GRAPPLING OVER A LEGACY
The populist policies of Thaksinomics divided the country and led to consumer debts and a huge budget deficit, writes Srisamorn Phoosuphanusorn
‘Thaksinomics” is an economic term academics, critics and civic groups have used to refer to the economic policies and strategies initiated by Thaksin Shinawatra during his tenure as the country’s prime minister from 2001-06.
He put in place several populist policies in favour of his voters, who were mainly low- to middle-income earners, along with a focus on government spending on megaprojects. This helped explain Thaksin’s resilient popularity and his government’s success in the eyes of voters.
A major goal of Thaksinomics was to pursue both goals in a manner that gradually shifted the economy from export dependence to greater reliance on the more controllable domestic market.
Thaksin’s economic policies were largely aimed at rural folk who made up the majority of the population. These policies represented a distinct break from the past in an attempt to return Thailand to the pre-1997 glory days of high economic growth.
Thaksinomics evolved through these key strategies:
* A debt suspension programme for farmers and a government mandate for state-owned banks to grant more loans to farmers, villagers and small and medium-sized enterprises (SMEs) at low interest rates.
* A Village Fund allocated 1 million baht to each of almost 75,000 villages nationwide. As a microcredit programme, the fund helped borrowers who otherwise couldn’t access the formal credit system without collateral, often turning to loan sharks.
* The 30-baht universal healthcare scheme, which guaranteed coverage for just 30 baht a visit at state hospitals. The programme was one of the largest health system reforms ever undertaken by a low- to middle-income country. In addition to lowering the cost of care for the previously uninsured in public facilities, it also entailed a fourfold increase in funding provided to hospitals to care for the poorest 30% of the population.
The World Bank reported the 30-baht scheme cost around 120 billion baht a year, as of 2011. However, the programme drove the number of Thais with no health insurance down from 16.5 million in 2001 to 2.9 million in 2005, just 4% of the population.
* The One Tambon One Product (Otop) project, which stimulated the development of rural SMEs. Otop was predicated on the idea that every tambon has a variety of specialised products. It encouraged communities to improve their product quality and marketing as selected products would receive formal branding as starred Otop products.
* Fuel price subsidies, starting in January 2004, to alleviate the impact of rising global oil prices on consumers. The government also forced the stateowned Electricity Generating Authority of Thailand ( Egat) to partially subsidise electricity tariffs.
* A push for continued privatisation of stateowned enterprises. Although this was an extension of Democrat Party-initiated policies in the late 1990s, Thaksin consistently urged privatisation of Egat. Egat remains state-owned today.
* Creating cartels or consortiums to increase the price of exports such as rubber.
These policies made Thaksin popular among his supporters. After four years as prime minister, his Thai Rak Thai Party won a landslide victory in the February 2005 elections, winning 374 out of 500 seats in parliament, the largest number of seats ever gained by a party in Thailand.
Thaksin claimed his policies were a success as the economy grew 2.1% in 2001, rising to 5.4% in 2002 and 6.7% in 2004.
But academics and critics viewed Thaksin’s populism as reckless and incoherent. They warned of revenue shortfalls and an unmanageable public debt, which stood at 53% of GDP at the end of 2002, having trebled since 1997.
However, Thaksin used a manoeuvre for fiscal policies that confounded his critics and academics. Off-budget expenditure allowed the Thaksin government to spend almost freely and fulfil its populist promises. State-owned financial institutions were directed to turn on the credit taps with lenient and seductive loan programmes.
Critics commented that Thaksin’s economic policies were somewhat similar to traditional Keynesian economic theory that focuses on total spending and increasing government expenditures.
They argued Thailand’s economy was driven by rising export demand rather than Thaksinomics, as domestic consumer demand grew only modestly with Thaksin at the helm.
Sceptics also noted that under Thaksin’s policy of pushing state-owned banks to increase loans to poor farmers, consumer indebtedness rose dramatically.
The Thaksin government ran up a huge budget deficit. The revenue gap increased yearly and an increasing proportion of the annual budget had to be allocated to service both domestic and foreign borrowings.
There was concern Thaksinomics may implode, as outlined in a Bangkok Post editorial headlined “Thaksinomics may prove a failure”, dated June 27, 2012. The article mentioned a comment from Thirayuth Boonmee, a well-known political critic, who described Thaksinomics as “spending until death from exhaustion”.
Public intellectual Prawase Wasi compared the spread of the Thaksin regime in society to HIV/Aids because it destroyed immunity. “It can mutate rapidly to avoid being wiped out,” said Mr Prawase in the Bangkok Post on July 8, 2012.
“The only cure available against the Thaksin regime is participatory politics involving people’s networks, teachers and businessmen. They will become the social vaccine.”
However supporters of Thaksinomics argue these policies, implemented in the aftermath of the Asian financial crisis, created a stable, demand-driven recovery in Thailand’s economy, which was previously dependent on exports and vulnerable to external shocks.
They also point out under the Thaksin administration Thailand repaid all of its debts to the International Monetary Fund (incurred after the financial crisis) four years ahead of schedule.