Middle class has paid for PM's popularity

[Chlp]

Middle class has paid for PM's popularity

 

Members of the middle class want Prime Minister Thaksin Shinawatra out of office because they are extremely upset at his family's tax-free sale of Shin Corp.

 

But they have also become highly suspicious of the Thaksin model, which they say exemplifies policy corruption and vote-buying.

 

At one of his anti-Thaksin rallies at Government House, Suriyasai Katasila, spokesman for the People's Alliance for Democracy, called for Thaksin's resignation, the setting up of a tribunal to probe the Shinawatra family's assets, an end to Thaksinomics, reversal of the privatisation programme and a complete review of all the free-trade agreements.

 

Everyone at the rally agreed that Thaksin must go, but they didn't quite agree on what Thaksinomics or the Thaksin model is.

 

An academic, who asked not to be named, has come up with an illustration of the Thaksin model, designed to make people at the grassroots indebted and dependent on government handouts, squeeze the middle-class for tax, and make the rich even richer. The strategy of the Thaksin model, which relies on high economic growth as a camouflage, in the end serves to fatten the pocketbooks of the Thai Rak Thai members and keeps them in power.

 

In the Thaksin model, the real losers are the middle-class, who have to foot most of the tax bills (see table). The middle class comprises people earning between Bt100,000 and Bt1 billion a year and includes salaried employees, traders, businesspeople, and small- and medium-scale entrepreneurs.

 

The grassroots are those people who earn below Bt100,000 a year or less than Bt10,000 a month. They have nothing further to lose but have no chance to break out of the cycle of poverty.

 

The rich make more than Bt1 billion a year. They enjoy tax exemptions on the stock market. If they invest in mutual funds, they also stand to save on their tax bills.

 

The tax paid by the middle class goes into the Finance Ministry's coffers before the government spends the money through the budgetary process. The budget pays for the salaries of the civil servants and state enterprise employees. It also funds investment in projects to develop the country such as airports, roads, electricity, water, mass transit systems, telecommunications and others.

 

As it turns out, the winners of most of the contracts for government projects are political cronies of the Thai Rak Thai Party.

 

But the Thaksin government has also devised populist spending for the people at the grassroots, who make up the majority of voters. Funds from the national budget are earmarked for the Bt1 million village fund, SML, One Tambon One Product, housing for the poor and other such schemes. The mobile Cabinet meetings have also resulted in white elephant projects, such as the Chiang Mai Night Safari, the At Samart model of poverty reduction in Roi Et and other pork-barrel projects along the way.

 

But the Thaksin government knows very well that people at the grassroots aren't familiar with running a business. What began as a social safety net has been twisted into a scheme to encourage consumption and debt creation. Money distributed through the populist policies ends up being spent on mobile phones, phone cards, motorcycles, pickup trucks and consumer items. The rich or top-bracket earners stand to benefit from such grassroots consumption because they control most of these businesses. The poor end up further in debt but are not worried because they know the government will bail them out.

 

An academic at Chulalongkorn University said, "The worst thing the prime minister has done is to destroy the basic market mechanism and twist social welfare into political king-playing."

 

Still, the people at the grassroots look upon Thaksin as the champion of their cause. Dr Somchai Kijsuchon, a researcher at the Thailand Development Research Institute, said that government money really was injected into the grassroots economy in the first three years of Thaksin's government. The poor, for the first time, got a taste of populist spending.

 

But after that, due to budget constraints, the funds stopped going to the grassroots. Somchai said the Thai Rak Thai Party had an exceptional ability to create hope among the people that the money they are waiting for will - somehow, some day - materialise.

 

Thai Rak Thai enjoyed a landslide victory in the February 2005 election because it got support from both the grassroots and the middle class, who got carried away with the high economic growth rate. Thai Rak Thai has bragged that per capita income rose by 38 per cent during their time in power, resulting in the growth of the GDP from Bt4.9 trillion to Bt7.1 trillion.

 

But this high GDP growth has had little trickle-down effect as average household debt has risen from Bt60,000 to more than Bt130,000 over the past five years, according to the opposition Democrat Party.

 

Ultimately, the Thaksin model is designed to squeeze the middle class, who have to work hard for themselves and also look after the entire population with their tax payments.

 

In one recent campaign Thaksin admitted that he had committed a mistake by failing to look after the middle class.

 

"I should have looked after the middle class instead of using money to bail out the financial institutions [which cost more than Bt2 trillion]," he said.

 

Thanong Khanthong

 

The Nation