Politics And Thailand's Wealth Gap

[Steve2UK]

Politics and Thailand's wealth gap

By Chang Noi

THE POLITICAL DIVISION remains fierce and emotional. Much of the country is a no-go area for members of the government. Abhisit's delivery of a compensation check to Granny Hai required a helicopter-borne military operation that cost many times the value on the cheque. Talk of "reconciliation" has faded away.

Little by very little, more people accept that this intense division is not caused by one man but a massively unequal distribution of wealth and power. Several worthy, middle-of-the-road institutions have found a new interest in the subject of economic and social inequality. These include the King Prajadhiphok Institute, Thailand Development Research Institute, and Thailand Research Fund.

The inequality in income in Thailand is much worse than it should be, given the relative success of the economy over the past generation. A simple way to measure income inequality is to estimate the gap between the top fifth and bottom fifth of the population. In countries like Sweden and Japan, where people value the advantages of living in a relatively equal society, the difference is 3 to 5 times. In Europe and North America, it's 5 to 8 times. Among Thailand's Asian neighbours, it's 9 to 12 times. In Thailand, it's 13 to 15 times. Almost all the countries worse than Thailand are African states with civil wars or Latin American states with endemic populist movements. The risks are very clear.

The economist Simon Kuznets proposed that developing economies would tend to get more unequal at first, because the benefits would be monopolised by a minority, but later would become more equal as many more people shared in the fruits of growth. That theory has generally been proven true, including among Thailand's neighbours. Indonesia, Malaysia, and the Philippines have all turned the corner from worsening to improving distribution. But Thailand defies Kuznets' rule. Recently, a Thammasat economist used Kuznets' method to calculate when Thailand should have turned the corner if it conformed to the pattern of most of the world. Her answer was 1994. But it still has not happened.

All these calculations are about income. But what about wealth? How unequal is the distribution of property, savings, and other assets in Thailand? Government began collecting data on this only in 2006, and the first analyses are now appearing. They are rather shocking. While the difference in income between the top and bottom fifths is 13 to 15 times, the difference in wealth is around 69 times. In terms of the Gini coefficient, a measure of inequality in which a higher figure means more unequal, the figure for income is a bit over 0.5 while that for wealth is 0.7.

What's more, we can be pretty sure that this calculation is an underestimate. It's not too difficult to count the assets of the poor. It's very difficult to count the assets of the rich because they are very shy people. If a certain former prime minister is a good guide to general practice, then the rich hide a third to a half of their wealth. That would mean that the wealth Gini is more like 0.8, and the wealth gap between the top and bottom fifths is more like 80 to 100 times.

Other data tend to corroborate this picture of a truly enormous wealth gap. According to the Bank of Thailand, there is almost Bt3 trillion in bank accounts.

Two-fifths of this total is held in just 0.1 per cent of all the accounts. Most people, especially rich people, tend to have more than one account. On a rough calculation, assuming the rich have two accounts apiece, half of the total savings in banks is owned by around 50,000 people.

The stock market is much the same. Between 1995 and 2004, the same 11 families appeared constantly as the top five holders on the exchange: Maleenont, Shinawatra, Damaphong, Chirathiwat, Benjarongkul, Damrongchaitham, Asavaphokin, Liewpairat, Photharamik, Kannasut and Joranajit.

Land is similar. In eight provinces where data has recently become available, the top 50 landholders (persons or juristic persons) hold on average a 10th of the total land. In Bangkok, the top 50 own 10.1 per cent of the land, and the single largest holder has 14,776 rai.

There are many, many reasons why income and wealth have become so unevenly distributed. One reason that is simple and can be relatively simply changed is the way the government raises revenue and spends that money.

Some countries use these mechanisms to even out equality by redistributing from the rich to the poor. Many other countries aim that the system should be roughly fair for all. In Thailand, the government redistributes from the poor to the rich.

