Endless Handouts Lead To Weakness And Dependency: Thai Editorial

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EDITORIAL

Endless handouts lead to weakness and dependency

The Nation

New debt moratorium will bring irresponsible financial habits and put even more pressure on taxpayers

BANGKOK: -- The government has again proceeded with another populist policy by providing a debt moratorium for borrowers even though it is unclear how this moratorium, financed by the taxpayers' money, will contribute to the country's economic development.

The government has instructed state-run banks to suspend principal repayments for three years. Customers will also benefit from an interest-rate cut of 3 percentage points. The project will cost the taxpayer Bt22.85 billion. The government expects the new scheme to cover 3.76 million borrowers, with combined outstanding loans of Bt459.11 billion.

Interestingly, the government initiated the moratorium even though creditors had not asked for it. Finance Minister Kittiratt Na-Ranong has apparently implemented the project to make voters feel good about the Pheu Thai-led government. It seems this is another ploy - at the expense of the taxpayer - to boost the chances of the party being re-elected at the next election.

Kittiratt has defended the scheme, saying that it will not cost taxpayers' too much money. But the real issue here is that there are so many other populist schemes haemhorraging taxpayers' money, and these are taking precedence over real problems that require high priority from the government such as improving the productivity of farmers, educational reform and preservation of the environment. The latter problem has been evident in the recent serious smog situation in northern provinces. But the government has chosen, yet again, to give easy money to its potential supporters.

The government says it is providing the debt moratorium as a reward for good creditors and low-income people. It says one of the reasons for the debt suspension is that it now wants to reward high-credit-rating borrowers, having already implemented a debt moratorium for poor-credit-rating borrowers.

This does not make any sense at all, as borrowers - anywhere in the world, regardless of their status - are obliged to repay their debts. After the government has "rewarded" these two groups of borrowers, what other groups of borrowers will start asking for similar debt forgiveness because they feel that they should be entitled to this kind of easy money too?

The government cannot clearly explain how this policy will primarily help low-income people, because they are not the majority of this group of borrowers. This programme is unlikely to create any multiple effects to strengthen borrowers' capacity or improve economic development in the longer term.

Worse, this project will create a moral hazard among borrowers. As has been seen many times before, these populist policies can become addictive. This will negatively instil an undesirable spending habit among borrowers. Easy money will simply encourage some borrowers to spend even further beyond their means. What will happen if the majority of Thai people feel the government will always be their ultimate provider.

Any developed country would sensibly desire to have its people more independent from the government's financial assistance and control. Instead, these populist policies have the opposite effect. But Pheu Thai politicians are using this ruse because it is effective in creating the feeling that they are indispensable to their voters' livelihoods.

A negative credit culture where borrowers feel that they don't have to service their debts can lead to another financial crisis as witnessed in 1997. The American mortgage crisis in 2008 and the ongoing economic crisis in Greece all come from undisciplined spending habits.

Thais should have learned from all these expensive and painful lessons. Instead, the government is trying to promote an undesirable spending habit among borrowers.

The debt moratorium is likely to drain the participating state-run banks. The Bank for Agriculture and Agricultural Cooperatives (BAAC) recently asked the government to increase its capital by Bt10 billion because it is affected by the populist policies. This moratorium alone will cost the BAAC Bt200 billion in lost income.

Sadly, Thai politicians prefer short-term policies to get elected, regardless of the negative long-term results for the country. The best way to help low-income earners is to enhance their capacity, to enable them to climb the social ladder. Populist policies such as endless farm and fuel subsidies, and this debt moratorium, do nothing to improve the competitiveness or capacity of low-income earners in the long term.

The lasting impact of these populist policies is to instil in consumers and borrowers undisciplined spending habits and the perception that the government will always take care of them. They serve to discourage the spirit of self-reliance. The government's squandering of the national budget is simply the tip of the iceberg. Our politicians never consider the country's long-term future because they are concerned only with their immediate short-term personal gain.

-- The Nation 2012-04-28

[Thai at Heart]

Only took to halfway down to compare thailand to v greece. 40% debt to gdp versus 150. Indeed very comparable. Useless article.

[Jawnie]

These are the kinds of policies one gets due to the lack of participatory government, government transparency or accountability, and the lack of active political and civil society.

[pimay11]

The problem with socialism is that eventually you run out of other people's money.

[phutoie2]

The problem with socialism is that eventually you run out of other people's money.

Mrs Thatcher said that!, though I cannot confirm it was an original quote.

[DNPBC0]

The problem with socialism is that eventually you run out of other people's money.

The problem with capitalism is that it allows investment bankers to turn other people's money into global financial crises.

[TAWP]

The problem with socialism is that eventually you run out of other people's money.

The problem with capitalism is that it allows investment bankers to turn other people's money into global financial crises.

No, that's corporatism.

By far very different things, since both socialism and corporatism counts on the governments intrusion into the market place.

