Chalongphob on Populism
By Jon Fernquest |
Today's Bangkok Post business section features an interview with current Finance Minister and economist Chalongphob Sussangkarn on populism.
Why is populism bad?
One big reason is that you can't see what is happening to the money being given away.
Populist projects lack transparency. Take price supports for rice and other farm commodities, for instance:
Policies taken under the Thaksin Shinawatra government to prop up farm commodity prices were essentially a "cash giveaway" leading to state losses of more than 100 billion baht, as rice and other crops were mortgaged to the state at prices well above market rates.
The solution is to make the use of government money transparent:
"Improving public transparency and creating a system to monitor the implementation and costs of public policy was also the best way to safeguard against demagogues."At the end of the day, we can only hope to have a system that allows the public to monitor policy and its costs. To guard against populism, we need to promote transparency, debate and criticism within society."
Chalongphob has tried to make the use of government funds more transparent during his tenure, so people can see what is going on:
Dr Chalongphob said he hoped to leave as a legacy changes in how fiscal policy is tracked and managed."Right now, rules such as limiting public debt at no more than 50% of gross domestic product or the budget deficit to just 2% of GDP are just rules of thumb. Other countries have become much more sophisticated in how to monitor their fiscal positions"
Another problem is that once people get something for free, they want more and more, free money now, rather than planning and investing for the future:
"The problem with populism is that once people receive [free] benefits, they begin to want more and more"...the loss of discipline and the heightened expectations of voters for populist programmes were "very dangerous" for the country's long-term development.
Giving money away randomly doesn't help an economy grow and prosper in the long-run. Investing money in businesses, infra-structure projects, and education does.
Investment always requires a plan. Banks want to see a business plan before they make a loan. Planning is required before launching large and costly infrastructure projects like the Skytrain in Bangkok. Just giving a million baht to every village without a plan or handing out one million cows is not investment. To be fair, Thaksin initiatives like the Thailand Creative and Design Centre (TDRC) were sophisticated investments in Thailand's future.
Populism will still be around for several years to come:
Thai society will remain vulnerable to populist politics for the next several years, until voter education and income increase to the point where the importance of long-term sustainability trumps election promises of state handouts
Populism is not a problem that only Thailand faces:
"Around the world, populism generally can take hold only in emerging markets. In developed markets, the long-term costs are better understood and politicians are punished for poor policy"
As Thailand's economy grows and develops, and as people become more educated and develop an appreciation of why "free" money is not actually "free" for the whole country, that is, the populism will decrease in importance:
"Right now, more than half of the eligible voters, at around 60%, have only a primary education. It wouldn't be until 2010 before the majority have a secondary education or higher."The growth of the middle class would also be a force against populist politics, as voters become more loath to see tax funds committed to state handouts. Dr Chalongphob cited Korea as an Asian country whose attitudes have changed quickly over just a few years.
"Korea today is a country with a high level of governance, a change that has come only in the years since the 1997 crisis. Public expectations for politicians have changed considerably"
In short Chalongphob argues that "populism" is just something that people will have to learn to live with in the short-term because Thailand's economy is not yet fully developed. Education is not yet widespread, so mass marketing techniques easily sell populism and the Thaksin brand as if it were just another brand of shampoo or soft drink. (Source: Bangkok Post, Business, 11-12-07, temp-link)
As Chang Noi points out, Thai political scientist Anek Laothamatas predicted this all years ago in his paper A Tale of Two Democracies and in his more recent book:
In his book, Thaksina-prachaniyom (Thaksin-style populism) Anek worries that Thaksin could be a signal of even worse to come. Thaksin gave people things they wanted, and was rewarded with massive support at the polls. Even if Thaksin and TRT vanish from Thailand’s political map, this populism will stay. Other leaders will copy it. Once one party offers people the moon, then its rivals must offer the moon and the stars. But Anek fears the risks are massive. The people become dependent on state handouts. The bureaucracy is politicized. The economy dives into the same kind of economic crises as populist Latin America. Society is sharply divided between the lower-class who benefit from populism, and the middle and upper classes who have to pay for it (Source: Chang Noi)
Anek's famous paper is available at the Thailand Information Center on the sixth floor of Chulalongkorn University's library:
Anek Laothamatas, "A Tale of Two Democracies : Conflicting Perceptions of Elections and Democracy in Thailand," New York : Woodrow Wilson Center Press, 1996 [TIC 52598]
Vocabulary:
transparency - visible, not hidden or secret
price supports, prop up a price - keep a price at a level above the market price by providing subsidies
commodities - goods bought in large quantities for which every unit is the same (oil, rice are commodities, fine wine is not)
mortgaged - receive money (a loan) in exchange for promising to hand over something of value if the loan cannot be repaid
monitor - check continuously, all the time
implementation - the way a plan is put into action
safeguard against - protect against
demagogues -
At the end of the day... - in the end...
tenure - time serving in public office
rules of thumb - easy to remember rules, easily used in everyday life
a legacy - what is left of your work after you leave the job or position
tracked - continuously check something while it is happening
heightened expectations - expect to receive more
randomly - without planning
vulnerable - easily hurt or damaged
sustainability - can continue for a long time
trumps - beats
handouts - things given away for free
take hold - when a believe becomes common among people
emerging markets - countries that have developed some, but are still not fully developed, for example South Korea and Thailand
eligible voters - people who are old enough to vote
primary education - Prathom, elementary school (age 6-12)
secondary education - Matthayom, high school (age 13-18)
are loath to - don't want to
governance - careful and transparent planning in running a company or government
public expectations - what the people believe will happen in the future
