Neoliberalism and Thailand's Class Struggle

(Author’s Note: The following is a selected passage from a chapter that will hopefully appear in a compendium on neoliberal globalization in the Fall/Winter 2011).

In many ways, the implementation and subsequent repudiation of neoliberal policies in Thailand is emblematic of the bitter divide along class lines that has afflicted the country for years and which culminated in large scale street protests in the spring of 2010 against the central government in Bangkok. With respect to Global South studies, Thailand represents an acute example of how a state’s adherence to the “Washington Consensus” serves to gradually expand the income gap between rich and poor as wealth becomes concentrated in an ever-shrinking minority of elites. The unprecedented demonstrations in the heart of the Thai capital were the manifestation of long simmering angst amongst the rural segment of the population which felt, and still feels, as if they have been forgotten and left behind by a political system which has benefitted the haves much more than the have-nots. Such resentment was directed towards an undemocratic and illegitimate government which had rolled back many of the reforms employed by the administration of former Prime Minister Thaksin Shinawatra, reforms which had the desired effect to curtail the unjust social reality pervading the country. Before conducting an analysis on Thailand’s economic policies, a brief historical overview is required.

Thailand is unique in a certain respect that it is the only Third World country to have never been colonized by the West. During the Cold War era, as its neighbors plunged into civil wars (Vietnam), secret wars (Laos), genocide (Cambodia), or experienced brutal political repression (Indonesia, the Philippines, Burma/Myanmar), Thailand remained relatively stable. Enjoying a robust tourism industry, certain segments of Thai society began to prosper. Bangkok became one of the largest cities in Southeast Asia and a cosmopolitan world capital. But as the rich get richer, the poor get poorer, and Thailand was not immune to the ills of capitalism.  According to the World Bank’s development indicators  as of 2000, 81 per cent of the state’s wealth belonged to the top 30 per cent of income makers. In comparison to other states of the Global South, that is not as grievous a number as one might expect. However, the lowest 10 per cent possesses a mere 2.8 per cent of the wealth and 28 per cent live on $2 per day. While one can make the case in other developing countries that the lasting legacies of colonialism have contributed to such explosions of poverty affecting substantial percentages of the population, this argument cannot be made in Thailand. The proliferation of poverty in Thailand, instead, is an indictment on successive Thai governments throughout the years, with one exception, and is another footnote in the failure of neoliberalism to provide socioeconomic rights and safety nets to its most at risk populace.

It has also caused Thai society to be split along class lines; the hills in the north of the country retain a poor, rural feel while the well-off and well-educated segment of society live in Bangkok and its many, comfortable suburbs. This schism was cogently encapsulated in a 2008 article in The New York Times during an interview with a farmer from the northeastern province of Issan amidst the anti-government protests being waged by the elites in Bangkok during that summer. “The people of Issan are people, too,” said the farmer, Damneun Pangsopha, who remarked on how insulting it was to be looked down upon and treated as ignorant nuisances by his nation’s wealthier brethren. “That’s not democracy,” added another farmer from the rural provinces. “They can’t win, so they try to find another way to fight.”

This context provides an appropriate comparison to the dueling monetary policies which have defined the country’s political economy since the Asian financial crisis of 1997. Neoliberal policies, instituted by the International Monetary Fund (IMF) after its intervention during the crisis, were met with approval by the elites of Bangkok who stood to expand their wealth ever more as a result. Conversely, it was the poor, rural constituencies who had reason to celebrate when Prime Minister Thaksin Shinawatra reversed these policies when he was inaugurated in office in 2001.

The Fund’s intervention in Thailand only augmented the crisis of 1997. The structural adjustment package (SAP) offered by the IMF was conditioned with the expectations that the states in need of a bailout would adhere to the principles which underscore neoliberalism: privatization, deregulation, and trade liberalization. This is despite the prevailing verisimilitude of the era which was that there were virtually no restrictions on capital flows during the run up to the crisis, as the Fund’s economists had previously recommended. As Richard Higgott has prophesized, “the political manifestations of [the crisis] will linger long after the necessary reforms have been introduced.” The austerity measures forced upon Thailand – bank closures, spending cuts, and staggering raises to interest rates – signaled to creditors that the Thai economy was only going to get worse. Improvements to the country’s healthcare and education systems were abandoned and industrial manufacturing plummeted. Furthermore, the unemployment rate shot up from 1.5 per cent in 1997 to 4.4 percent in 1998 – a 193.33 per cent increase.

