One of the recurrent themes in attacks on the Thaksin government is that “populist” policies (the term often used to refer to policies that allocate resources to rural areas rather than Bangkok) have increased household debt. For example, Kasian’s important article on the political economy of the Thaksin government argues that policies such as the one million baht Village Fund have increased household debt by encouraging spending on mobile phones and “motor-scooters.” He cites data that average household debt in Thailand has increased from 70, 586 baht (5.7 times the average household monthly income) in 2000 to 84, 603 baht (6.1 times the monthly income) in 2002.
Of course, rising household debt may well be a matter for concern. But is a debt amounting to 6.1 times monthly income really so high, especially in an expanding and diversifying economy? Most people in Australia would be delighted with a household debt that amounted to only about one half of their annual income! The key issue is whether or not people can service their debt. This is an important issue that receives little attention in current debate. But there is some work being done, such as the very useful paper by the Monetary Policy Group. The data in the paper does point to some of the hazards of household debt, but it provides a much more subtle picture than the increasingly popular images of rural folk being relentlessly sucked into a vortex of debt-driven consumerism.
In the current political context is is important to ask to what extent policies such as the one million baht Village Fund have fed an increase in household debt. Perhaps not very much at all. Figure 3.1 in the Monetary Policy Group paper suggests that in 2003 the Village Fund represented less than 3 percent of household credit. And the Bangkok Post’s 2004 Mid-Year Economic Review reports that “Government policies such as the 30-baht health-care scheme, farm debt relief and the village fund programme are not seen as significant contributors to consumer loan growth since most lenders have focused on middle-income earners in urban areas.”
It may be more legimate for social commentators to focus their attention on the proliferation of credit card debt.
But credit cards are the darlings of the middle class. It is only rural debt that seems to threaten the ideals of self-sufficiency that are being deployed against Thaksin. Especially when rural folk have the cheek to purchase some of the trappings of urban modernity such as mobile phones. Outrageous!
3 responses so far ↓
1 New Mandala » Thai village fund hysteria // Sep 19, 2006 at 6:58 pm
[...] As I have indicated in a number of previous posts,there is a lot of hysteria about the one million baht village fund in Thailand. For many of the critics of Thaksin this program is typical of his government’s profligate populism. There is much talk of the money being misspent, mismanaged and misused. The so-called pro-democracy elitists seem offended that rural people are being given resources to manage themselves. Much of this discussion takes place in the absence of any detailed knowledge about how the scheme works at a local level.With a view to encouraging some more informed discussion, here are some facts and figures about one village fund (in Chiang Mai province) that I am a little familiar with. [...]
2 New Mandala » Save for sufficiency // Nov 3, 2006 at 6:16 pm
[...] Let’s hope the debt reduction campaign starts in the city where the middle classes have gone on a credit binge. But it won’t surprise me at all if the war cry of sufficiency is used against “populist” policies like the one million baht village fund. As I wrote (pre-coup) in an earlier post: In the current political context is is important to ask to what extent policies such as the one million baht Village Fund have fed an increase in household debt. Perhaps not very much at all. Figure 3.1 in the Monetary Policy Group paper suggests that in 2003 the Village Fund represented less than 3 percent of household credit. And the Bangkok Post’s 2004 Mid-Year Economic Review reports that “Government policies such as the 30-baht health-care scheme, farm debt relief and the village fund programme are not seen as significant contributors to consumer loan growth since most lenders have focused on middle-income earners in urban areas.” It may be more legimate for social commentators to focus their attention on the proliferation of credit card debt. But credit cards are the darlings of the middle class. It is only rural debt that seems to threaten the ideals of self-sufficiency that are being deployed against Thaksin. Especially when rural folk have the cheek to purchase some of the trappings of urban modernity such as mobile phones. Outrageous! [...]
3 Rick Doner // Aug 4, 2007 at 2:48 am
I recently had the opportunity to spend a few days in the Srisaket village where I worked as a Peace Corps volunteer from 1968-1971. I had been back only sporadically, but after a brief visit last year, I vowed to go back and talk to folks, including the abbott of the wat. I was struck by a number of things, including the wat’s very explicit support for making Buddhism the official state religion, but the economic changes in the village and surrounding area and what seemed to be their link to Thaksin policies, was especially striking.
Briefly, what I found was an increasingly diversified economic structure in which villagers had formed 4-5 groups devoted to producing garlands for sale in town (the village is only 10 minutes from the provincial town). The sequence seems to have been as follows: Several villagers had noticed a vibrant market for garlands. Prior to Thaksin, they initiated cultivation of flowers (”dok mal”i and “dok phut”) with which to make the garlands. With Thaksin’s victory, they report visits by agro-extension agents who provided useful ideas on pest control, water use, etc. They used the million baht loan scheme to establish groups of 4 or so families, each of which planted these flowers. The groups functioned to organize the actual “weaving” of the garlands and, I believe, sale in town. I visited 3 of the groups – all women. I was also told that this activity now contributed to a significant portion of the families’ income. After Thaksin’s overthrow, they reported, the extension agents stopped coming. I pushed on the debt question: Didn’t these loans result in more debt due to consumer spending? The answer – admittedly from a very small sample of 3-4 people – was that yes, there was some debt increase, but 1) the number of consumer-driven cases was relatively small, and 2) at least the debt was at a lower interest owed to public rather than private lenders.
I should note that I approached this issue with great skepticism about the Thaksin policies.
I also pushed my respondents on whether their economic activities were consistent with the idea of a ’sufficiency economy.’ The answer, universally, was: of course. The loans could be used to help increase diversity and self reliance – goals consistent with the sufficiency economy idea.
I’m planning to write up this visit as a short article and would appreciate suggestions as to suitable outlets.
And I’m eager to see more empirically based assessments of Thaksin policies.
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