The Electoral System in Thailand

The Electoral System in Thailand: A Perspective of Federalism, Transaction Costs, and Institutional Change

More than fifty constitutions have come and gone in Thailand since democracy was established in 1932. Military coups have overthrown many of these constitutions, the most recent example of this political failure being the coup de tat on September 19, 2006. Thailand’s political instability seems to be an anomaly with respect the other developed countries where democracies have been consolidated. One way to explain Thailand’s repeated political failure is to consider the role of federalism transaction costs, and institutional change in the electoral system. I apply these concepts in this essay to comprehend this phenomenon.
I. Preliminary

The causes of Thailand’s chaotic experience with democracy can be viewed from many aspects, such as voters’ behavior, social norms, politicians’ actions1, electoral systems, and so on. In this paper, I focus on how the electoral system can affect economic outcomes. The historical survey by Wilson and Phillips (1958) gives us some background of political history. Thailand adopted the parliamentary system from England. The electoral system in this country has generally been composed of plurality and proportional representative electoral regimes to form a coalition government. Political parties have tended to be short-lived; a notable exception being “The Democratic Party” (Wilson 1958), which has managed to survive the political winds of change. Thailand political parties are usually formed by special interest groups. For example, after the 1997 constitution, the “Thai Ruk Thai Party” a new party composed of mostly of businesspersons, aggressively sought state power to control profitable economic activities. The Thai Ruk Thai party won the election in 1999 and had a majority number of members of parliament (MP). Prime Minister Shinawatra, the most prominent member of the Thai Ruk Thai Party, put much of his political and money resources towards pushing acts and laws through the lower and upper houses. He had power to promote his relatives and close friends to hold important positions within the government, and to remove those in office who were in opposition to his policies. Indeed, Mr. Shinawatra has been Thailand’s most powerful prime minister in recent history. But why were Thai citizens who gave Mr. Shinawatra a landslide vote into office, so eager to support a military coup that removed him from office? We need an analytical framework to link all the pieces of information together in order to explain this phenomenon.
II. Federalism, Institution, and Transaction Cost Framework

Based on the idea of decentralizing power, (a) federalism not only structures political polity within federal, state and local governments, but also limits government discretion with economic uncertainties and protects the government from being overwhelmingly influenced by any special interest group. Democracy can be perceived as the conflict within a negotiation game, in which, actors in the game are trying to maximize their own utility. Supposedly, people are divided into three classes; the poor, the middle man, and the rich. Here, the conflict arises from the effort of each group trying to take someone else’s resources, let us say wealth. Acemoglu3 (2006) approaches this conflict using a tax rate to understand the resulting income distribution, in which the poor prefers higher a tax rate and the rich prefers a lower tax rate. A well-designed approach of federalism will reduce the fluctuation of uncertain policies. Even though the Thai government has all three levels of federalism, the economic and political powers are centralized towards the federal government. Obviously, this deprives the lower level governments of their sovereignty. To have an efficient enforcement of the rule of law consistent with the preferences of a society’s majority, the rule of game must be well defined. To this end, a country’s constitution is paramount.
(b) A successful constitution is a set of formal rules that most people abide by, with punishments imposed on those who do not. North (1990) has a strong view that a formal institution along with norms and social values will provide for a stable market4. Changing in institution will change the relative price in the political market. In regard to Thailand, as a consequence of their political instability caused from coalitions of the multiparty systems in the Thai parliament, most legislation and economic policies took a long time to come to fruition. During the 1997 constitutional drafting, there was a consensus among drafters, scholars, politicians, citizens, and businesspersons, that the cost of political instability was too high and it should reduced in order to gain more economic efficiency. As a result, the 1997 constitution put enormous power in the hands of the prime minister, who normally has the majority of MPs in his party, by supporting the bi-party system instead of multi-party system. This constitutional bias creates an unintentional monopoly and reduces the competition in the market. In addition, this constitution requires every MP to be a member of political party. As a result, politicians, who want to get elected, are trying to be a member of the most likely-win party. And it also creates the barrier to entry for the ones who are not the member of political party.
(c) Lastly, transaction costs, Coase (1937) has acknowledged the impact of transaction cost to the economic outcomes where positive transaction cost does exists. Dixit (1996) reviews North’s view of transaction costs
“... namely, a lack of “instrumental rationality” of participants in the economic or political world: they use incorrect models of the world to guide their actions, and the information feedback they receive is not sufficient to cause them to revise the models…”

