Thailand needs to think beyond populism

Thailand needs to think beyond populism

Beyond populism. This subject is an extremely challenging notion, one that Thailand has is struggling to find an answer to, and currently many of us feel that we are stuck in what is being called a "Democracy Trap" of spiralling competition among political parties to present increasingly populist policies to win votes.

The question as a politician is: how does one win elections without excessive populism?

While the question as a finance minister is: how does one ensure competing politicians are not given blank cheques?

For sure, and especially in new democracies, it is important for policy makers to ensure that the people should be able to feel the tangible benefits of newly received political freedoms.

In Thailand, these populist policies started out being quite "rational". For example:

- Part of a farmer's rice crop was mortgaged at a price 30-40% below the market price.

- Free education/free healthcare was guaranteed for all Thais.

- State-owned banks refinanced people's borrowings from loan sharks.

However, as political competition intensified, these policies became increasingly irrational and more and more expensive, as political parties sought to "outbid" one another.

For example:

- Every grain of rice is now acquired by the government at 40% above the market price.

- Loans by state-owned banks were simply either relieved of interest obligations, or waived altogether.

- First graders were given computer tablets.

- And in a city where the number one problem cited by residents is the traffic, the government recently gave a tax rebate to car buyers, costing the state in lost revenues funds that could have built about 25km of mass transit underground trains. At the same time a total of 1.2 million cars were added to the already clogged roads.

There are a number of questions that need to asked. How did the populist trend begin? What can break the cycle? Are all populist policies bad? Are voters ignorant of the dangers? What is the alternative? How can these policies be paid for?

Democracy is a numbers game. We are betting that there is collective sanity in "The Majority" and sometimes there is, sometimes not. But once it is clear what the rules are to win, then sooner or later a political party is going to "game it". In a developing democracy, it is normal that the majority of the population are under educated, and financially poor - therefore naturally vulnerable to populist offerings. However, Western democracies have shown that they are not immune either.

It is a rule understood in all democracies that individuals go to the polling booth with the question: "What will I get for my vote?". The poorer the voter is, the more likely the answer will be closer to home, and, of course, nothing is better, in any economy, than cash.

Still, not all populism is bad, by any stretch. In fact, arguably, it is "better" for a society to be "too" populist than the other extreme of not feeling the need to cater to individuals at all.

So we need to build "firewalls" to protect the economy from excessive populism. Populism also takes away scarce resources from key infrastructure and sustainable social welfare, so measures should be put in place to ensure that there is a limit to populist spending.

Populism can also lead to excessive public sector debt. So we need to build walls to protect us from this too.

There needs to be a legal national debt ceiling; in terms of a cap on the annual deficit, and a total overall gross debt ceiling.

There may also be a legal requirement that populist spending is financed only by revenues. Only infrastructure and current expenditures can be financed by debt. Note that even infrastructure spending should be monitored, and requirements for private sector participation (PPP) should be built in.

Proactive savings promotion should be introduced as a form of populism. In Thailand a law was recently passed to create a National Savings Fund, where the saving of individuals are matched by the state.

All new democracies need to address the Four Pillars of Sustainable Life straight away. Education, health, food and housing. No one can make all four free, but basic access must be possible to all of them.

Priority in terms of resource allocation needs to be made to these four pillars.

In terms of a development model, it is important to involve as much private sector participation as possible at the outset. This typically means attracting foreign investment. It is important to try to avoid economic rent by ensuring there are no unnecessary foreign ownership restrictions.

In doing this, institutions need to be put in place to ensure good governance and consumer protection. This should include an independent central bank, enactment of laws to promote fair competition, anti-corruption as well as independent regulators in key fields such as energy, telecommunications and transport.

This will help to prevent excessive populism filling a void.

Time is of the essence, for the people in any transition will have high expectations and be impatient. Identify quick wins and communicate clearly and honestly with the people.

Korn Chatikavanij is a former Finance Minister and is currently the Deputy Leader of the Democrat Party. The article is based on his speech at the UN High-Level Meeting on Beyond Populism, in Rabat, Morocco on Feb 6.

Korn Chatikavanij


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