This is not to sat that Thaksin was an ardent socialist. In fact, he gave generous contracts to huge corporations including the country’s largest agribusiness, Charoen Pokphand Foods, and set about privatizing many industries. But after Thaksin’s electoral victory is 2001, the overhaul of the economic system — still reeling from the financial crisis and spending cuts instructed by the IMF — began almost immediately. The telecom billionaire turned prime minister confronted this problem by implementing a set of reforms that would later be dubbed “Thaksinomics.” One of the primary hallmarks of the populist sets of policies was the instituting of a debt forgiveness program for farmers, and orders given to state-owned banks to issue loans to small businesses at remarkably low interest rates, sometimes for as little as 3.5 per cent. The quick success of the program was encapsulated in a Time Magazine online story in 2003 of a farmer who had been the recipient of a microloan from his village, subsidized by the Bank of Thailand:

[T]he sense that the tide has turned is palpable not just in the cities but in the countryside as well, where farmers were particularly hard hit by the ’97 crisis. Indeed, Thaksin’s greatest success so far may be reviving the debt-laden rural economies. In the farming town of Bahn Rong Kong Khao, near the city of Chiang Mai in the country’s north, the government’s $2.3 billion Village Fund program, a microlending scheme, is a mini miracle, say residents. Narong Fongkraew, 50, who grows rice and chilies on his small farm, credits the Village Fund with saving not just his farm but the whole community. “After 1997, banks stopped lending to us and some people were forced to borrow from moneylenders who charged high rates of interest,” he says. Recently, Narong borrowed $475 from the Village Fund at a very low rate and used it to hire laborers to help him work his fields. Increased labor led to a greater crop yield, and this year, for the first time in six years, he earned enough to begin paying back his creditors. “I came very close to losing my land,” he says. “But now I think I will be free of debt within five years.” And Narong is not alone: nationwide, poverty levels have dropped almost 4% since Thaksin’s programs began in early 2001. Farm incomes rose 11% last year and more than 20% in the first half of this year.

Not only was Thailand able to repay its debt to the IMF, but it did so two years ahead of schedule. After watching its economy retract in the wake of the financial crisis in the last 1990s, GDP rose from 1.9 per cent in 2001 to 5.3 per cent in 2002. The Thaksin administration also introduced the “One Tambon One Product” (OTOP) program, marketed after the “One Village One Product” program which originated in Japan in the 1980s. OTOP was designed as an economic stimulus for rural enterprises who were encouraged to develop a commodity as a comparative advantage in their tambon (village), thus facilitating trade with other tambons and boosting small businesses.

Small scale development was reinforced by a commitment to macroeconomic planning. The “developmental state” economic model, elucidated by economist Robert Pollin, was designed to support the smaller initiatives to really drive the country’s economic growth and was met with early success. The state began subsidizing fuel to combat rising oil prices in 2004, and shortly thereafter directed the state owned Electricity Generating Authority of Thailand (EGAT), to begin lowering tariffs in an effort to increase consumption in poor, rural areas. Additionally, stimulus money was apportioned to finance the development of the country’s much maligned infrastructure, including $10 billion in improvements to the national railway and the opening of Suvarnabhumi International Airport in Bangkok.

These gains were thrown into questions following the 2006 coup and the consequent political unrest which has shaped the country the following five years. The mood of the country, categorized by a growing class divide — especially following the demonstrations against the pro-Thaksin government in 2008 by the People’s Alliance for Democracy (PAD) or “Yellow Shirts” — was captured in an annual overview of Thailand’s affairs by Asian Survey.

Thailand is currently facing a political crisis without precedent, with the country increasingly divided by political disagreements and social polarization. Anti-Thaksin and pro-Thaksin groups are engaged in a stand-off and are prepared for violence. The causes of the crisis are many, but at the heart of the problem lies the urban-rural divide. Although the judicial branch has stepped up its efforts to discharge the confl ict through legal means, the populace has apparently found it impossible to wait or accept the rulings.

Summed up in an eloquent, analytical piece in The New York Times last year, columnist Thomas Fuller posits:

The Thailand of today is not quite the France of 1789 — there is no history of major tensions between rich and poor here, and most of the country is peaceful despite the noisy protests. But more than ever Thailand’s underprivileged are less inclined to quietly accept their station in life as past generations did and are voicing anger about wide disparities in wealth, about shakedowns by the police and what they see as the longstanding condescension in Bangkok toward people who speak provincial dialects.

This divide persists to the present day, and will be played out in general elections in the beginning of July pitting Thaksin’s sister, Yingluck Shinawatra, against the establishment Democrat Party led by Prime Minister Abhisit Vejjajiva. To be sure though, this conflict is much more than partisan politics underscored by accusations of corruption and vote buying. This is a class struggle, one that represents a distinct paradigm shift in the way Thailand is perceived in the international community.