Handouts Are Not An Investment In Our Future

[webfact]

EDITORIAL

Handouts are not an investment in our future

By The Nation

Populist policies are designed to win votes and nothing else. There is no plan for the country beyond the election

As of press time, it is uncertain if the US federal government will be forced into a shutdown, in the same way it experienced in 1995, because of the budget crisis.

The budget battle has often become a serious political issue during times of economic difficulty. During fat years, all governments have the luxury of spending to appease voters. But the ongoing economic downturn has brought about a reality check as governments around the world are forced to execute budget cuts.

The US public is naturally not keen to see its benefits diminishing. Proposed cuts can bring people out onto the streets, as witnessed in the recent standoff in Wisconsin. And now the labour battles are spreading nationwide because American workers do not want to see cuts to pay or benefits, or a weakening of their collective right to bargain.

The possible showdown in the US should serve as a lesson for Thailand, especially as the Thai government has justified an increase in spending to support its populist policies by claiming that we are enjoying a buoyant economy. In short, the government is trying to ensure that it will have enough money to finance a series of welfare programmes, to which it's committed, to continue for several years to come.

But even the best economists in the world cannot predict economic fortunes. American economists are still perplexed at how this severe situation has come about in their nation. The US fiscal stance has changed from surplus to massive deficit in less than 10 years.

The Thai government, meanwhile, has pushed its luck on external factors. The Thai economy has enjoyed steady growth over the past few years largely because of the booming export sector. This is in part thanks to the rise of demand in China and other countries in Asia. But there is a big question over whether the wealth generated has been fairly spread. Many observers agree that this is not the case; that the prosperity has been concentrated among a small group of people with greater opportunities. The "coloured" political movements have risen on the back of increasing public discontent. Demonstrations are seen by the public as channels to vent anger over the disparities in income distribution and business opportunity. This is not a promising sign either.

The Abhisit government, however, has responded by injecting more money into programmes to appease Thai voters, even though many of these programmes are unnecessary and clearly designed for short-term political benefit. Some of these schemes are a waste of taxpayers' money - such as fuel subsidies and cash handouts.

This money is not being spent to boost our economic strength or competitiveness, but for a one-off political purpose: for the government to be able to win the next election. Even worse, the government has borrowed the money, increasing the public debt for future generations in order to satisfy the appetite of this generation. The fuel subsidy is a case in point. We should be learning to maximise the efficiency of energy consumption instead of leaving the burden of an Oil Fund that runs in the red.

As the debate in the US has shown, the amount of money available for the government to spend is not the real issue. The more serious question to address is whether the money is being spent wisely or stupidly. The question is whether the money is being spent to realise a future vision for the country.

The government must abide by proper guidelines and principles in its spending. The definition of the role of government is that should exist to enhance the strength of civil society and the private sector, not to increase the latter's dependency on the government. The ongoing protests in this country, and the government's interventions in the economy, have shown that the public has - due to populist saturation - come to perceive the government as simply a provider.

Every single baht should be spent in a calculated manner, under proper principles. The evaluative assumption must be that it will contribute to a national "master plan". If the government wants to enhance the capacity of future generations, the question now is whether money is being effectively invested for this purpose. Unfortunately, it seems at the moment that money is being thrown around meaninglessly.

So don't be surprised if Thailand sees a budget showdown in the near future.

-- The Nation 2011-03-03

[trisailer]

The situations in the US and Thailand could not be more different. The two economies are at completely different stages with completely different challanges.

The US is faced with the distruction of the middleclass. The middleclass was essentually created by the unions and it's demise coinsides with the decline of those same unions. The US has achieved huge gains in productivity that have not been shared with the population. Instead incompitent, reckless management by leaders have destroyed the gains which should have been realized. Illegal wars, reckless banking practices, the elimination of oversight of important financial practices and on and on and on. These poor, short sighted decisons that put the US into the current situation were made by people at the top who have been unharmed by them. A handful of incompitent, greedy, war loving paper shufflers have ruined the lives of millions and and sent the ratios of have and have nots back to the dark ages. If Americans were not so fat, lazy and cowardly they might be hitting the streets in red shirts themselves.

