Debate swirls over yawning inequality gap
Regardless of what the latest annual Global Wealth Report by Credit Suisse (CS) says about financial inequality in Thailand, it is easy to see how wide the income gap has become. The CS 2018 report just states the facts. What matters is whether we are ready to accept them.
The report highlights that in 2018, Thailand’s richest 1% controlled 66.9% of the national wealth, overtaking their peers in Russia, whose share of all wealth fell from 78% to 57.1%. In 2016, the 1% owned 58.0% of Thai wealth.
Banyong Pongpanich, a financier and a former member of the State Enterprise Policy Commission, studied the statistics and concluded that Thailand’s inequality gap has become the worst in the world.
This prompted the government and relevant state agencies to come out to refute the claim. Government spokesman Buddhipongse Punnakanta said the data collected for the report was too old and lacks credibility.
Meanwhile the National Economic and Social Development Board (NESDB), a government think tank, said the report contradicts the World Bank’s Gini coefficient index, which indicates that Thailand’s inequality gap has improved over time and is not the worst.
In 2015, the country ranked 40th out of 67 countries on the World Bank’s Gini index, while in 2013 it was ranked 46th out of 73 nations.
The World Bank’s Gini index has long been regarded as the standard international indicator of inequality adopted by all 110 member countries, said Danucha Phichayanan, deputy secretary-general of the NESDB.
Over a period of 10 years, Thailand’s distribution of both income and spending has improved significantly based on that index, he said.
Mr Danucha criticised the Swiss-based bank’s report for its “rough” estimation of wealth distribution, saying Thailand lacks data on this.
The CS Report used Thailand’s income distribution data for its wealth distribution estimation, which is based on econometric models. Mr Danucha said the data was outdated.
Moreover, he pointed out that the estimation of Thailand’s wealth distribution cannot be compared to that of other countries because they use different types of data.
Mr Danucha’s criticism of the report’s methodology may be right and, to be fair, I’m not convinced that the inequality gap in Thailand is really the worst in the world as Mr Banyong concluded.
However, both Mr Danucha and the government spokesman still missed the point. They tried to discredit the report even though most people would consider the facts contained therein to be credible.
On several occasions, Prime Minister Prayut Chan-o-cha has acknowledged the severity of the rate of income inequality in Thailand, even though his administration has still not come up with any concrete policies to root out the problem.
The fact is that the inequality gap is one of the critical and chronic problems that have obstructed the country’s sustainable development.
Since Thailand has never collected data about the distribution of wealth in the country, how can the government and NESDB be confident the situation has improved?
How do they know the report’s data on inequality is outdated?
We can’t blame the government for the worsening inequality. That is instead a failure on the part of all governments whose economic policies mainly focus on increasing GDP instead of promoting an inclusive market economy.
Many Thai governments have promoted fairness in terms of sharing economic prosperity and resources as part of their policies, but the goal has never been materialised.
To narrow the inequality gap, the government has to start by accepting the painful truth that we have a deep-rooted problem.
Gen Prayut often claims credit when the government climbs up in various international rankings.
These include its improved 27th place in the Best Countries ranking by a US news website, its 36th place in this year’s ranking by the World Bank in terms of ease of doing business, and its new status as “the least miserable country” on Bloomberg’s Misery Index.
If the government can acknowledge those rankings, why can’t it do the same for the CS Report?
To be fair, the regime has made significant progress in its efforts to solve inequality. The government and the National Legislative Assembly (NLA) brought about the promulgation of the Inheritance Tax Act in 2015.
More recently, the NLA passed a new land and building tax bill.
Even though the tax rates and enforcement criteria of the two tax laws are considered too lenient to bring about substantial changes and narrow inequality in the near future, the laws are important tools to address the problem at its root in the long run.
This is something we have not seen in previous administrations.
But some of the government’s other efforts to redistribute income more fairly cannot be considered effective tools for addressing the inequality gap. Its recent cash handout measures for low-income earners under the Pracharath welfare scheme is a perfect example of this.
Last weekend, welfare cardholders were seen lining up in long queues to withdraw a 500-baht cash giveaway from ATMs. But giving a one-off cash handout to the poor as a New Year’s gift is hardly an effective means of tackling economic disparity.
The government has allocated several billion baht for such “welfare” schemes, along with other subsidies.
But at the end of the day, the poor will spend the money buying products and services from the super rich. And the sum each receives from the government will be much smaller than the amount by which each of these business behemoths stand to benefit, resulting in an even wider income gap.
The inequality gap is a critical problem that has obstructed the country’s sustainable development.