RECKLESSLY implementing populist measures could lead to Thailand being hit by a sovereign debt crisis as faced by some Latin American countries in the 1990s and Greece, Spain, and Italy during 2009-2010 while promoting investment in Myanmar may seriously endanger Thai capital and businesses venturing forth, Dr. Anusorn Thammajai, a People’s MP who staged a protest at parliament during Myanmar leader Min Aung Hlaing’s visit said today (Aug. 9).
Populist policies have become an important tool for winning elections and gaining a competitive advantage in politics but remain a vulnerable point in Thailand’s fiscal position, he said, adding in considering the 2027 national budget, the government refused to reduce the budget for populist measures, even though it would increase the risk of a fiscal crisis.
If populist policies are used excessively and undermine the macroeconomic policy framework, the result will be a vicious circle, which will inevitably drag the overall economic system to ruin.
This vicious circle begins with a government budget deficit due to the government borrowing to finance its spending. Overspending would lead to an international trade deficit (current account deficit) because both the public and private sectors consume more than they produce, thus having to import goods from abroad to satisfy this excessive consumption.
Doing so leads to deficits in all three sectors (public sector, private sector, and international trade) which will accumulate and increase in size, causing the economic system to fall out of equilibrium and leading to a financial crisis like those that occurred in the past, such as the sovereign debt crises of Latin American countries in the 1990s, the Tom Yum Kung crisis in 1997, the Hamburger crisis during 2008-2009, and the sovereign debt crises of Greece, Spain, and Italy during 2009-2010, Anusorn warned.
Those who lose out will oppose by reducing production and employment, leading to a decrease in GDP. Tax revenues collected by the government will also decrease, forcing the government to borrow more.
If populist measures involve haphazardly transferring or distributing money to the public, it will lead to problems with fiscal discipline, and beneficiaries will become dependent on government assistance and work less because they can receive free benefits from the government without working.
This will result in a decrease in the nation’s overall productivity and the long-term economic growth rate will be low.
Some populist programmes lead to the reallocation of resources, by shifting resources from efficient production units to consumption units, increasing overall consumption, but decreasing overall investment (due to reduced savings).
This will lead to decreased future production, making resource allocation less efficient than before, and potentially leading to economic problems.
Conversely, some types of populist measures can help reallocate benefits and reduce inequality, if these benefits are efficiently transferred from the wealthy to the poor.
“Moving beyond Latin American populism is therefore not easy, especially if the people are addicted to it. At the same time, we must differentiate between populist programmes that provide occasional assistance, and state welfare programmes that care for low-income groups or welfare state systems that create a system of benefit,” he said.
“A more sustainable system for caring for the people should be established. If populist policies are used excessively and undermine the macroeconomic policy framework, the result will be a vicious circle, which will inevitably drag the overall economic system to ruin.
“This vicious circle begins with a government budget deficit due to the government borrowing to finance its spending.”
Anusorn also warned that Thai-Myanmar trade and investment negotiations may not achieve the aimed goals without the restoration of peace, democracy, and an end to humanitarian violations in the neighbouring country.
The Thai government and parliament must help promote peace negotiation process and restore democracy and human rights in Myanmar; he underscored.
Advancing economic cooperation in trade and investment, and bilateral business agreements not only places Thai capital and businesses investing in Myanmar at risk but also poses a risk to Thai government agencies involved in or conducting transactions with a regime that is still heavily sanctioned by the international community, especially Western nations.
This could result in secondary sanctions being imposed on Thai private businesses and government agencies in addition to damaging their credibility on the international stage.
Moreover, the benefits from investment may not reach the society and the general public but instead become funds that nourish the authoritarian military dictatorship, strengthening it and enabling it to continue oppressing the people.
It also legitimises the “regime of succession of power” that does not help resolve the border crisis, end the ongoing civil war, with drugs, human and arms trafficking also not having improved in anyway.
“Human rights and humanitarian violations will continue as long as restoration of democracy and peace negotiation process do not truly occur.
“Thai society must work together to bring peace and democracy to the neighbouring country for the mutual benefit of all citizens.
“The Thai government can play a mediating role in opening a forum for negotiations to achieve a ceasefire,” Anuson said.
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Top and Front Page: People’s MP Anusorn Thammajai. Photos – Naewna
Insert: People cover with plastic in case of a water canon use during a rally against the military coup and to demand the release of elected leader Aung San Suu Kyi, in Yangon, Myanmar, on Feb. 9, 2021. Photo: Reuters/Stringer and published by CNA
Earlier report:
19 university student groups jointly protest Myanmar leader’s visit to Thailand
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