In order to make a rational decision, North argues that it is not necessary for voters to get perfect information, but they have to possess certain level of information. The 1997 constitution limited politicians campaign by only allowing them to introduce themselves on fliers and prohibiting their public appearance on any media. This has made rational voters to be rationally ignorance (Johnson, 1991). We are living in the world of asymmetric information where information is costliness. The result of the constitution has made situation worse, where voters cannot even possess a minimum set of information and cannot fix their model when they have made a wrong decision. This causes the problem of adverse selection.
III. The New Drafting

Up to now, the military coup government has suspended the constitution. No one knows about the continuation of the 1997 constitution. At least, scholars and lawyers do agree for redrafting of constitution. Whether we continue using the 1997 constitution with little modification or redrafting the whole constitution, drafters should keep their mind about the nature of imperfect market. A well-design structure of the market, federalism, will reduce the burden of government to deal with uncertainty. A clear-cut rule, constitution, with self-enforcing will yield a consistent outcome. Finally, reducing transaction cost will help voters to possess minimum set of information in their decision making process.

Footnotes
1. Georg Jallinek points out that in parliamentary system politicians might use the strategies such as repeated interpellations, call for a quorum, and so on.
2. I replicate this framework from Barry R. Weingast in his work “The Economic Role of Political Institutions: Market-Preserving Federalism and Economic Development.
3. Here, Acemoglu’s work is more specific than Weingast’s. In Weingast’s game theory, he mentions only wealth but Acemoglu’s model in his book “Economic Origins of Dictatorship and Democracy” has used an income tax rate to explain why there exists confliction between the rich and the poor. This helps us understand that both groups are trying to get government power to maximize their own utility.
4. This is accorded with Georg Jallinek claim that in the parliamentary system “it lacks of sanction to a degree unparallel in other parts of the legal order, and all safeguards which juristic ingenuity can contrive have no significance in practical politics.”


References

Acemoglu Daron and James A. Robinson. 2006. Economic Origins of Dictatorship and Democracy. Cambridge: Cambridge University Press.

Coase, Ronald H. 1937, “The Nature of the Firm.” Economica, 4:386-405.

Dixit, Avinash K. The Making of Economic Policy. Cambridge: The MIT Press.

Downs, Anthony. 1957. An Economic Theory of Democracy. New York: Harper and & Brothers.

Jellinek, Georg. 1904. “Parliamentary Obstruction.” Political Science Quarterly, 19:579-588.

Johnson, David B. 1991. Public Choice: An Introduction to the New Political Economy. MountainView: Bristlecone Books.

North, Douglass C. 1990. Institutions, Institutional Change, and Economic Performance. Cambridge: Cambridge University Press.

Qian, Yingyi and Barry Weingast. 1997, “Federalism as a Commitment to Preserving Market Incentives.” The Journal of Economic Perspectives, 11:83-92.

Tanapornpan, Rungsan. 2003. A Constitutional Economics: An Analysis of the 1997 Constitution of Thailand. Bangkok: Matichon Press.

Weingast, Barry R. 1995. “The Economic Role of Political Institutions: Market-Preserving Federalism and Economic Development.” Journal of Law, Economics, & Organization, 11:1-31.

Wilson, David A. and Herbert Phillips. 1958. “Elections and Parties in Thailand.” Far Eastern Survey, 27:113-119.