that rents are
a necessary evil in LAO conditions, while in fact rents can also be developmental on the one
hand, and predatory on the other. Although the logic of LAO as outlined by NWW adds to our
repertoire of understanding the function of rents, the definition of rents suffers from
oversimplification and rigidity. A too narrow focus on violence might lead us to overlook the
broader spectrum of possible functions that rents play.
A second point of criticism involves the causality of economic growth. NWW argue that
OAOs are more successful (in terms of economic development) than LAOs because they can
sustain competition and innovation through Schumpeterian rents. The causality in the theory
is that only when the right institutional context has been achieved (the doorstep conditions
fulfilled), a country can achieve full development. Institutions, thus, are the independent
causal factor; economic growth is the dependent factor. How growth can be achieved in a
LAO context remains vaguer. NWW seem to argue that, as LAOs mature, they can sustain a
wider range of (economic) organizations, which increased specialization and economic
participation. Another source of economic growth, in the argument of NWW, is that elites in a
LAO condition can try to minimize the negative consequences of rents. The underlying idea
57
that competition is ultimately necessary to achieve growth, however, is questionable. In
today’s world, LAOs are capable of importing technology in a wide variety of ways (ranging
from intellectual property theft to FDI), decreasing the necessity for innovation. The argument
of NWW (2009) is based on the developments in three ‘prime movers’ (France, England and
the United States). The fact that in contemporary conditions developing countries can import
technology sets them apart from these prime movers. Because imported technology does not
require competition and innovation, growth can be sustained in LAO conditions. Continuing
growth leads to abundance, meaning that more and more elites can be incorporated into the
dominant coalition and the natural state can continue to be successful. The fact that Malaysia
is currently experiencing problems with competitiveness and innovation, does not offer
empirical evidence of the above theoretical reasoning. A small country like Singapore does. A
suggestion for future research would be to investigate the case of China.
A third criticism is directed at the materialistic, economic approach of the conceptual
framework. To explain social, political and economic development, NWW point at the central
importance of rents for elites, and the need to arrange an institutional framework for credible
commitment among elites to distribute such rents. Applying this principle to real world cases
leads to new insights (as discussed in the first sections of this chapter), but NWWs simple
explanatory framework has a price, as it also results in a neglect of other factors involved in
social, political and economic development, such as the power of ideas and beliefs. Some
issues have not been discussed in detail in this paper (such as the role of the monarchy,
religion, and nationalism or attitudes towards authority and violence). Other issues have
explicitly been discussed in terms of rents, elites and violence. Fukuyama (2011), in his
account of the development of political order, convincingly shows the gains of going beyond
the narrow conception of a homo economicus and taking a more nuanced and multifaceted
perspective on human motivation. Because, ultimately, it seems unconvincing that complex
social phenomena can be reduced to only one causal factor. Although distribution of rents is a
fundamentally important factor, it cannot by itself and alone explain development in ‘recorded
human history’.
A final criticism involves the operationalization of the conceptual framework proposed by
NWW. As Karl Popper famously argued, a theory derives its strength from the degree to
which empirically falsifiable hypotheses can be formulated. The abstract, high-level nature of
the NWW conceptual framework makes it difficult to apply the Popperian criterion of
falsification. For example, NWW argue that there is a ‘hard break’ between LAO’s and
OAOs. However, in practice, the exact point where a society stops being a natural state and
achieves open access is hard to point out. A detailed investigation of the cases has shown that
limited access societies often have pockets of open access, such as free trade regions,
democratic state elections or competition in some key industries. Similarly, competition is far
from perfect in open access orders. One can point at the high level of rent extraction that can
be found in OAO democracies, in the form of bank bailouts, powerful lobbies or ‘pork barrel’
politics. Similarly hard to operationalize is the degree of political access in relation to
economic access. This paper used a narrative (instead of a quantitative) approach to describe
the development of access in both spheres. A concrete definition and conditions were derived
from the conceptual framework, but no quantitative benchmarks have been developed.
58
Ultimately, testing of the conceptual framework will also have to involve a more quantitative
operationalization and more specific benchmarking of such concepts as rents, elites and
access.
59
Conclusion
This paper has applied the notion of the limited access order (LAO) to the cases of Malaysia
and Thailand over a historical time span of approximately 100 years. The goal has been to
contribute to discussions about development on both an empirical and a theoretical level. The
paper has been guided by the following research question:
To what extent can we use the concepts of ‘limited access order’ and ‘transition to open
access’ to understand the social, political and economic development of Thailand and
Malaysia during approximately the last century?