Thailand, on the other hand is an emerging economy. The excellent growth here is because of the cheap, quality labor. That will not last forever. Just like in China it remains to be seen how well the leaders manage expectations and balance the returns of the society's labors among all the people. From where I sit they have a long way to go. The middleclass is growing in Thailand but the pace is not keeping up with the overall progress of the country and this I am certain will be a source of constant unrest. People are not as stupid as the rich folks at the top would like to believe, they are going to want their rightful piece of the action and the past practices used to distract them will be less effective.

Someday the common man will realize that he has to take a larger role in how capital is used. The current system, weather in the US or Thailand where rich egomaniacs compete with each other to amass obscene fortunes secured by private armies to soothe their insecurities is no more sustainable today than it was in the dark ages. In fact the very reason that those ages were so dark is that the masses were resigned to their poverty. All of the progress of the world came from the minds of free people who dreamed of a better life and saw the opportunity to obtain it.

There is a limit to how long people will stand by and watch as the idle rich skim off all the cream for themselves. The welfare programs around the world that assist poor people are a drop in the bucket compared to the obscene skimming that is being done by the idle rich.

[dumball]

 Despite all that has been noted here about America , they are still logged as the richest country with more opportunitues available to most of its citizens , Thailand is far below that status due to massive corruption at the top .

 Throwing money at poor people who have no real concept on economics as proven by the Thaksin thinking , should raise a red flag to Ahbasit that all it does  is increase the debt of the poor uneducated masses , supplying the means and educating the use  thereof is far more productive in the overall economy of the whole country . Thai think mostly in their world of today , tomorrow never comes , many would grab $5.00 today instead of waiting for tomorrow to receive $50.00 , after all , what can you purchase with that which is not already in the hand ?

[asiawatcher]

Interesting two posts but let's not forget - any economy with handouts is a failing economy as it puts the whole country into continuing and rising debt. Look at the US... broke as it comes, technically trading whilst insolvent (an act of bankruptcy in any world court) and now printing wads of cash to cover!!! (I wish I could do that) - so the US$ has only one way to go and it will happen this year. Anyone holding US paper - dump it whilst you have a chance. Treasury Bills will be the first to fail and from there - the vortex of crashes will drag the US into oblivion financially and into another failed reserve world currency as Great Britain did after WWII.

On Thailand's side - simple, enter the realm of handouts (indirect vote buying) and history will repeat itself with an eventual debt ridden society at the hands of incompetent politicians. Until it crashes!! You would think after all the examples of global debt (and banks controlling governments) - Thailand has the opportunity to make intelligent decisions and not follow the herd of lemmings in a cliff jump! Having said that - things like health should be subsidised but not unemployment as pay anything here in unemployment and the nation would grind to a halt ... and the divide between rich and poor cemented into our future with no chance of merging. LOL.

[bangkockney]

Every single baht should be spent in a calculated manner, under proper principles. The evaluative assumption must be that it will contribute to a national "master plan".

And I guess the author's "master plan" has no compassion or sympathy for fellow citizens who live below the poverty line! Absolutely nothing wrong with a welfare system that provides for those that truly need it.

And; shock horror, a Government releases its manifesto before an up-coming election with voter-centric policies. Have The Nation's reporters never witnessed an election outside Thailand before?

[trogers]

Do it the Thaksin way - hand out taxpayers money and then get it back through the government lottery, and this money can then be distributed as further handouts by his political party...

[Arkady]

The money stolen from the national budget by politicians and government officials could pay for a sh*tload of welfare.

[Macmundi]

Thailand is too dependent on handouts, its becoming an ugly habit. Generally the people here are always waiting for others to pay.

Never proud enough to say,"It's my shout!! Let me pay!!" .... poor shameless bastards.. it's a known habit, that means, hearts are easily bought.

