another publication by IMAGE asia

Narrative economics and contagion of business and legal failure

  Bangkok / Boat Lagoon

COVID19 has provided an amplified reflection of the weaknesses in state and private sectors throughout the globe. It has also allowed some, perhaps temporary but hopefully long-term, recognition of persons in our societies who are more heroic in their everyday achievements than idolised Instagrammers, media-hyped ‘Super CEOs’ with monthly salaries that could buy a lifetime of income for some and, dare we say it, politicians. Nurses, doctors, public and private transport workers, otherwise known as ‘essential workers’, have been unintentionally highlighted as fundamental cornerstones of a functional society, even though it perhaps should have been obvious, previously.

Amidst this real-life drama of a global mental reorganisation of perceived priorities, a polarised spectrum of narrative has unfolded, which appears to be driven by herd mentality and could shape the economic outcomes of the serious challenges COVID19 has triggered.

There is a school of economic thinking that emphasises the rebalancing of the economy is linked to the overall “rationality” of the invisible hand of the market. The belief is that, even when major crises occur, a swing back towards equilibrium based on overall rational thinking consuming the lesser irrational movements, will” right itself” ‘over time. This is an oversimplified expression of the sophisticated and worthy studies of Eugene F. Fama. Personally, whilst accepting my opinion is only worth a similar amount to the paper this might be printed on, I find this an overoptimistic interpretation of humanity which has been, and continues to be, responsible for genocides, atrocities, climate destruction, old and modern slavery and a host of other ills that are too many to list. With the benefit of hindsight each irrational set of acts is justified as fitting the historical context, but perhaps with more rational thought, some conflicts, exploitation and opportunism could have been avoided.

Another school of thought, linked to Robert J Shiller’s writings, and in particular his recent book Narrative Economics, believes (I am again simplifying here for the sake of brevity) that human behaviour is not “overall rational” but is fundamentally irrational, repeating mistakes over and over, in different contexts, to the extent that we are simply faced with interludes between group-think incompetence. There is a series of narratives that Shiller analyses as evidence for herd-led thinking, such as the irrational valuations of Bitcoin, the irrational fear of labour-saving machines ‘replacing’ humans, and the more classic narratives that create real estate bubbles causing boom and bust cycles. Shiller compares these narratives to an “epidemic”, and neatly fits the patterns into references of the behaviour of the Ebola virus. Post-COVID19, these observations of the significance of human behaviour and narratives spreading like a contagion continue to ring true.

This theoretical backdrop can be framed into the narrower context of the potential future shapes of Thailand’s legal and business climate which will determine social, cultural and economic development. If it is correct that narratives are responsible for driving human behaviour, then it will be critical to formulate a narrative that represents an enlightened and happy future.

The types of narratives that will affect law and business will contain many of the following themes:

  • Does Thailand wish to restrict or encourage foreign investment, in a sustainable but globally competitive manner?
  • Is Thailand prepared to enhance rights of security and tenure over certain property assets in Thailand and give more certainty to investors who need internationally acceptable security to justify the selection of Thailand as an investment destination?
  • To what extent will Thailand liberalise some parts of its laws to allow greater competition and the use of foreign skill and expertise? Or does Thailand believe it has already found the correct balance between openness and restrictiveness?
  • To what extent will Thailand self-reflect on its public sector institutions, identify structural weaknesses and reform, or preserve the status quo as adequate or underserving of budgets?
  • Can public and private institutions modernize their practices to enhance the efficiency of the lives of the citizens they serve?
  • Will key policies relating to critical aspects of the economy such as tourism strategy be adjusted to address the concerns of and needs of Thailand in receiving tourists, but also the needs and perceptions of tourists?
  • Will long-stay visitors, workers who wish to settle with families in Thailand, be provided with better systems and organised structures to accommodate the all-important sense of well-being and security through predictability and certainty of the right of abode, the right to work and when participating in the tax system, the right to benefits?

The effects of these decisions will spread, just like a highly contagious virus, throughout Thailand and the global economy. Further, the market participants, domestic Thai entities and persons, foreign investors and persons, will be part of formulating the ‘narrative’ of what Thailand’s policies will mean for its future. Being part of a narrative, in an ethical context, means at the very least, being accountable or responsible for the type and effect of the narrative.

To conclude, it is worth, Post-COV ID19, doing our collective best to create an overall constructive and positive reforming narrative for whatever type of economic, business and societal relationship we have with Thailand because – if we accept even just a part of Shiller’s theories – these will be echoed and amplified in our interconnected social media-driven echo chambers, and then we individually and collectively will have to suck up and share the consequences, even if that is in an increasingly unequal way based on the current increasing inequality gap.

To create a narrative, falsehoods are not required. Thailand possesses enough qualities for the positive aspects to be utilised as a resource for reform and improvement, without pretending there aren’t issues or weaknesses. If a sports or recreational activity is risky, admit it is so, and make it as safe as possible demonstrating such clearly. If wet season is really wet, perhaps don’t call it “green” and hope people won’t realise it is also wet, instead create interesting and enjoyable safe events for the ‘wet season’. Inspecting boats after accidents doesn’t inspire as much confidence as demonstrating inspections take place before an accident might take place. Asking people not to get too close to each other and then forcing them onto a tightly packed bus from an airplane to an airport terminal doesn’t create a sense of consistency or safety when a pandemic has just ravaged the globe. A narrative can be created that fosters belief, confidence, certainty, wellbeing and happiness, and this can be channelled to benefit Thailand, and those that are Thai, are resident here or are simply visitors.

The incorrect, imbalanced narrative would be contagiously destructive. However, the new tools of society – such as advanced technology – enhance knowledge, enabling more power and control to transform a narrative from its current trajectory. Better research and innovation, now more prominent than ever before, can be used to battle the real epidemics but also the damaging narrative epidemics that plague economies and businesses, and with which laws are continually trying to keep pace. Fortunately, there is some hope in the mutated version of the narrative being easier to cope with than the first.


By Desmond Hughes, Senior Partner of Hughes Krupica.
Hughes Krupica is a law firm which specialises in Dispute Resolution; Corporate Transnational and Domestic Law; Real Estate; Hospitality; Construction Contract Support; Transnational Structuring and Compliance; Transnational Commercial; and Litigation, operating in Bangkok and Phuket, servicing clients in relation to their business activities in Thailand and in other regions of Asia

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