[TAWP]

Only took to halfway down to compare thailand to v greece. 40% debt to gdp versus 150. Indeed very comparable. Useless article.

The article, and especially the title, is still spot on - hands-outs creates dependencies.

Something some governments depend on to stay in power.

[heiwa]

The problem with socialism is that eventually you run out of other people's money.

Mrs Thatcher said that!, though I cannot confirm it was an original quote.

that was not a problem for the capitalists who bought up all uk oil for nothing - sold by maggie thatcher. problem was she saw the money as her own rather than the money of the electorate.

[GentlemanJim]

Only took to halfway down to compare thailand to v greece. 40% debt to gdp versus 150. Indeed very comparable. Useless article.

Why is it a useless article because of that comparison? Do you think Greece has always been at 150? It was the policies within the Greek economy that led it down the path to financial ruin. The Government there were continually handing out money to the poor and to government workers. Populist policies were rife. The same trend is being set in Thailand. Drain the banks at the tax payers expense to get re-elected. It wont take much more mismanagement for it to start snowballing out of control.

It appears that the Finance Minister needs to do a course in finance.

[OzMick]

One economic situation where low interest and a capital moratorium benefits borrowers greatly is galloping inflation. It seems that someone in this government can see where their policies are leading.

[zakk9]

I don't know what to call the economic system in Thailand, but I believe either socialism or capitalism would be an improvement

Edited April 28, 2012 by zakk9

[noitom]

The math doesn't check out. 2 million taxpaying entities on a tax base of 9 million. At best, what could the tax revenue be? Where does all this government money come from? There is never a standup reconciliation.

[givenall]

Only took to halfway down to compare thailand to v greece. 40% debt to gdp versus 150. Indeed very comparable. Useless article.

Do the Thai people really think the hand out are for their benefit?

The only thing the politician care is to line up their own packet and all the hand outs are to get vote and they really don’t give a dam about wellbeing of the Thai society.

Hi Greece her we come

[GentlemanJim]

The math doesn't check out. 2 million taxpaying entities on a tax base of 9 million. At best, what could the tax revenue be? Where does all this government money come from? There is never a standup reconciliation.

EXACTLY! Very few Thai citizens actually pay tax. the cost of the populist policies the Government are implementing are over a trillion baht. Where is the money coming from? The rice pledging system will see Thai exports of rice diminish. In a nation where the politicians are not only untrustworthy (like the rest of the world i grant), but also inherently corrupt can they actually be trusted to disclose the true state of Thailand's economic affairs. By the time we find out what they have truly done in this country, it will be too late to rectify the problem. You are correct in every respect of the Thai economy..the maths simply does not add up.

For anyone it may concern, I would be very wary about holding any significant savings in a Government bank for the next 3 years.

[brit1984]

Same thing happens in almost every Western country... governments steal money from the hard-working taxpayers and give it to the poor... thus buying their votes for the next election and boosting the retail economy given the poor's high propensity to spend... that is democracy

[rkidlad]

Get good at saying no, and get good at hearing no. Simple.

Edited April 28, 2012 by rkidlad

[DNPBC0]

The problem with socialism is that eventually you run out of other people's money.

The problem with capitalism is that it allows investment bankers to turn other people's money into global financial crises.

No, that's corporatism.

By far very different things, since both socialism and corporatism counts on the governments intrusion into the market place.

No. it's capitalism - a particularly rampant form of it. It was precisely the lack of government regulatory control of the financial market which allowed the investment banking system to create worldwide economic havoc.

[Bagwan]

The problem with socialism is that eventually you run out of other people's money.

Mrs Thatcher said that!, though I cannot confirm it was an original quote.

that was not a problem for the capitalists who bought up all uk oil for nothing - sold by maggie thatcher. problem was she saw the money as her own rather than the money of the electorate.

I don't know where you got that idea from. Perhaps you are confusing the good lady with her crooked son. She had the balls to shut down money losing industries and a measure of how the North East has since prospered is that their football grounds are packed to capacity for home matches. Did nobody else see the irony of coal miners, led by an avowed Communist yet living in a walled 1,000,000 GBP mansion just outside Barnsley, up in arms about closing uneconomic pits yet being vehemently opposed to their sons followingin their fathers footsteps? You just can't please some people. I suggest that you vent your spleen on the lying, sleight of hand master Blair and the moronic Brown.

One of the sadest things to happen in those times was that when her <deleted> offspring lost himself in the Sahara that search parties were sent to rescue him.

[Bagwan]

I am not against giving those with problems a helping hand but I do object to shelling out for idiots who produce far too many kids or have just given up on life. You want kids, you pay for them. More support should be given to educating the simple and stupid, under penalty of withdrawal of all social security payments, such as they are, if they do not try to better themselves so that they make themselves employable. Such a system would assist Thailand to grow expotentially to the benefit of all.

