The Economic and Political Future of Thailand

The title for this submission is probably pretentious. But I am troubled by the prognosis for Thailand and dismayed both by the inability of Thais themselves to see what is happening and by the ill-informed generalisations of expat commentators in the various forums.

My contention is that Thailand is probably headed for serious economic difficulty and political and social upheaval. This is not because of Thaksin, or the PAD or the current global recession or multinational conspiracy. It is very simply because Thailand has not escaped its feudal past, and the population masses remain as a result socially, economically and politically disenfranchised.

The poorer classes in Thailand barely one hundred years ago were nothing more than serfs farming the lands of the Thai gentry. Today, a significant proportion of the same population still do not have full title of the lands they farm. They have been encouraged by at best incompetent and quite likely corrupt officials to abandon the rigorous and disease resistant rice strains they have successfully grown for decades in favour of supposedly higher-yielding strains that require heavy use of fertilisers and pesticides to grow – pesticides and fertilisers which the farmers must buy from the same Thai business monopolies that purchase their crops. While those businesses made the owners fat, returns to the farmer withered. Various essays by Pira Sudham recount the numerous injustices the farmers have suffered, how many are driven into debt and then off their land. Other farmers have had lands they have farmed for generations declared “degraded forest” so they can be forced off by big business interests to establish eucalypt plantations or sometimes tourist developments. Those who stood up against this were often beaten and some were killed. There has not been justice for any of those so murdered.

Meanwhile the majority of land in Thailand is owned by a small number of families and not an insignificant proportion is under-utilised and unproductive as a result.

The education system in Thailand is a national disgrace. Every English teacher I know has observed this, and quite a few Thai observers also (see for example “1+1=2” in the BKK Post by Voranai Vanijaka). Thai education serves one primary function: to maintain the status quo and ensure the feudal system of patronage remains intact. There is no place for critical thinking in Thai schools – the masses must above all learn not to question their betters!

Economic development in Thailand after the second world war was no economic miracle. A handful of future tycoons – either born with golden fork and spoon or married into the rich Thai elite were handed monopolies, concessions, privileged access to capital, and protectionism by the political elites in exchange for political support. These tycoons didn’t create wealth they skimmed it off and were unscrupulous in doing so.

As Joe Studwell, frequent contributor to the oft-banned in Thailand Economist and founding Editor of the China Economic Unit has ably demonstrated, these tycoons were not successful because of their superior “Chinese” commercial nous, rather their success was built with loaded dice on fortunes gained from land, gambling, distribution, resources, and other monopolies or cartels (including the drug trade). Not only were they supported with state issued monopolies and protectionist policies from their political cronies, they were able to draw on the national security forces – both military and police to ensure they prevailed. When they failed (as in the Asian debt crisis of the late 90s) they were bailed out by their political cronies with public funds.

These businesses, unlike those that developed in the more democratic Japan, South Korea or Taiwan, have produced no world-class brands because there was no underlying business capability or productivity, merely a lop-sided playing field that restricted opportunities to the elite few and ensured an ever growing gap between rich and poor.

But that is only part of the story. For the next episode we need to hear from Walden Bello, Professor of Sociology at the University of the Philippines, and president of the Freedom from Debt Coalition. Import substitution industrialization had a limited future in countries like Thailand because there has to be a growing domestic market based on a significant redistribution of income and wealth. Since the ruling elites were never going to allow such a thing to happen, a new strategy was required: export orientated industrialization. In Thailand this was achieved by an alliance between foreign capital and brands with the Thai tycoons providing cheap labour. The tiger economies emerged, and the factories provided an outlet for the next generation of the poor who could no longer be sustained on lands limited to unproductive size by the absence of land reform.

The rapid growth that resulted from Thailand manufacturing the products of other nations (but failing to produce any of its own) reduced the number of people living below the poverty line in Thailand as in many other countries, despite the grossly widening disparity of income and wealth distribution between the elites and the masses. As Dr Kongkiat, CEO of Asia Plus Securities observed this week in the Bangkok Post, "Around 71% of the seven trillion baht in bank savings is in accounts holding more than one million baht. Some 67,000 accounts have balances of more than 10 million baht." In other words most people in Thailand have no money, but a small number have a shit load.

But the current recession has exposed starkly the soft underbelly of the economic model – Western profligacy and greed could not be eternally funded on debt and rising house prices. The Thai government so far shows no signs of understanding that things have changed forever, the house of cards has fallen, and there is no Thai middle class to provide an alternative way out of trouble. Many of the increasing unemployed will return to the farms but the farms have no capacity to support them because there has never been any land reform. The end of the growth era, increasing poverty and great inequality will be an explosive recipe.

This is the landscape that underlies the real political crisis in Thailand. Thaksin was neither the political saviour of the poor nor the corrupt demagogue portrayed by the PAD. He was simply one of the Thai establishment who eventually got offside with his peers and paid the price. Thaksin was smart to recognize the opportunity courting the poor offered to gain political power and assiduous in portraying himself as one of them despite the obvious reality. However cynical and ultimately self-interested he was, he is perceived in the North and North East as having done more for the poor than any of his predecessors. It is unlikely that Thaksin was himself anti-royalist as he has often been perceived – in fact he zealously pursued links with the Crown Prince who is still likely to be the King’s successor. But he awoke the monster of mass political consciousness, and now that the poor have tasted their own power they are unlikely to let go. The ruling elites have been desperately trying to put the genie back in the bottle and perhaps with a more astute Abhisit government, and without an economic crisis that represents the end of the export era, it might have been possible for a while.

Abhisit’s “me-too” populism will not solve Thailand’s economic problems and he is too beholden to the PAD and their military and royal patrons to deal to the PAD in a way that will gain the confidence of the newly awakened masses alarmed by the clearly stated intentions of the elites to limit their political participation. The reality is that the PAD, the UDD and Thaksin are merely a sideshow to the unrest yet to come. All of these parties are still part and parcel of the doomed elitist patronage system.

As the economic crisis takes hold and increasingly impacts the poor, dissatisfaction and tension will rise. The King has been a unifying force for the Thailand of old, but now he too is aging. The time bomb is ticking and it doesn’t take a genius to predict the events of its likely detonation.

I fervently hope this is all too pessimistic. I hope the American economy will quickly burst into life, Western property prices will soar, we will all have enough cash for a brand new Thai made Honda Accord, Thai teachers will start encouraging questions in class, the PAD and UDD will kiss and make up, Abhisit will launch urgent and immediate land reform, the Thai elites will renounce their greed and encourage local farming and business cooperatives and pigs will fly.