Giles Ji Ungpakorn
The period leading up to the 1997 economic crisis was a period in which the Thai economy grew at a phenomenal rate. Average GDP growth rates reached 8% and on occasions the annual rate was in double figures. The main beneficiaries, naturally, were the rich. Between 1975 and 1988 the richest 20% of the population increased their share of national wealth from 43% to 55.4%, while the share controlled by the poorest 20% dropped from 6% to 4.5%.
The economic crisis was a shock to almost everyone for most had predicted it. Once the crisis broke, political scapegoats were quickly found in order to protect the status-quo. The more neo-liberal sections of the big business community quickly suggested the idea that the crisis was all the fault of Prime Minister Chawalit Yongjaiyut‘s government. This ridiculous message was put across at the “Silom Road Business People’s Protests” in October 1997, where businessmen and professional people came down from their office blocks, to demonstrate. They demanded and soon achieved the resignation of Chawalit’s government. The rich were not, however, very good at demonstrating. Many complained about the heat and others brought their servants to make up the numbers and, no doubt, to serve them with cold drinks and drive them to the protest.
Once Chawalit resigned, his Government was replaced by a Democrat Party-led coalition under Chuan Leekpai. The new finance minister, Tarrin Nimmanhaemind, was regarded as a reliable “bankers’ man”. This suggestion was born out by the fact that the Government quickly moved to nationalise the private debts of 56 failed banks and finance companies, which the Chawalit Government had already closed, and then proceeded to set aside a further 300 billion baht of state funds to boost the capital of existing banks. In total, the Government committed at least 1.2 trillion baht of public money to prop up the banking system and the savings of the rich and middle-classes.
The same enthusiasm for the use of public finances was not shown towards helping the poor and the unemployed who were worst hit by the crisis. The Government passed a bill allowing it to withhold state contribution to the private sector employees’ Social Insurance Fund and repeatedly delayed the implementation of an unemployment benefit scheme. It also told the unemployed to “go back to their villages” and live off their relatives. According to one survey carried out for the National Economic & Social Development Board, there was a 12.6% decline in earnings rates and a 4.4% decline in hours of employment in the first half of 1998. These were the main factors behind a fall in real incomes of 19.2% over this period.
The racist explanations of the Asian crisis which talked about Asian corruption, Asian Crony Capitalism and lack of good governance in Asia, are hardly worthy of serious consideration. More serious mainstream explanations for the crisis pinned the blame on lack of proper controls over investment after economic liberalisation in the late 1980s. Although it is true that the increased free movement of capital in and out of Thailand made the boom and the crisis more spectacular, these highly visible movements of money were more a symptom of what was happening in the real economy rather than the cause of the crisis. The implication of this neo-liberal explanation was that if proper controls were established, then crises would never occur again. Clearly a review of Western economies shows this to be nonsense.
The Marxist theory of capitalist crisis identifies over-production and falling rates of profit as the key underlying factors causing a crisis. Both these factors result from the uncontrolled competition for profit found under Capitalism. The main cause of the tendency for a fall in the rate of profit is the increased investment in fixed capital as compared to the hiring of labour (from which surplus value is extracted). However, the falling rate of profit is only an overall tendency with many countervailing factors. Profit rates can be restored temporarily by increased labour efficiency, increased exploitation or the destruction of competitors.
In Thailand over-capacity and falling rates of return were seen in most of the export industries. This caused a shift in the direction of investment away from the productive sector towards speculation in real estate and the banking system. It is estimated that in 1996 about half of all investment was property related and this accounted for half of annual GDP growth.
The Thai working class reacted to the crisis in different ways. On the one hand, significant groups of workers were very angry when their annual bonus payments were cut. On one occasion, a Japanese-owned electronics factory was burnt to the ground. At many workers’ protest gatherings after that, someone could be relied upon to scare the management with a cry of “set fire to the bloody place!” Most of the time it was just a bluff. On another occasion workers at Summit Auto Parts blocked a main highway in response to a bonus cut, but they were eventually physically beaten by riot police, supported by volunteer “emergency rescue workers” and right-wing journalists from The Nation and their struggle was defeated.
A more organised response came at the Triumph underwear factory, where women workers had a long tradition of building a strong shop stewards network. Workers were able to achieve a respectable wage increase after a twenty day dispute in July 1999.
The rate of inflation, which quickly fell (after an initial rise) as the economy went into recession, was also a factor in determining the will to fight. For those who retained their jobs, a further sharp fall in living standards was avoided by the decline in inflation.
The dominant ideological response among organised workers and left-wing intellectuals to the crisis, and to the manner in which governments handled economic policy, was in the form of Left Nationalism. This ideology was a mirror image of ruling class nationalism. A quick glance through the new book titles in any Thai book shop during the early part of the crisis would quickly have revealed the growing number of publications on “saving the country from the crisis”. In the main these publications were written by left-of-centre academics, many of them ex-CPT sympathisers, who regarded the 1997 crisis as a serious threat to “national independence”.
The cause of the crisis, according to the nationalists, was the imperialist designs of the G7 powers, especially the United States, in attempting to put the Asian Tigers under the yoke of Economic Colonialism. This could be seen from the proposal that the crisis was merely a crisis of a certain model of Capitalism: “fast-track” or foreign-investment-led export orientated manufacturing. Much of the Left Nationalist analysis also leant heavily on Dependency Theory, which saw the main divide in the world as between the “northern” industrial countries and the “southern” developing countries.
A number of solutions were proposed by the Left Nationalists; all within the framework of the capitalist system. Firstly there were the naive and utopian ideas of the “Community Economists” who believed that the Thai economy could somehow “turn back” to a self-sufficient low technology agricultural economy. Instead of foreign capital and technology, Thailand should use traditional “Thai intellectual resources”.
Secondly, there was a proposal to use Keynesian style economics. It was argued that the state should increase public expenditure in order to stimulate consumption. This strategy was eventually adapted for use by Taksin’s Thai Rak Thai (TRT) government after their election victory in 2001.
In the general election of January 2001, TRT won a landslide victory. The election victory was in response to previous government policy under the Democrats, which had totally ignored the plight of the rural and urban poor. TRT also made 3 important promises to the electorate. These were (1) a promise to introduce a Universal Health Care Scheme for all citizens, (2) a promise to provide a 1 million baht loan to each village in order to stimulate economic activity and (3) a promise to introduce a debt moratorium for poor peasants.
Ex-student and NGO activists, such as Pumtam Wejjayachai were recruited to TRT and became important links with the Peoples Movement. These activists encouraged the Prime Minister to meet with social movements like the Assembly of the Poor and they coordinated with movement and NGO leaders in order to solve disputes or dampen down protest actions against the Government.
Pumtam explained that Thailand needed a “Dual Track” development policy, where “Capitalism” and the “Peoples Economy” (community based activities) went hand in hand. This eventually evolved into the government policy of mixing neo-liberal policies with “grass roots Keynesianism”. The government also spent state funds on improving the lives of ordinary citizens and on developing infrastructure in order to raise productivity. These measures were helpful in reviving the economy, along with the fact that the Western advanced nations and China were not in crisis at the time, but they had little impact on preventing any future economic crises.
The popularity of Taksin and TRT with the electorate eventually resulted in increasing hostility against the government from conservative members of the ruling class, Taksin’s political rivals and members of the middle classes. They resented the alliance between the government and urban and rural working people and wanted to turn the clock back to the bad old days when the majority of the population were to be ignored by politicians and members of the elites. Today, we are still living under the shadow of military coups and a military regime which intends to craft a “Military Guided Democracy”.
Uglytruth-Thailand 