How much is hard to calculate accurately. One study from 1981 showed that the poorest 10th were taxed over twice as much as the rich as a percentage of income. A 1994 study showed that the situation had improved but was still marginally pro-rich. Since then, nobody has looked. It's too embarrassing. The reasons for the skew are the heavy reliance on indirect taxes (VAT, excise) which fall more heavily on the poor, and the high levels of evasion. Some 8.6 million people file income tax returns, but only 5 million pay any tax, and only 4 per cent of those are taxed in the two highest brackets. The number of payees has been dropping in recent years.

Spending is similar. A World Bank study by Hyun Hwa Son showed that Thai government spending on health, education, and infrastructure benefited the rich more than the poor. So do subsidies on public utilities. The reasons lie in past development policy. Spending was concentrated on such things as Bangkok infrastructure and higher education on grounds these would have the largest impact on economic growth. Policies have since changed, but the legacy remains.

Just making government's tax and spending a bit fairer would begin to counter the trend to inequality. Is there the political will to make those changes? How much time is left?

-- The Nation November 2 2009

http://www.nationmultimedia.com/2009/11/02...on_30115689.php

[JR Texas]

Both fascinating and sad.........the findings are not a surprise to me and will not be a surprise to many others who have lived here for some time.

What is even more fascinating is how people can be taught to exploit themselves at their own expense.

I do believe we now have a semi-educated unit of young people who are becoming aware of the "rigged game" that they are being encouraged to participate in.

These people also have much higher expectations than their predecessors.

How long they will they continue to make the rich richer?

Will a massive revolt take place?

Will Thailand have its 60s revolt against social injustice and radical conservatism?

Who knows..........I am not sure at this point.

[PeaceBlondie]

Excellent post, Steve.

[Xangsamhua]

Depressing stats. It can't go on like this, can it? The political parties don't seem to address the question, despite the rhetoric. Has any of them - Democrats, Pheua Thai, NPP - produced a blueprint for more equal distribution of wealth? I suspect the latter will be more inclined to advocate frugal living (as per Phlang Dhamma, Santi Asoke, etc) and the first two just more of the same as before.

[sibeymai]

The rich get richer and the poor get poorer.......and then......REVOLUTION.

Don't believe me. Look at history.

The rich don't care, provided the revolution is not world wide. They just go somewhere else with their money hence the big "globalisation" lie which is just an excuse for the rich to move their capital wherever they can make (exploit) the most.

After the revolution the greediest of those remaining take over to repeat the cycle.

Edited November 3, 2009 by sibeymai

[thaihome]

Well, you can make statistics say anything you want. Here is a table from wiki of the Gini Coefficient (Differences in national income equality ) for Asian countries as calculated by the UN. As you can see, Malaysia has by far the worst disparity in income, followed closely by the PRC.

TH

Country   UN Gini[3]  

 Malaysia 49.2

 People's Republic of China 46.9

 Philippines 44.5

 Hong Kong 43.4

Singpapore  42.5

Thailand 42

 Cambodia 41.7

 India 36.8

 Laos 34.6

 Vietnam 34.4

 Indonesia 34.3

 South Korea 31.6

 Japan 24.9

[seri thai]

The rich get richer and the poor get poorer.......and then......REVOLUTION.

Don't believe me. Look at history.

The rich don't care, provided the revolution is not world wide. They just go somewhere else with their money hence the big "globalisation" lie which is just an excuse for the rich to move their capital wherever they can make (exploit) the most.

After the revolution the greediest of those remaining take over to repeat the cycle.

Another point Chang Noi doesn't address is that a lot of the elites wealth has been transferred out of Thailand (Ready for when they have to leave). I wouldn't be surprised if that is greater than what they keep in the country.

As a non-tax paying "guest" living in Thailand I have often wondered why they don't allow us residency and then tax our income. If most of the fahrang "guests" are in the upper income bracket why not make them citizens and tax 'em?

I guess it might set an unpleasant precedent for the non-tax paying wealthy thais also?

The 1932 "revolution" didn't quite pan out as planned and Thailand bypassed the 1970's ones thanks to Uncle Sam so they are now in a quaint fascist backwater with their Burmese pals. It'll be interesting to see how much longer they can keep the lid on the pot without getting their fingers burnt. "The times they are a'changin"

Then again Dylan was wrong about that, too.

