The ongoing political crisis in Thailand
has been capturing headlines for some time now, and now even appears to
be heading towards some kind of climax. This political instability reflects
more than the resistance of the existing establishment to the increasingly
vociferous demands of those who have been marginalised from most of the
benefits. It also reinforces the significance of (and the need for) democratic
legitimacy in a developing country such as Thailand, despite all the known
problems with its electoral process.
But the purely political is not all that underlies this current crisis.
Indeed, it could be argued that the economic underpinnings of this political
crisis are the more significant forces propelling the actions of the anti-government
protestors. This reflects the socio-political results of more than a decade
in which the neo-liberal economic model, which still drives the policy
making of the elite, has been fundamentally exposed among the people.
The conflict between the current Thai government (as well as those elements
of the establishment that directly and indirectly enabled this particular
political grouping to rule) and the wide spectrum of anti-government protestors
is not simply about certain political processes or about individuals like
Thaksin Shinawatra, the exiled former Prime Minister. Rather, it is substantially
about economic policy. As Pausk Phongpaichit and Chris Baker have shown
in their excellent book on Thaksin, he was (and remains) a larger-than-life
figure with only too lifelike faults, which have ranged from blatant nepotism
to megalomaniac attempts at stifling democracy. So the support for his
return is not only (or even necessarily) because of the craving for a
strong leader, but much more due to the perception that the economic strategies
followed by his government brought at least some relief to the people.
The continued popularity of Thaksin among the peasants and otherwise unorganised
workers is largely because of what the Thai elite sniffs away as “populist
policies”. This term is a favourite among chattering classes across the
developing world, used to denigrate any economic policies with minimally
redistributive impact from the rich and middle classes to the poor. In
Thaksin’s case, these included providing peasants and small businesses
with access to institutional finance, increasing the share of rural Thailand
in public expenditure, providing fiscal transfers down to the village
level in the form of untied funds to be used according to the preferences
of local communities, and such like. While these did not contradict or
even challenge the basic neo-liberal framework within which corporate
industry continued to be favoured, they share some of the spoils of economic
growth with those who had hitherto been excluded. They were certainly
popular policies, and they played a role in giving to Thaksin and his
various political formations a degree of legitimacy among ordinary people
that is still unmatched in Thailand.
While many of Thaksin’s actions in power (and his own undemocratic tendencies)
certainly sowed the seeds of his decline and fall from grace, the coup
and various other actions of the Thai establishment could also be seen
as the empire striking back. The subsequent inability of the government
to capture the political imagination of the masses, or even to achieve
basic legitimacy despite trying to continue with some of Thaksin’s economic
policies, may be due to the growing evidence that even such “populism”
is no longer economically sustainable in Thailand.
To understand this, and also to begin to comprehend the extent of general
dissatisfaction with the economic regime, it is useful to examine the
relationship between economic growth and employment (which determines
the material conditions of the bulk of the Thai population, even the peasantry).
Chart 1 shows how real GDP and total employment have moved over the past
twenty five years in Thailand. Remember that Thailand, in common with
many developing countries, is generally a labour surplus economy engaged
in an uneven and unbalanced process of industrialisation. Yet it is evident
that aggregate GDP growth rates have run far ahead of aggregate employment
growth, even when the measure of employment includes (as it does here)
all form of self-employment, casual work and even part-time work.
The period of the Asian crisis occasioned a drop in GDP as well as in
aggregate employment, but the subsequent sharp recovery in GDP did not
translate in more rapid employment growth, which has tended to stagnate.
This pattern is confirmed by Chart 2, which shows annual rates of growth
of aggregate employment as well as the unemployment rate. Employment growth
has been volatile within a narrow range, and indicates a trend decline
compared to the 1980s. It was negative at several points in the 1990s,
not only in the crisis years, and zero in 1999 and again in 2001, reflecting
the effects of the global recession. Subsequently, despite more respectable
aggregate GDP growth, the peak rates of employment expansion have been
less than 2.5 per cent. Unemployment rates fell somewhat during the 1980s
boom but rose again after the crisis and since then have displayed volatility
around a higher trend. While these rates may appear low, they are part
of an institutional structure that offers no social protection to the
unemployed, where the inability to find paid work is therefore reflected
in more disguised unemployment in agriculture and petty services.
The pattern is a recognisable one. Many developing countries, including those perceived to be the most successful in terms of output growth rates, exhibit this form of jobless growth. This reflects two general tendencies: a shift in production structure across and within sectors, whereby income expansion is associated for demand for goods and services produced in more capital-intensive conditions without generating demand for labour-intensive goods and services; and the associated technological and organisational changes that improve labour productivity.
This pattern is seen once again in the incidence of jobless growth in the formal sector, described in Chart 3. Both in terms of number of establishments and number of workers, termination of work contracts was relatively low in the economic boom that preceded the crisis. However, layoffs zoomed up during the Asian crisis of 1997-98, and have stayed high in the entire subsequent period even though the economy supposedly started booming. In fact, the number of establishments adversely affected has grown faster during the 2000s boom, rather than the previous crisis.
Overall, this means a labour market in which workers are clearly worse
off, since both external competitiveness issues and internal dynamics
have dictated that demand for labour does not keep up with supply. This
reduced bargaining power is indicated by the fact that real wages – which
were drastically affected during the crisis of 1997-98 – continued to
fall even during the recovery, and then have recovered only slightly.
In 2008, real wages were only 5 per cent higher than their level of 2000,
while labour productivity had increased by 22 per cent.
Of course these are aggregate figures, and the sectoral pattern is likely
to be more complex. But they indicate an economy in which the distribution
of national income is clearly shifting away from workers to those who
receive profit, rent and interest. The reduced bargaining power of workers
is inevitably part of the reduced bargaining power of the peasantry, from
whom the ranks of new workers are generally drawn.
This broader context of worsening income distribution is essential to
understand the current political tensions in Thailand. The anger of the
anti-government protestors is fundamentally related to this process, and
Thaksin is appreciated by this group only because he showed that it is
still possible at the margins to improve the lot of the poor using fiscal
and monetary policies.