Think-tank calls for welfare state

A really interesting story in The Nation about a think tank’s recommendation that the Thai government develop a welfare system.

I do disagree when they say the market system failed in Thailand. Something that doesn’t actually exist can’t fail. When the government is nothing more than a way for people to enrich themselves and make sure others can’t compete with them then it’s not being ruled by market forces. It’s a pseudo-market where all of the rules are rigged to make sure the rich keep getting richer and the poor remain poor.

Think-tank calls for welfare state

Published on September 13, 2009

THE NATION ON SUNDAY

The country’s leading think-tank has proposed a “survival strategy” – an exit from the current economic and political distress by transforming the country into a welfare state that would help bridge opportunity and income disparity.

They believed this would address the root causes of the current political conflicts that have pushed the country to the brink.

The Thailand Development Research Institute led by TDRI chairman Dr Nipon Poapongsakorn said the institute’s research had found that disparities in income and assets was the main cause of the ongoing political conflicts that could spiral into a crisis.

He said the way out of the political crisis is to reform the economy by creating a welfare state that would help close the gap between the rich and the poor, and thus reduce social and political conflicts.

The research findings showed that the richest had 69 times more assets than the poorest. In addition to 10 per cent of the poorest people, about half the country’s population lacked job security.

The current market economic system fails to bridge economic inequality and the state also adds salt to injuries for failing to provide equal opportunity for everyone to access financial credit, knowledge, natural resources because the state represents a large business conglomerate that monopolises businesses. Only a handful group of politicians and businessmen access to business privileges and benefit from the monopoly. The current tax structure does not help reduce assets and wealth concentration.

Wealth concentration has a significant correlation to political power as the country has seen business tycoons enter political arena.

Not only does political power protect business interests and concessions. Being politicians in power means they can write regulations to expand their own political and economic base and make rules that penalise business rivals. This makes business of politicians distort the market economy. This is the case especially in a country that lacks political stability.

“The more assets they have the more the motivation for the businessmen to come to power,” Nipon said.

Nipon also quoted a research by Dr Somkiat Tangkitvanich, which found that in 2004, companies run by Shinawatra family provide 141 per cent better return than other companies.

The research also found that companies having connections with ministers enjoy 18.5 per cent higher profit than other companies.

The economics presented the research at a seminar organised by the Thai Journalist Association and the King Prachadhipok’s Institute at a Bangkok hotel.

He said a welfare state was the answer because the system could bring sustainable democracy.

While the market economy failed to provide economic equality, extreme populist policies may trigger a coup or revolt by the rich because they would be hardest hit.

Two economic crises in 13 years have made populism popular and every party is forced to adopt the policies. However populist policies bring about great public debt and a lack of fiscal transparency.

A welfare state also helps the middle-to-lower class manage their “risk” caused by fluctuating income, unexpected expenses since they do not have enough savings and liquidity or financial resource to turn to for help in times of financial troubles.

The country also has a group of people that the state and NGOs cannot extend a helping hand to such as the disabled, the homeless and the elderly if the country is still run under the current economic system, Nipon said.