[YoungNRich12]

You always know why the writer wants to say, but doesn't when you read these types of articles.

[Huey]

Excellent post. Hmm gives something to think about. In one way Thailand's rural and labor class need to remain poor so that the costs of producing goods can remain low and marginally competitive with their neighbors. China is killing us down here because they keep their labor costs down better than anyone else and still produce a large quantity of goods.

However, in order for this to work right then you should also keep the baht weak too, so that your export industry can get more orders internationally and keep more staff employed as a result. However this gives the rich less buying power abroad. For the poor their lives don't change much if they are making less than 10,000 baht a month. Simply because most of the things they purchace or domestic in origin anyway. But the rich get hosed when they go overseas or purchase big ticket imported items. However the increase in revenue from more frequent and larger orders for export related business should help that class.

It's a complicated issue however I think no matter what;

1) You need to keep the poor that way to compete internationally in agriculture and labor intensive exports.

2) They need to open the country up like Dubai when it comes to business laws. If it was as easy for a foreign company to operate here as in Dubai there would be a flood of outside cash coming in and consequentially a NEED for skilled and better educated work force. Better educated being the key because as of now the society dose not economically value education...hel_l you can make more with a noodle stand than with a degree from your local college.

3) Devalue the baht for atleast 5 years.

just MHO

[YoungNRich12]

Devaluing the baht is easier said than done. Its like saying, "Keep Lebron out of the paint." When the US government is printing money like the Parker Brothers there is not a whole lot you can do about it.

[mca]

edited

Edited November 3, 2009 by mca

[tgw]

too much equality is what we have in Sweden, Japan, etc. and most of Europe.

it is one of the reasons why everything is expensive and why in so-called "rich" countries there is no labor available for mowing the lawn and why executives type their letters themselves.

the income equality in Europe is already unhealthy, because even if you are in the top 15% earners, you cannot outsource tedious work to others. you are just too poor.

not only is everything so bloody expensive, but people here only get consumer goods while being depossessed of real assets.

everything is rented, even money itself, and forces people to work a lot. oh yes, revenue is high, but what remains once the rent has been paid, the taxes, all the over-the-top insurances, retirement plans, etc ? zilch!

wealth can't be only measured in income

many Thais are lazy and happy that way.

I really don't know why the average Thai revenue should rise, what are the benefits?

That they will get more useless consumer goods that will be broken in 5 years, that they take loans, pay rent, work more to pay for everything?

Better concentrate on giving every citizen better chances, improve the school system, see that farmers and house owners don't sell their assets, and make sure the people have enough to eat and decent free medical infrastructure.

This is already a wealth many in Europe don't have.

I will soon move to Thailand, so don't break this country please.

Edited November 3, 2009 by tgw

[IanForbes]

Good post, tgw. It IS a complicated issue. What you basically said is true. I know many huge farms in Canada went broke because they needed to buy expensive equipment to produce more grain and corn etc. Then, a few weather caused crop disasters and the farmer was out of business. He couldn't pay the banks for the mortgage he took to buy the machinery. Here in so called wealthy British Columbia the forest industry is in a shambles and companies are steadily going out of business. Anything that was kept small, like the mom and pop places, have managed to survive.

Dubai is only for the rich and they can have it. I own a frigging big house with all sorts of toys and it sometimes feels like I'm being run by my possessions. I don't even think of it as my own anymore and it's just my children's inheritance. We really don't need much to survive and have a happy life. A little puddle jumper of a car will get you to your next location just as easily as a fancy Mercedes.

[Ricardo]

Excellent article, thanks to the OP for posting it.

I guess most farangs agree that things have to change, in the UK the rich-and-powerful saw what was happening in France, and started to throw us normal people a few bones from time to time. Small steps in the right direction. While not perfect, the process was at least relatively less-violent than a full-on revolution, which is my main concern for Thailand.

But there also remains the risk, of someone media-savvy and wealthy, riding the populist/defender-of-the-poor image merely to put themselves into power, another Indonesia or Phillipines, hope that Thailand can avoid this outcome too.