[rotary]

Of course Thailand's problem is somewhat different than the USA problem but the most important part is do not become a welfare state, and in basic a socialist country as the USA has. Free handouts in 95% of the cases are just wrong no matter what country. Human nature in many cases takes over and people want to take it easy without working in any country if they can live off the govt. Of course not all people are like this but a great number are and they will work the system. Borrowing of money and running the govt like a drunken sailor will end in the US$ reaching new unprecedented lows. Many countries over history have been world leaders for a few years and then policy and economics takes over and they fall from the top spot as has happened with the USA. Thailand can use the USA as an example, in some cases of how not to run the country. Even bad examples are good examples when viewed from the proper view point.

Another factor is that China and India are coming on strong so will be world leaders in the future. One major problem in the USA is most of the manufacturing base is gone including the jobs in it. People in the USA are lacking job skills such as electricians, mechanics, welders, etc. Another problem is easy credit...its so easy to get a credit card, run up a large amount which many people cannot payback. Also the USA govt, in basic, pushing to loan money to buy homes with to people who cannot afford them.

There is a great shortage of skilled hands on people in these manufacturing areas in the USA so Thailand must maintain the manufacturing base and jobs.

Really credit is a bad thing and just comes back to make problems. Look at the massive amount of money owed to China by the USA.

I could go on but living within ones budget no matter if it is personal or for a country is very important and a lesson the USA has forgot.

When was the last time you bought a USA brand name and the product was made in the USA other than Tabasco hot sauce? Sad but true.

[SantiSuk]

Thailand is too dependent on handouts, its becoming an ugly habit. Generally the people here are always waiting for others to pay.

Never proud enough to say,"It's my shout!! Let me pay!!" .... poor shameless bastards.. it's a known habit, that means, hearts are easily bought.

I agree - this emerging subsidy culture is a cancer on Thai society.

If petrol prices go up then the populace now expects the government to cap the price and subsidise it. No efforts made to encourage the population to reduce consumption or economise

If palm oil comes into short supply, the populace expects the government to hand out cheap cooking oil. No efforts made to encourage the population to switch temporarily to other forms of cooking or otherwise reduce its usage.

Subsidies encourage inefficient behaviour that in the long run exacerbate the very problem they are meant to to alleviate

[TheyCallmeScooter]

Throwing money at poor people who have no real concept on economics as proven by the Thaksin thinking , should raise a red flag to Ahbasit that all it does is increase the debt of the poor uneducated masses , supplying the means and educating the use thereof is far more productive in the overall economy of the whole country . Thai think mostly in their world of today , tomorrow never comes , many would grab $5.00 today instead of waiting for tomorrow to receive $50.00 , after all , what can you purchase with that which is not already in the hand ?

Whilst the point you make is valid in some respects, macroeconomics is ridiculously complex and often counter-intuitive. Thaksin wasn't trying to trigger efficiency via a brilliant Keynesian monetary policy, he was just trying to buy popularity with government funds (the key to successful politicking) - but the result was a booming economy because Keynes was (and remains) god.

This editorial displays what would be almost-stunning ignorance of the complexities of macroeconomics. Almost stunning, but not really; because even the US can't get Keynesian basic economic theory right in practice...in the 21st century.

What Keynes understood is that the entire thing is largely a game of expectations. If people think times are good, and that the near future will bring more of the same, they'll then spend more ("plenty more where that came from"), they'll invest more ("gotta get me some"), and they'll borrow more ("just pay it back with the profits"). And the dominoes fall in a predictable direction.

And it goes the other way of course, albeit more viciously (humans being pessimists by nature, and prone to over-reaction).

Korn is brilliant. And I'm pretty sure he is a rare genius who gets Keynes. The key to effective stimulation is getting the free money into the hands of people who are certain to quickly spend it on consumables...and then efficiently taxing the resultant cycle/s of spending. Pure, brazen splashing of cash can be brilliant for the economy (if done correctly):

The Keynesian multiplier: exogenous increases in spending, such as an increase in government outlays, increases total spending by a multiple of that increase. A government could stimulate a great deal of new production with a modest outlay if:

• The people who receive this money then spend most or all on consumption goods.
• This extra spending allows businesses to hire more people and pay them, which in turn allows a further increase consumer spending.

This process continues. At each step, the increase in spending is smaller than in the previous step, so that the multiplier process tapers off and allows the attainment of an equilibrium.