Do not feed the poor, give them a rod or net so that they may catch fish and feed themselves. In Thailands case, give them land, teach them to farm, teach them what is most profitable to grow, crack down on the greedy middlemen, and maybe just as important, teach them financial discipline. And good luck with that! Somewhat much like baying at the moon, maybe.

[billd766]

The problem with socialism is that eventually you run out of other people's money.

Mrs Thatcher said that!, though I cannot confirm it was an original quote.

that was not a problem for the capitalists who bought up all uk oil for nothing - sold by maggie thatcher. problem was she saw the money as her own rather than the money of the electorate.

Can you explain what you mean or give a reference so I can look it up please?

[Skywalker69]

The problem with socialism is that eventually you run out of other people's money.

[Skywalker69]

I don't know what to call the economic system in Thailand, but I believe either socialism or capitalism would be an improvement

Egoism?

[TAWP]

No. it's capitalism - a particularly rampant form of it. It was precisely the lack of government regulatory control of the financial market which allowed the investment banking system to create worldwide economic havoc.

No, it is not.

It is the knowledge that their political pawns have their backs when they fail that allows these big corporations to misbehave without proper self-oversight, leading to huge failures, bailouts by government and complete lack of any one deemed responsible or held responsible for the events - if the company had been allowed to failed all owners (share-holders) would have been able to bring legal and civil actions against the members of the board etc.

Corporatism.

[Skywalker69]

The math doesn't check out. 2 million taxpaying entities on a tax base of 9 million. At best, what could the tax revenue be? Where does all this government money come from? There is never a standup reconciliation.

EXACTLY! Very few Thai citizens actually pay tax. the cost of the populist policies the Government are implementing are over a trillion baht. Where is the money coming from? The rice pledging system will see Thai exports of rice diminish. In a nation where the politicians are not only untrustworthy (like the rest of the world i grant), but also inherently corrupt can they actually be trusted to disclose the true state of Thailand's economic affairs. By the time we find out what they have truly done in this country, it will be too late to rectify the problem. You are correct in every respect of the Thai economy..the maths simply does not add up.

For anyone it may concern, I would be very wary about holding any significant savings in a Government bank for the next 3 years.

The government can´t even spell the word economy.

[OzMick]

I am not against giving those with problems a helping hand but I do object to shelling out for idiots who produce far too many kids or have just given up on life. You want kids, you pay for them. More support should be given to educating the simple and stupid, under penalty of withdrawal of all social security payments, such as they are, if they do not try to better themselves so that they make themselves employable. Such a system would assist Thailand to grow expotentially to the benefit of all.

Do not feed the poor, give them a rod or net so that they may catch fish and feed themselves. In Thailands case, give them land, teach them to farm, teach them what is most profitable to grow, crack down on the greedy middlemen, and maybe just as important, teach them financial discipline. And good luck with that! Somewhat much like baying at the moon, maybe.

There is very little in the way of social security in Thailand. A small old age payment, and milk powder for one child for the mother of twins is the only that I've heard of.

There is a plan to give landless farmers 2 rai of land. This is sufficient to keep them in poverty for the rest of their life.

[JohnAllan]

Exacerbated by the fact that all of the populist policies - which generally originate with Thaksin's party of the moment, rather than parties in general - are aimed squarely at the PT government's supporters, few, if any, of whom actually pay income tax. And unfortunately, leaving aside the ludicrous debt moratorium [write-off], most of these ideas not only have no merit, but suffer from a lack of planning, poor implementation, and non-existent project management. Yes, I know; the last phrase is doublespeak.

[belg]

banks wants us to be slave till we die... borrow money, pay back later with much more interest than you can get from any bank as a good lender of your money towards them, making the banks rich on your behalf.

"high priority from the government such as improving the productivity of farmers, educational reform and preservation of the environment."

1) improve productivity of farmers : let them do something else besides watch the rice grow ?

2) educational reform : i guess they must mean, an ipad clone so that kids can play better games

3) preservation of the environment : ah, i see, burn your plastic and garbages on the same day as your neighboor

just wanted to add (edit)

i have been living here several years... no WP (do not work, do not need to), have enough assets on the bank, but, big but... NO BANK WILL ALLOW ME TO HAVE A CREDIT CARD...

how crazy is that ?

Edited April 28, 2012 by belg

[farang000999]

The HiSo guy who wrote this article really gets it. Right now poor people in Thailand are becoming outright spoiled by the immense social benefits afforded to them by the government. They are living the life of riley on the tax payers baht and it is making them unproductive.

[pimay11]

The HiSo guy who wrote this article really gets it. Right now poor people in Thailand are becoming outright spoiled by the immense social benefits afforded to them by the government. They are living the life of riley on the tax payers baht and it is making them unproductive.

Try the USA. More than 40% of citizens receive some sort of government handouts and this does not include the millions of illegal aliens. Now the younger generation has come to expect it. I am from the old school. No work no eat.