Edited November 4, 2009 by Ricardo

[thaihome]

Its amazing to me the why people just buy into this socialist crap without even thinking for themselves.

Is anybody here actually in favor of using taxes to redistribute wealth from the rich to the poor?

I guess it doesn't matter that his numbers about Thailand and its neighbors are just plain wrong. Or that Thailand actually has smaller gap between the 20% rich and the 20% poor then the US

TH

[Felt 35]

Better concentrate on giving every citizen better chances, improve the school system, see that farmers and house owners don't sell their assets, and make sure the people have enough to eat and decent free medical infrastructure.

This is already a wealth many in Europe don't have.

So how have they done this in Sweden and Japan where generally people have better changes, better school system etc, (BTW, why Japan when speaking about equality)

Do they keep the masses uneducated, do only a few percent of the population in Sweden and Japan pay taxes, where do the free healthcare in Sweden and many other countries in Europe come from? Please explain!

[Felt 35]

Its amazing to me the why people just buy into this socialist crap without even thinking for themselves.

Is anybody here actually in favor of using taxes to redistribute wealth from the rich to the poor?

I guess it doesn't matter that his numbers about Thailand and its neighbors are just plain wrong. Or that Thailand actually has smaller gap between the 20% rich and the 20% poor then the US

TH

Of course I’m for wealth distribution through taxes. That’s the only way to go for a more equal society. Besides it will keep Thailand clean for wanna be capitalist foreigners coming here underpaying Thais and using their recourses in some newly started companies they never could afford to open in their home countries and which sooner or later fail anyway

[tgw]

So how have they done this in Sweden and Japan where generally people have better changes, better school system etc, (BTW, why Japan when speaking about equality)

Do they keep the masses uneducated, do only a few percent of the population in Sweden and Japan pay taxes, where do the free healthcare in Sweden and many other countries in Europe come from? Please explain!

Of course I'm for wealth distribution through taxes. That's the only way to go for a more equal society.

Free healthcare is good... up to a point!

What is not good is that the free healthcare is as good as the premium healthcare.

Free healthcare should help with ailments that are easy & cheap to treat, it should have a statistical benefit, not concentrate on giving every single citizen the best care available, because that's what is causing costs to explode.

I am not in favor of social help in the form of money being paid to poor people.

Better provide shelter in cheapish but adequate state-owned collective accomodation, basic food and the minimum healthcare and no money.

I am against minimum wages, because this prevents competition and drives prices up.

I do not think people are entitled to a private dwelling.

High taxes are proven to cause more inequality.

This has been the case in the last 10 years in Germany and France.

While the "super rich" category grew a lot, the middle classes were eroded and the working poor category increased.

So... yes, considering the middle class and the working poor class are progressively merging into one, we can say that these people become more equal in seeing their buying power decrease.

The socialists like to measure buying power using consumer goods.

But real buying power is measured in real estate and in how much other people are we able to employ using our excess cash.

I have been lucky a couple of years ago to be in my country's top 5% earners.

And what do you think I could have achieved with this?

Here is what I could buy with my excess cash (i.e. remaining cash after payment of taxes, health insurances, rent, tuiton fees for the kids, car insurance, etc.):

- if I took on a 30 year mortgage and applied all of my "excess cash" (meaning no holidays, no expensive cars, etc.), I could have bought a 150 sqm apartment (standard, not especially luxurious nor at an expensive address)

- or I could have employed one person at minimum wage to work for me, again using ALL of my excess cash to achieve that.

That's the reality today of what those "filthy capitalists" in the top 5% can achieve: not much.

If you are looking for rich people, look into the 1% or 0.5% percentile categories. They are there. And there is very few of them.

I have the feeling that we are already too equal here, and I see no motivation, no benefit in continuing to work here, since I don't get real buying power for my work.

I can just buy a lot of stuff that will be outdated or broken in 5 years (consumer goods).

I also have the feeling that my taxes help to keep that despisable consumer goods system working. My taxes go into welfare, distributes money to people who spend it in things that get broken quick, paying rents they couldn't afford otherwise, and in general driving prices up.