Malaysia’s establishment of a relatively stable, semi-authoritarian system in the post-colonial
period has been investigated, in light of its colonial legacy. Thailand’s tumultuous political
and economic history since the fall of absolute monarchy in 1932 has been discussed, in the
light of the earlier process of state formation. The discussion included both political and
economic developments. The empirical evidence has lead to the conclusion that both
Malaysia and Thailand exhibited the characteristics of the LAO throughout the period
discussed. In both countries, elites have limited competition and organization outside the
control of the dominant coalition. Both economics and politics were involved in this
limitation of access. The necessity of achieving stability and overcome violence played an
important role. The concepts of transition and doorstep conditions also contributed to our
understanding of Malaysia and Thailand, especially in the most recent period discussed. A
comparison of the two cases in light of the NWW conceptual framework has drawn attention
to the way the composition of elites, the strength of the state and the process of opening
access interacted to create specific development outcomes. Rents, elites and violence have
shown to be valuable concepts to understand processes of change and development. In
conclusion, the conceptual framework, as a universalizing comparison as defined by Tilly, has
shed new light on important aspects of the individual cases which might have been left in the
dark otherwise.
At the same time, a study of the cases has revealed some important shortcomings of the
conceptual framework. Some empirical evidence is not in accordance with the conceptual
framework. For example, despite its highly competitive and instable elite, Thailand has
managed to achieve remarkable economic growth. The inability of elites to credibly commit
to a division of rents perhaps forestalled even more persistent and high rate growth, but
Thailand has certainly not relapsed into fragility and civil war. Moreover, the idea that
political and economic access develop simultaneously cannot account for two significantly
different paths of development to have occurred in the two cases. In Thailand, the state was
relatively weak and highly contested, while in Malaysia, the state was strong and firmly in
control of one party. While entrepreneurs who were connected to, but at some distance from,
the state dominated in Thailand, large sections of the economy where in the hands of the state
in Malaysia.
60
Following NWW, one could predict that to further climb the ladder of development, Malaysia
needs to open up its political system, and Thailand should fight inequality and expose money
politics and corruption. However, it is important to keep in mind that a similar argument could
have been launched ten or even twenty years ago, and not much has changed in the
meanwhile, while growth has continued; even after the severe 1997 recession. Also
problematic is the fact that the framework does not say much about the actual margin between
which the parallel economic and political development can go out of step. In historical and
current development debates, the exact issue of the order of opening up access – politics or
economics first? – is of central concern. Moreover, the relation between access and growth is
problematic. No conclusive evidence seems to exist that that when favorable conditions for
growth, such as the possibility to import technology, the availability of resources (not just oil)
and smart macroeconomic management, continue to exists, Thailand and especially Malaysia
will not be able to continue to grow, despite their limited access characteristics. A closer look
at the case of China would also be relevant in this respect.
Evidence from both cases puts into question the central contention that limiting access is a
double edged sword; necessary for stability, but negatively impacting economic growth in
itself: in Thailand the military leaders managed to develop a strong macro-economic
framework and business climate that was perhaps more conducive to growth than a less
coordinated and focused policy resulting from open access; similarly, in Malaysia much
growth and a high tempo of industrialization was achieved under the strict auspices of the
state. Perhaps, the role of Schumpeterian rents is not as fundamental as NWW argue.
Some of the problematic aspects of the conceptual framework can be formulated on a more
general, abstract level: the conceptualization of rents has shown to be too rigid, the role of
international forces ignored, the causality of economic growth not sufficiently explained and
non-materialistic aspects neglected. Moreover, the framework lacked clear benchmarks and
has shown to be difficult to operationalize comparatively.
These shortcomings compromise the ambition of the authors to provide a new framework for
interpreting human history. However, shortcomings could have been expected, considering
the general and encompassing claims of the framework. If we go back to the observation that
the debate about development is contentious and far from resolved, the forces identified by
NWW certainly are a worthwhile contribution to understand processes of change. First of all,
the Violence and Social Orders framework intervenes and shifts the debate about the role of
states versus markets by convincingly showing that the limited access order state is a
necessary force to sustain stability and reach beyond a specific point (involving a transition
and doorstep conditions), although the nature of this point needs much more theoretical
conceptualization to be empirically valuable. Secondly, the framework intervenes in the
debate about modernization by showing that the underlying institutional framework impacts
both economics and politics. The concept of ‘marginal increase of access’ makes a more class
oriented approach redundant. Finally, the framework shows that democracy itself is not a
guarantee for openness, and that transitions to democracy can even destabilize elite relations.
NWW show both that history matters, and that historical comparisons can be instructive.
Although more specification is needed, and the explanatory power of the framework should
61
not be overinflated, the insights that can be derived from it are highly relevant to the science
and policy of development in Malaysia and Thailand, but also promise to be instructive to
diverse places such as Afghanistan, Egypt, India and China.
62
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