THE 19th century was a time when the fruits of the Industrial Revolution that started 50 years earlier began to really take hold on the economies of Europe. That period also saw the increasing development of economic theories and models.
A London newspaper wrote in an editorial in the middle of that century that “all this newfound knowledge of economics is nonsense until they can predict whether a proper English gentleman will order bangers [sausage] or rashers of bacon for his breakfast.”
The point was that small decisions magnified over millions of people would change the course of the economy in a way that the models and theories could not adequately predict.
Currently, economists spend countless hours comparing the relative merits of one economy to another. In some cases, policy decisions are made based on those comparisons.
The Philippines is constantly compared to Thailand as the older brother that this country should try to emulate. In the mid-1990s the Philippines was the “basket case” and Thailand was the “tiger cub,” even as, more than 20 years earlier, the former was the one that was economically better off. Then, the 1997 Asian financial crisis hit, and the Thai tiger lost its teeth.
The per-capita gross domestic product of the Philippines is $1,580; for Thailand, it is $3,430. Obviously, the Thai economy is twice as large as the Philippines’s and, presumably, both income and wealth, along with the standard of living, should also be twice as great. However, income is only as good as what you can buy with your money.
Wages are higher in Thailand. The starting salary for a maid here is about P14,000. If someone employs a maid in Thailand, he or she must earn substantially more than the average employer of a maid here in the Philippines. But the average wage, after taxes, in Thailand is only about 130 percent of that in the Philippines, even if the total economic output is 200 percent higher.
A kilo of pork in Thailand costs about P220, making prices fairly comparable, but much easier on the Thai budget. Using the US dollar at current baht and peso-exchange rates, Filipinos pay $0.82 for a bottle of local beer, while the Thais must pay $1.60. But electricity, a taxi ride and the Internet are all much cheaper in Thailand. Yet, the price of a pair of men’s shoes, rent on an apartment in the city, and the cost of a condominium in the province, are all significantly cheaper in the Philippines.
But, sadly, the truth can be found on the 2013 Prosperity Index of the Legatum Institute, a public-policy think tank. On the index, the Philippines dropped two places to 66th, while Thailand climbed five places to 52nd.
Image credits: Jimbo Albano