Thaksinomics
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Thaksinomics (a portmanteau of "Thaksin" and "economics") is a term used to refer to the economic policies of Thaksin Shinawatra, Prime Minister of Thailand from 2001-2006. There has been considerable controversy over the role Thaksinomics has played in Thailand's recovery from the 1997 Asian financial crisis. Among the most prominent advocates of Thaksin's economic policies is Morgan Stanley economist Daniel Lian.
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[edit] Overview
The core of Thaksinomics revolves around populist economic policies designed to increase the purchasing power of Thailand's rural lower classes, who make up the majority of the country's population. These policies have included
- A three-year debt moratorium for farmers, combined with orders to Thailand's state-owned banks to aggressively extend loans to farmers, villages and SMEs (small and medium-size enterprises) at discounted rates.
- Subsidized petrol and diesel prices, starting January 2004 in order to cushion the impact of rising world oil prices on consumers. The government has also forced the state-owned electricity company EGAT to partially subsidize electricity tariffs.
- In the area of public health, Thaksin started the 30 Baht universal healthcare program, which guarantees universal healthcare coverage for just 30 Baht (about .75 USD) a visit at state hospitals.
- The One Tambon One Product (OTOP) program, which gives incentives for the development of rural small and medium-sized enterprises.
- Thaksin has pushed for continued privatization of state-owned enterprises. Although a continuation of the Democrat-initiated policies of the late-90's, Thaksin has consistently pushed for the privatization of the state-owned electricity company EGAT.
- An important component of Thaksin's economic policies are the proposed "mega-projects", which involve investing over $50 billion in public works, including roads, public transit, and a new international airport.
Supporters of Thaksinomics argue that these policies, implemented in the aftermath of the Asian Financial Crisis, have driven a stable, demand-driven recovery of Thailand's economy, which was previously dependent on exports, making it vulnerable to external shocks. They also point out that under the Thaksin administration, Thailand has repaid all of its debts to the International Monetary Fund (incurred after the Asian Financial Crisis) ahead of schedule.
These policies have made Thaksin Shinawatra incredibly popular. After an unprecedented uninterrupted 4 years as Prime Minister, his Thai Rak Thai (TRT) party won a landslide victory in the February 2005 elections, winning 374 out of 500 seats in Parliament. This is the largest number of parliamentary seats ever gained by a single party in Thailand's history as a democratic country.
Critics of Thaksinomics claim that Thaksin's economic policies amount to little more than traditional Keynesian fiscal stimulus policies rebranded as a revolutionary economic doctrine. They argue that, contrary to the claims of Thaksinomics's advocates, Thailand's economy was actually driven by rising export demand, while domestic consumer demand has grown only modestly at best since Thaksin became Prime Minister. Skeptics also note that under Thaksin's policy of pushing state-owned banks to increase loans to poor farmers, consumer indebtedness has also risen. They charge that the banks often made loans without proper due diligence to people who had little means to repay the loans. Thaksin supporters often counter by pointing out that the percentage of non-performing loans in the banking system has fallen during his administration.
[edit] Thaksinomics in practice
By 2001, the currency had risen to a reasonable, export friendly level, and the economy overall had fully recovered from the 1997 Asian Financial Crisis. The strong performance of the Thai economy beginning in 2002 drew international attention to the Thaksinomics phenomenon. In that year, Thailand outpaced the rest of Southeast Asia by posting GDP growth of 5.2%, the fastest rate since the Asian financial crisis of 1997. The economy grew by another 6.9% in 2003 outpacing the rest of the region except the People's Republic of China. In 2004, in spite of a volatile exernal environment and rising oil prices, Thailand still managed a GDP growth rate of 6.1%. [1]
Since the beginning of 2005, however, the wisdom of Thaksinomics has been increasingly questioned. Although the reelection of Thaksin and his Thai Rak Thai party in an unprecedented landslide in February demonstrated the widespread popularity of his policies, slower economic growth since then (4.5% in 2005) has also given ammunition to critics of Thaksinomics. Thaksin's supporters argue that the economic slowdown is largely a result of the Great Indian Ocean Tsunami of December 26, 2004 and rising oil prices. But others point out that rising inflation, consumer indebtedness and trade deficits continued to plague the Thai economy as a direct result of Thaksin's policies. Thaksin was forced into an embarrassing retreat in July 2005 when the ballooning trade deficit and skyrocketing fiscal burden caused the government to abandon its diesel price subsidy. Corruption allegations stemming from public contracts in the construction of Suvarnabhumi Airport also threaten to cloud the future of Thaksin's public works projects that form the core of his second-term economic policies.
In addition, the most prominent advocate of Thaksinomics among international investors, Morgan Stanley economist Daniel Lian, suffered a blow to his credibility in October when the nature of his close, personal relationship with Thaksin was revealed in a letter that was leaked to Thai Day, an English-language newspaper in Bangkok. In the letter, which was a personal note from Lian to Thaksin, Lian noted the efforts he made on Thaksin's behalf, including his help in organizing a road show in Hong Kong. Lian then went on to attack the opposition Democrat Party, and its leader, Abhisit Vejjajiva, questioning whether Abhisit can "offer to the Thai people" anything other than his "pretty young face" — a sarcastic reference to Abhisit's supposed youthful good looks. [2]
