Capitalism has been a great invention of humanity. It has enabled countless entrepreneurs to develop new products and is a major reason why we have modern advancements such as aeroplanes, cars, and mobile phones. Yet, limitless capitalism has its problems. As the French economist Thomas Piketty's influential Capitalism in the Twenty-First Century describes, over an extended period, capitalism invariably leads to ever-growing wealth among the rich at the expense of the poor, causing class cleavages. As Thailand expects to return to normal politics next year, the country must address the potential instability extreme wealth inequality produces.
Extreme inequality is clearly demonstrated in the freest market in the world -- the United States. The US is the world's most technologically developed country thanks to its free-market capitalism. Nonetheless, in recent decades, the rich have accumulated more wealth while middle-class incomes stagnate and the poor grow poorer. This phenomenon has resulted in socio-political problems, such as a lack of proper education and support for disadvantaged minorities, with more than 44 million Americans receiving food aid. Capitalism may theoretically provide everyone with a chance for upward mobility, but in practice opportunities such as the stock market are mostly for the rich, who can capitalise on them, while the poor have limited means.
Thailand has followed a similar path and has embraced capitalism. As a result, it has enjoyed an economic prosperity not seen in its non-capitalistic neighbours. However, it, too, is suffering from the same problems as the US. According to Credit Suisse's Global Wealth Report 2016, Thailand has the third-highest wealth inequality globally. The power differentials among the populace grow ever larger and cause socio-political problems, including the 2010 red-shirt anti-government protest at Bangkok's Ratchaprasong intersection, which resulted in a bloody military crackdown. The widening gap between the rich and the poor is a significant contributor to the current political rift, the lack of substantive reconciliation and the country's failure to achieve democracy.
The country is also stuck in the dreaded middle-income trap as those in the lower socio-economic strata have limited opportunities to improve themselves. The result is a country where the rich grow richer and control most of the country's economy, the middle-class struggle to survive, the poor are unskilled and are forced to go through never-ending cycles of exploitation, and the country's overall economic development stalls. This is modern-day Thailand.
Recent research by Chulalongkorn University's renowned academic duo, Chris Baker and Pasuk Phongpaichit, confirms this growing gap in wealth and the deterioration of social equality. Their "Towards a More Equal Thailand: A Study of Wealth, Power and Reform" project demonstrates that the top 10% of Thai people own 61% of all land while the bottom 10% own a paltry 0.1%. The Credit Suisse report similarly notes that 58% of the nation's wealth is controlled by only 1% of the population.
The solution to this problem lies in a system which neither the US nor Thailand has properly explored: Nordic bloc-style social democracy. In such a system, capitalism is used as the main driving force of the economy, but the major difference is the addition of state interventions to redistribute wealth and empower the poor. This can be seen through the average European Union-28 tax rate of 40% of GDP, which taps into the wealth accrued by market economies and allows governments to provide necessary infrastructure and welfare for the middle class and opportunities for upward mobility for the poor. These include good public transportation, education and health care.
Some may view this system as stealing from the rich, depriving them of rightfully earned wealth. However, this view assumes that wealth is limited and that if someone is to acquire wealth, then others must lose it. In truth, the overall wealth of the country can grow, and everyone, rich and poor alike, can have a bigger share than before. South Korea, which has undergone a similar wealth redistribution and welfare development process as the Nordic countries and therefore has a more skilled workforce and more equitable opportunities, has moved out of the middle-income trap and now enjoys a GDP that is more than three times that of Thailand's. This is despite the fact that the two countries had comparable GDPs in the seventies and that South Korea only has two thirds of Thailand's population.
Thailand can grow much more, but first the current inequality must be curtailed and those in the lower socio-economic strata must be provided adequate opportunities to improve themselves. This will enhance overall education and skill levels and help lift the country out of the middle-income trap. A country cannot hope to achieve sustainable long-term development or social cohesion if a substantial portion of its population have no access to good transportation, are improperly educated, are perennially malnourished or sick.
The current tax revenue of Thailand stands at 17% of its GDP, significantly below the middle-income country average of 26% and markedly below the OECD 2016 average of 34%. As a result, Thailand has relatively little discretionary spending power to invest in infrastructure development projects, smart cities, and social programmes. This evidence also suggests inefficient wealth redistribution in Thailand. Therefore, a grand societal compromise via taxation of the very wealthy to empower the middle class and poor is of paramount importance, as has been shown by Nordic bloc countries and other Asian nations.
The new inheritance tax introduced last year and the current land and buildings tax bill are a move in the right direction, but more steps still have to be taken, inevitably by holding politicians accountable, before Thailand can reach a more equitable income distribution and economic opportunities. New forms of taxation must be enacted, the tax system must be revised equitably, and tax evasion must be combatted, all for the goal of providing necessary support for the middle class and the poor to improve themselves. Only then can the country progress in solidarity and enjoy more sustainable and prosperous development.
Atipong Pathanasethpong is a clinical instructor at Khon Kaen University's Faculty of Medicine and the spokesman of the Project for a Social Democracy (prosocdem@gmail.com). John Draper is a PhD student at Khon Kaen University's College of Local Administration and a member of the Project for a Social Democracy.