Then there is that imperious need of our western societies to plan as if we would live forever. We need to find the responsible persons for every fuc_kup. There HAS TO BE a responsible person to blame. We insure everything. We save money for when we will stop working, at 65 !!! 39 years to go, yikes!

The insurances drive prices up everywhere like crazy. Insurance for risks, insurance for health, etc.

Doctors sometime refuse to treat weak patients, fearing that they die and drive their insurance premium up, and that as a consequence they loose competitiveness...

European countries don't get shit done anymore.

We live in a society living on the achievements of the past and planning too much ahead into the future.

We totally forget the "here and now".

The planning and the suppression of risks has killed economic dynamics and thus enabled all the credit schemes that put a tremendous pressure on people in the west.

I read that as much as 84% of graduates of the best Swiss business school want to live the life of an employee, only 16% would like to become entrepreneurs.

There is something wrong with these societies.

and please, Felt 35, can you explain the benefits or a "more equal society" versus a society with big differences in income, but where basic needs are covered and where the system provides every citizen with real chances to succeed?

I feel there must be some inequality in society, let's say the 20% top incomes should be able to employ at least one person full time by devoting 50% of their excess cash for that.

Edited November 4, 2009 by tgw

[Heng]

Some people just aren't wired for wealth. Just like some people can only run so fast, jump so high, kick/hit a ball so far. Any kind of redistribution is temporary at best, and it's only a matter of time before your own ability gets you cut from the team.

[Felt 35]

Any kind of redistribution is temporary at best, and it's only a matter of time before your own ability gets you cut from the team.

You are totally wrong Heng and you know it.

[Heng]

Any kind of redistribution is temporary at best, and it's only a matter of time before your own ability gets you cut from the team.

You are totally wrong Heng and you know it.

You are totally in denial and you know it. People aren't born equal, they aren't raised equal, and the sum result of their entire lives to any specific point certainly can't be expected to be equal. Any redistribution is just a temporary burden for them before they find a way to return to their natural state.

Edited November 4, 2009 by Heng

[Felt 35]

and please, Felt 35, can you explain the benefits or a "more equal society" versus a society with big differences in income, but where basic needs are covered and where the system provides every citizen with real chances to succeed?

The benefits is of course that its for all the people, not a few newly wealthy due to their tax evasion and underpayment of their workers.

- poverty and social exclusion

- less income inequality

- eradication of child poverty

- less disadvantage for people by where they live

- legislation which protects people from discrimination

- free and equal healthcare for all

- equality between sexes

No reason to give more examples unless of course you where this pink glasses which are very popular here.

[Heng]

Wealth in a perfect World is accumated via hard work and serious risk taking, with that naturally come the rewards when and if you get it right.

I think the key argument is usually along the lines of: Not fair, I want another shot. I can't actually say how you cheated, but I'm pretty sure you did. I wasn't paying attention the first time around. And so forth.

There's nothing magical about it, some people are just are ahead of others in line and others simply want to trade places with them without any other logic other than they would rather be further along in line. Those ahead of the game say they woke up earlier, those behind say they must have been tricked somehow. Stalemate.

[way2muchcoffee]

Alternatively, the wealthiest are those most willing to exploit others, engage in unethical or immoral behavior in the acquisition of wealth, or were simply born into a wealthy family. This in no way means that every wealthy person is unethical or immoral. However, accumulation of large quantities of wealth necessarily means others suffer for it, directly or indirectly.

Another point is that it is ridiculous to assume that a dirt farmer in Issan has anywhere near the opportunity that a child born of wealthy parents will have. The playing field is not even.

[Felt 35]

You are totally in denial and you know it. People aren't born equal, they aren't raised equal, and the sum result of their entire lives to any specific point certainly can't be expected to be equal. Any redistribution is just a temporary burden for them before they find a way to return to their natural state.

Wrong again Heng… what should I deny….that I think it is a shame that in 2009 scrupulous business owners, local and foreign still can make themselves rich with tax evasion and lousy staff salaries under the umbrella to undemocratic and mostly one mans Governments.

