The global economic slowdown. Mr. Thaksin’s signature economic achievement was to encourage consumption among lower-class people: His government provided access to affordable health care, gave out credits to rural communities, and created a transfer system benefiting poor students and old people. Today, the generals are reducing transfers to lower-income groups, concentrating on unfocused infrastructure expansion and taking no action to increase exports or tourism.
This will not do in the face of Thailand’s aging population and broken educational system, and of the global economic slowdown. Especially not when stagnation already threatens the social contract. The N.E.S.D.B. reckons that 0.1 percent of Thais own nearly half of the country’s assets. Capitalist America, where 0.1 percent of the population owns one-fifth of all assets, looks like a socialist paradise in comparison.
Some simple, well-known measures could do much immediate good. The central bank could spur stagnating exports and tourism by buying U.S. dollars to drive down the baht. The government could boost private consumption with a massive transfer program to farmers, students and the elderly. The Bank of Thailand could make credit more readily available by increasing the money supply, and it could stop using interests rate to manage monetary policy, which has not been effective.
Yet the chances of such policies being implemented are low. The Bank of Thailand seems crippled by conservatism and uncertainty. Fiscal policy is in the hands of bureaucrats who are fearful of spending public money. The generals’ own support base is too narrow for them to suggest, much less achieve, anything contentious. And some of their economic proposals so far have been essentially nationalistic and risk discouraging foreign investment.
Every rational path out of stagnation seems blocked by autocratic rule. Thailand is not, as many economists argue, in a middle-income trap; it is in a coup trap. And this is a self-inflicted condition.
To raise the economic welfare of all Thais, and reduce the economic inequalities that have underlain political conflicts, by our estimation Thailand’s G.D.P. growth rate would have to be brought up to at least 6 percent. For that, though, bold measures are needed.
Small and medium-sized investors need to be given greater access to credit. The financial sector must be made more competitive, including with the creation of new lending institutions, ideally more domestic commercial banks. The junta should also encourage more foreign direct investment in high technology, both to increase productivity in existing manufacturing (such as the automotive industry) and to spur higher-value manufacturing (such as for pharmaceuticals and telecommunication products).
In the 1980s and 1990s, Thailand developed its Eastern Seaboard by turning infrastructure built in the Gulf of Thailand during the Vietnam War into one of Asia’s greatest production and export platforms, especially for automobiles and petrochemical products. A similarly grand strategy today might be to revive this old idea: creating an alternative route to the Strait of Malacca, the world’s busiest shipping lane, by digging a canal through the Kra Isthmus, in southern Thailand. A diversified manufacturing belt could then be developed along the canal, with two new great ports on either end. Another option would be to build a vast economic zone in the north and northeast of Thailand to supply the Chinese market.
The generals claim to want to address all these issues urgently. They must adopt a bold approach to overcome bureaucratic inertia or else recovery will be slow. Reviving the economy is their single best chance of justifying the coup and stabilizing the country.
Cookson, Forrest E., and Tom F. Joehnk. “Thailand and the Coup Trap.” New York Times 2 Jan. 2015: NA(L). Business Insights: Essentials. Web. 30 Aug. 2021.
- How do firms in Thailand overcome market failure?
- What costs and benefits do US based Ford and British companies experience has a result of FDI in Thailand?
- What role does Thailand’s location play in its booming economy? Is agglomeration involved?
- Should foreign invested and domestic firms sell more to domestic consumers in Thailand?
- How will the coup affect the auto and other American and British companies doing business in Thailand?
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