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Interesting topic guys. I've had this same discussion with varying people on countless occassions. I'd like to add my $.02
First off, in regards to "rank" in Muay Thai, many different schools employ different methods and criteria for grading or ranking their students and fighters. My understanding is that this phenomena occurs mostly outside of Thailand. One of the main reasons for this is that opportunities to fight are not as readily available outside of Thailand where the whole fight culture is built into their society.
As others have said, outside of Thailand, the ranking structure is a means for teachers and students to mark their progress. The ranking structure varies from school to school, organization to organization.
The only UNIVERSALLY RECOGNIZED ranking structure is your fight record. Period. When it really boils down to it, all anyone truly cares about is:
1. Have you fought?
2. What is your record?
3. Who have you fought/beaten?
4. Have you won any titles?
That really about covers it. My Muay Thai program offers a ranking structure which (THANKFULLY!) my students don't really seem greatly interested in. I think that one of the reasons why none of my students are interested in earning rank is because I advise them that outside of our school (and affiliated schools) our ranking means squat! If my students were to go to another Muay Thai program and advise them that they have earned such-n-such armband or certifcate under my or my instructors Muay Thai program, no one will give a damn. Their skill will be determined quite simply...
"Glove up!"
Now, when it comes to terms such as Master, Kru, Ajarn, etc....
My instructors, Kumron "K" Vaitayanonta and Bumrong "Danny" Prawatsrichai are both referred to as "Master" here in the USA. This is a title of respect. Neither of these instructors took the title for themselves. Instead, students fo theirs and other martial artists have made a practice of addressing them with these honorific titles, causing them to "stick". They are now known as Master K and Master Danny.
Now, my understanding of the Thai language comes from Master K and his daughter, Palerut Bodhiprasart. They have explained to me that the difference between the titles "Ajarn" and "Kru" is this...
"Ajarn" is the FORMAL way of addressing an instructor
"Kru" is the INFORMAL way of addressing an instructor
If you were a student of any subject (including Muay Thai), you would refer to your instructor as "Kru". This is because you directly associate with this instructor on an often personal level.
However, another instructor who you do not directly associate or train with would be referred to as "Ajarn".
How does this relate to Muay Thai?
The example given to me by Palerut is that because I have trained under Master K for years and years on a personal level, I could and would correctly refer to him as Kru Kumron, or Kru K.
However, someone who is new to training with us would refer to Master K as either Ajarn Kumron, or Ajarn K. This would continue until that relationship or bond between teacher and student has been formed.
Now, in English, when we are addressing our Martial Arts instructors, we don't often make a real distinction. We refer to our instructors as "Master". Whether we are using the FORMAL or INFORMAL. Hence, Master K, Master Danny, Master Sken, Master Toddy, Master Woody, Master Chai, Master Vut, Master Sem, etc. etc. etc. etc....
Another example would be in the college setting. In your regular university classes, the teacher of your class would be referred to as "Kru". The Deans of the university would be referred to as "Ajarn".
Well, I hope this has been helpful. I realize that this is not the final word on the topic, but this is merely one way that the actual Thai's view the distinction. I also know that the above is not the only interpretation of the distinction.
Khun Kao