The Thai Government Is Not Asking The Right Questions

[webfact]

EDITORIAL

The government is not asking the right questions

By The Nation

Instead of relying on risky populist policies to garner votes, the Abhist administration should be thinking about long-term economic solutions

With inflation becoming a major concern, the government may be considering the wrong answers to tackle the problem. The Abhisit government has recently introduced a series of populist measures such as the fuel subsidy, reasoning that a controlled price will help curb the inflation rate. But at the same time, the administration has implemented its populist policies to promote consumer spending.

Such measures may not only fail to address the inflation issue. In addition, they may exacerbate the problem in the long term. One major concern is that they can negatively affect the country's fiscal stability, especially when rising prices have become a threat to disrupt the economic stability of the entire region.

Inflation can be attributed to a number of factors, such as the economic growth rate and rising oil prices. These factors are not always bad news, especially in the case where price rises are a natural consequence of a desirable economic situation.

However, the current inflationary pressure can pose a bigger challenge for the government because of external factors that are beyond its control. The US Fed's low interest rate and the European debt crisis can contribute to local inflation, as they encourage huge amounts of foreign capital inflow into the country and region. In addition, global fuel prices are likely to continue to fluctuate in reaction to the ongoing political turmoil in the Middle East.

However, some of the government's policies can be seen as desperate attempts to curb rising prices. For instance, the Abhisit government has spent a huge amount of money to control the diesel price. This is despite the fact that no one can predict how far the global fuel price will rise.

Despite the massive budget spent on this desperate effort to woo voters, the measure is unlikely to curb inflation in a substantive meaner. In addition, it will only squander the Oil Fund reserves and may cause more price instability in the longer term.

Price intervention measures should be temporary and limited. They should only address those target groups that will suffer most from price rises. If things continue the way they are, the government's price-control measures may result in the scenario of hoarding, as seen in the recent cooking-oil crisis. At times, the price intervention policy has instead caused more problems, such as a temporary shortage of products on the market, which leads to increased prices of sought-after items on the black market.

The government's tendency to rely heavily on its populist policies does not help the overall picture. In spite of the inflationary pressure, the government continues to stimulate public spending. Unfortunately, measures like this often happen only before the election season, as we have seen many times before. Not only that; the benefits fall to only a select group of people.

These wrong measures have added a burden to the country's fiscal position. In addition, they create temporary consumption patterns, putting more pressure on inflation.

Perhaps the best way to tackle inflation is to encourage the public to adjust to price rises by controlling their consumption habits against the now inevitable rise in interest rates. This would better ensure the strength and sustainability of the economy and create a degree of immunity for the country to withstand the effects of external disruptions that are likely to occur in the future.

Price rises can adversely affect some groups of people. Thus, if the government plans to implement measures to alleviate the suffering of targeted groups, the measures must specifically address those targets instead of serving wider political purposes. Additionally, the government cannot promise the long-term continuity of such policies. Consequently, these populist measures must not leave a burden for future taxpayers.

The government should address the right questions instead of adopting short-term and unsustainable measures to boost the economy and its own popularity. Stimulus measures can be tempting, politically. But as has already been proved in the US economy, which is a global economic powerhouse, they cannot always guarantee sustainability and continued economic growth.

-- The Nation 2011-04-30

[whybother]

Instead of relying on risky populist policies to garner votes, the Abhist administration should be thinking about long-term economic solutions

The problem with politics in any country is that political parties need to get voted back in every 3-4 years. That means they need popular policies.

The difficult, unpopular long term policies only get a look in when they get bipartisan support, or when other things are going so well that an unpopular policy don't get noticed by the voters.

Unpopular policies will especially not get mentioned leading into an important election.

[animatic]

Any policy that benefits the Thai people, gets labeled populist by the perverse opposition that didn't promulgate it. And if it is actually working and long term, the opposition will say our leaders did it first, they stole it from us! Hyperventilate. Of course chances are they stole it long before.

Edited April 30, 2011 by animatic

[Robby nz]

However, some of the government's policies can be seen as desperate attempts to curb rising prices. For instance, the Abhisit government has spent a huge amount of money to control the diesel price. This is despite the fact that no one can predict how far the global fuel price will rise.

Despite the massive budget spent on this desperate effort to woo voters, the measure is unlikely to curb inflation in a substantive meaner. In addition, it will only squander the Oil Fund reserves and may cause more price instability in the longer term.

Dont see how the price control on diesel is a 'desperate effort to woo voters' most everything that is manufactured and comsumed in this country uses diesel in some way, either in its manufacture or cartage.

So the price of diesel will impact on most other prices.

That being the case it makes sense to go for the thing that impacts on a range of things rather than cherry pick out small sections of the economy.

Perhaps the best way to tackle inflation is to encourage the public to adjust to price rises by controlling their consumption habits against the now inevitable rise in interest rates

That one only works for people who have plenty to start with.

I can see it; sorry son you can only have half a boul of rice from now on, we have to control our consumption habits.

[asiawatcher]

The present Govt has no long term commitment in tackling any obvious issue - they have the time to say what they want now and not get involved in a media slander match. The Nation can well bring up issues of inflation and fiscal irresponsibility but it is on deaf ears. Who cares - 60 days can't fix anything - wait until after the elections and see what happens - after all the USD will collapse before the next election - which alone will send the world into a tail spin and all this rhetoric will be worthless as always. There will be far greater issues to tackle for the survival of Thailand.