This paper analyses the characteristics of Thai agricultural and economic development, their relationship to the economic crisis, which started in 1997, properties of the policies affecting the agricultural sector, and changes in the demand and supply of agricultural products. The economic growth during the past few decades emphasizing industrialization and excessive liberalization of international monetary transactions opened Thailand to foreign short-run speculative investments. This is the major cause of the economic crisis in Thailand that is a small Asian economy relative to the huge amount of foreign short-run speculative money. It is argued that this is a dangerous policy for a small country to persue based on the idea of market fundamentalism. The Thai agricultural sector had been taxed heavily during the past 4 decades through over-valued local currency and the export tax policy on rice. This taxing seemed to have reversed since 1987 following the start of the transformation in agricultural policy from taxing to subsidizing agriculture, a common policy in most middle income countries. The transformation seems to have stopped because of the economic crisis after 1997. Since the negative effects of the economic crisis will continue during the first decade of the 21st century, the halt in this transformation will also continue. Diversification of products has occurred, and their production and exports increased very rapidly until the late 1980s. Growth of agricultural production in 1989 had been realized by an increase in the harvested area. This increase of the harvested area was done by individual farmers' burning the forest and planting crops. After the easily reclaimable forest had been totally exhausted, crop yield for such crops as rice, maize, and soyabean, have increased, but not enough to compensate the limitation in the land to plant these crops. The yields of cassava and sugarcane did not increase. Production of the most important crops in Thailand has started to decline since 1990, and large amounts of imports for maize and soyabean have become necessary. Free function of the market mechanism based on the idea of market fundamentalism led to the destruction of half of the forest and a severe decline in soil fertility in Thailand. Appropriate public interventions are needed to (1) the monetary institution in order to avoid another severe economic crisis in Thailand; and (2) agricultural policy in order to restore the forest and soil fertility.
