EDITORIAL

Time to rein in populism and excessive spending

The Nation

BANGKOK: -- Levels of household and national debt in Thailand are rising to alarming levels; we cannot continue on this path of overconsumption without disaster striking eventually

After the first year of full-blown populism, the government will now have to ensure that its policy platform yields results in a sustainable manner.

The government's populist policies encourage the public to spend more now by borrowing money. These borrowers are betting that they will enjoy a booming future. But this is not guaranteed to be the case, especially amidst the current external economic turbulence.

The Bank of Thailand shows a rise in defaults on debt and an increase in personal debts over the past six months. Thai people have been encouraged to borrow to satisfy their material appetite through populist schemes and low interest rates. But these spending habits will not produce constructive results. Thai household debts are already at a worrisome level, and if this is not rectified in the long term, it will destabilise the country's fiscal security.

The government's populist policies include a subsidy for customers who buy a first car, and similar breaks for people to buy a first house. With such enticements on the table, people are willing to spend recklessly, and the low-interest rate policy makes many people less hesitant to borrow.

The signal being sent by the government is that people should continue to spend more, even though the Thai economy is facing many challenges. First, Thailand's competitiveness and productivity have not improved to a satisfactory level. Thai export growth is decelerating and the country is still trapped in the middle-income bracket while failing to move forward rapidly enough due to a lack of skilled workers.

Although the government claims it is promoting moderation, its economic policies and general message to the public suggests otherwise.

The ongoing economic trouble in European countries and the sub-prime mortgage crisis in the US should serve as a reminder to Thais about the danger of excessive spending. Thailand faced a similar financial crisis in 1997, but the problem was fixed and the economy managed to recover a few years afterwards because of the austerity policy imposed upon the then government.

At any rate, Thailand's household debt at that time was lower than the current level. Then, it was around 40 per cent of gross domestic product, compared to more than 50 per cent of GDP currently.

Aside from household debt, public debt is also rising. Before the 1997 crisis, the level of public debt was only 20 per cent of GDP, compared to around 40 per cent now. If our debts continue to rise and creditors cannot service those debts, the number of defaults will rise. And this will cause a wider problem in the economic system.

If people continue to spend money on short-term consumption, it will affect the level of savings. In the bigger picture, lower savings can affect the country's ability to finance long-term investment projects.

The government should take the lead in making people more conscious of their spending. First, it should start by re-examining its own populist policies, to ensure that hard-earned taxpayers' money is well spent.

The government has no right to squander taxpayers' money on policies that do not generate benefits in a sustainable manner, nor create multiple positive effects in the long term. The financial institutions and banks should also be careful before approving loans to creditors.

The rising levels of both public- and private-sector debt will weaken the foundation of the Thai economy. Thus the government should curb its spending and send honest and correct message to the public about the state of the Thai economy, which is certainly not immune to external and domestic shocks. Sending the wrong message that the economic good times will last forever can only lead to disaster.

-- The Nation 2012-12-14

Even at the new improved government minimum DAILY wage of Bt300 <deleted> can a family afford to purchase ?

They spend every baht just on food alone, can you imagine a household with both earners on the minimum wage, with one or two children in school having any spare cash to buy the necessities in life, let alone any luxuries.

They're skint after buying food & clothing, followed by running a car or motorbike which is probably financed.

Then add up the essentials like insurances for health or home/contents/possessions etc

Their only way to make headway is to borrow, not always from the high street banks either, as often they are turned down as being too poor to pay back, the banks policy say's it's better to lend money to the rich, while the poor are driven into the waiting arms of the sharks!!

In yesterday's post we all saw the extremely wealthy getting richer by the second, earning millions & billions, while the poor are pushed deeper into poverty, the divide will grow wider until the wealth of the nation is equally shared.

Should this be a problem to the degree stated here, and if armageddon follows these erroneous Govt. policies as this editorial suggests, the next election will take care of it.

This broad-brush condemnation of PTP policies concerning the entire past year, smacks of Opposition posturing that reflect their basic beliefs. These being that if they are not in charge, the country is going to "H... in a handbasket".

There is a certain arrogance in that, not lost on those who have elected Ms. Y. and company. Agree or disagree with this editorial, its' opinion cannot escape the political context within which it is offered.

"Me-thinks they protest too much"..... Is there a fear that having a Government responsive to the electorate is a recipy for their own ongoing electoral demise....Perhaps!

Edited December 14, 201213 yr by righteous

WHAT! Time To Rein In Populism And Excessive Spending!!!!!!!!!!!!!!!

Is the Writer of this Editorial Crazy in the Head and stop the politicans from SCREWING THE PUBLIC with False Promises built on Sand.

I hate to burst his bubble, that time is is long past due and it is clear that Reining in Populism to gather votes is about as remote as seeing

Haley's Comet twice in 76 years.

When you have an environment where those benefiting from these policies will be insulated from the consequences, then there really is no reason for them to stop.

the function of a good and responsible government is NOT to give people what they want, or at least think they want. Rather they should be given what they NEED, and then those things that they want which are affordable.

Some righteous people will declare that the economy should be allowed to collapse and then responsible managers will become more easily elected. IMHO after they solve the economic problems, only to be beaten again by the populists, the country goes into a cycle of boom and bust with little progress made. The answer is to educate voters so that they understand a B500 bribe, and some pie-in-the-sky promises aren't going to advance their cause or the countries.

the function of a good and responsible government is NOT to give people what they want, or at least think they want. Rather they should be given what they NEED, and then those things that they want which are affordable.

Some righteous people will declare that the economy should be allowed to collapse and then responsible managers will become more easily elected. IMHO after they solve the economic problems, only to be beaten again by the populists, the country goes into a cycle of boom and bust with little progress made. The answer is to educate voters so that they understand a B500 bribe, and some pie-in-the-sky promises aren't going to advance their cause or the countries.

Actually all governments should not be giving handouts (except in a flood / natural serious disaster / folks who are incapable of managing money etc.) but should be creating the circumstances where all citizens have the capability and opportunity to gain a good qaulity of life through their own productivity.

It can be done, there are many many countries who have achieved this.

Edited December 14, 201213 yr by scorecard

Good luck with curtailing the goodies.

Wait till the next election, only two and a half more years. Imagine country going down the drain, and Pheu Thai helps the Democratic party to get elected to help clean-up the mess.

TiT?

Tomorrow never comes.