I have no personal agenda with this just political, but I think its both interesting and a bit sad that I make to steer up the steam in some which obviously seems to not yet have come out of the imperial times and observed that some of the countries with best education, high equal index and high standard of living use tax as a form to redistribute wealth.

BTW, unless the world start to go backward your grand-grandchildren will one day see it even in this part of the world

[Felt 35]

No he's not, he's spot on the money. So to speak...

So was MR T. as long as it lasted.

While money needs to be spread around that is, or should be the governments job in a properly functioning society. Wealth in a perfect World is accumated via hard work and serious risk taking, with that naturally come the rewards when and if you get it right.

When I absolutely agree with you about the hard work why shouldn’t the one who really do the work have his fair share of the profit?

If everybody on the planet had everything they needed and some to spare can you imagine the mess it would be? And I don't mean to belittle anybodies suffering, I just mean that in my opinion something inbetween is probably optimal.

Why should it be a mess? If you look at on single society just out the window at this moment then maybe, but then I guess it is a mess also without! Its here the Government and then again parents, schools etc have their say or job.

[YoungNRich12]

"In Bangkok, the top 50 own 10.1 per cent of the land, and the single largest holder has 14,776 rai."

Something like 12,000,000 people live in Bangkok.

50 of them own 10 percent of the land.

Gotta love it! 5555555555

[YoungNRich12]

"In the United States at the end of 2001, 10% of the population owned 71% of the wealth, and the top 1% controlled 38%. On the other hand, the bottom 40% owned less than 1% of the nation's wealth."

Oops.

[tgw]

and please, Felt 35, can you explain the benefits or a "more equal society" versus a society with big differences in income, but where basic needs are covered and where the system provides every citizen with real chances to succeed?

The benefits is of course that its for all the people, not a few newly wealthy due to their tax evasion and underpayment of their workers.

- poverty and social exclusion

are not the same thing. Thais, poor or rich, hang around in large groups and have fun. Sanook?

- less income inequality

I can't see how this in itself is a good thing

- eradication of child poverty

sure, better for the individual child, but again, not sure how this helps society - I am convinced a mix of poor and rich is better than a mass of equals.

- less disadvantage for people by where they live

sorry, it is logical that if people settle down / live in an area without much resources or things to do don't get much income, they've got to move.

- legislation which protects people from discrimination

there is no virtue if one doesn't have the liberty to misbehave.

"laws against discrimination" only work in places where nobody gives a darn, i.e. government services/agencies

- free and equal healthcare for all

Now this is a definitve NO NO.

This is the best way to let a society bleed to death with unreasonable health costs.

- equality between sexes

when was the last time you saw the opposite sex?

if you get the chance, take a picture and then compare with yours and post the results.

Joke aside, men and women are different in appearance, strength, character and biological and psychological needs. Why should they be absolute equals?

No reason to give more examples unless of course you where this pink glasses which are very popular here.

arf. you just gave a catalog of socialistic prejudices.

what you do is like the handicapping system for horses.

horses are greatly inequal, like humans.

instead of giving each horse at the beginning the same training, you put extra ones on the best horses, hindering them to run at their full speed.

[Nio]

We all know this story too well no matter how many times it is told and by whom.

Almost every single MP and those in the cabinet of the Thai Govt are all multi-millionaires

Except for maybe 2%, the rest of these LIFE LONG CIVIL SERVANT politicians cannot prove where their wealth came from?

And quess what? The don't have to prove it because there is no one with any power to make them prove it.

What is lacking is a bonafide system of Checks and Balances.

Mr. Politician, you are earning 25,000 thb per month for your entire career, can you tell us where and how in this time frame as a civil servant you were able to accumulate US $10,000,000 in personal wealth?

No one has any clout to hold these politicians accountable and with no accountability the rich get richer and the poor get poorer.

Money earmarked for the poor ends up making the politicians even richer.

Social programs for the poor are concocted so that the majority of the money mysteriously finds its way to the rich and the poor get next to nothing.