I'm rambling but my point is...

One man's idiotic, irresponsible, unethical, shameless, populist, vote-buying economic 'policy'...and a genius, brilliant, multiplier-effect, expansionary, Keynesian stimulus spending policy...can look very much alike, but they should not be confused (even though they can have very similar (positive) results).

The key word is can. Just because something can happen, doesn't mean it is likely or expected to happen. Idiotic splashing is still idiotic, whether it brought a boom (as Thaksin's did) or near-bankruptcy (Argentina pre-Lavagna). The levels of corruption will usually determine the outcome. I doubt Korn is as brilliant as Lavagna, but he's still a genius. And whilst the coalition is corrupt, the Abhisit government is not. Whomever wrote this editorial is an ignorant twit, but they probably meant well. They just need to realise there is other stuff going on, and have a bit more faith in the geniuses who currently steer the ship....to bring her home.

And they will. If Thailand (and the Thai media's thousands of ignorant OpEd-writers) allow them to.

[Robby nz]

Thailand is too dependent on handouts, its becoming an ugly habit. Generally the people here are always waiting for others to pay.

Never proud enough to say,"It's my shout!! Let me pay!!" .... poor shameless bastards.. it's a known habit, that means, hearts are easily bought.

Not what I see where I live and travel (in Thailand).

Most everyone is trying to do the best they can to sell something of work in some other way to better themselves.

I dont see long dole lines of people who have no intention of ever working even though they could.

This and any Govt in Thailand has little control over fuel prices as the price of oil is governed by outside forces, see present situation.

A subsidy on diesel is fair enough as it is the fuel of commerce, it runs many of the factories, the trucks that take goods to market but it can get too much as we see now when that subsidy has been cut, price of diesel now over 30b per L.

We see those who are shrilly squealing the farmers need halp, the poor need help, why isnt the Govt doing more to help them.

Then when they do what do we hear?

Just a ploy to win votes, self serving for the pollys, etc.

Cant have it all ways fellas

[jayjay0]

Thailand is too dependent on handouts, its becoming an ugly habit. Generally the people here are always waiting for others to pay.

Never proud enough to say,"It's my shout!! Let me pay!!" .... poor shameless bastards.. it's a known habit, that means, hearts are easily bought.

Not what I see where I live and travel (in Thailand).

Most everyone is trying to do the best they can to sell something of work in some other way to better themselves.

I dont see long dole lines of people who have no intention of ever working even though they could.

This and any Govt in Thailand has little control over fuel prices as the price of oil is governed by outside forces, see present situation.

A subsidy on diesel is fair enough as it is the fuel of commerce, it runs many of the factories, the trucks that take goods to market but it can get too much as we see now when that subsidy has been cut, price of diesel now over 30b per L.

We see those who are shrilly squealing the farmers need halp, the poor need help, why isnt the Govt doing more to help them.

Then when they do what do we hear?

Just a ploy to win votes, self serving for the pollys, etc.

Cant have it all ways fellas

Robby

Great Post

I life in Chiang Mai and have yet to see a line up to get welfare money.

I don't believe that we should not have socialist program's. There are people who really can not help themselves. Crippled and mentally sick spring to mind.

Also the elderly. In the past they were taking care of by the family but society is changing. Sadly with the help of many Thai Visa posters it is leaning towards Western Tradition's. You know the one's where some one else will take care of Mom or Dad. Some of these people forget what they left behind.

On another point why do these so called know it all's compare Thailand to the States. Even the dumbest idiot knows that when you have prolonged wars and play police man to the world your national dept is going to soar. If Thailands economy was so bad why is it doing so well.

Talk of the poor farmers. Well maybe if they weren't depended on other countries things would be better for them. There is other ways to make a living besides farming. Education is the key to that. Sad to say that is a area that Thailand is missing the boat on. Even if they straightened out today it would take years to see the results. But that should not stop them from starting.

Yes they need a better distribution of the wealth. But it haws to be with in reason. You can not take a way the dream. And besides wouldn't that be like a socialist state. How did it work out in Russia under the Communist governments.

Rant over