Admittedly, I did not vote for Move Forward Party (MFP). I did like the idea of pro-democracy, equality for all, people-centric policies, and de-monopolisation, all of which they espouse.
However, I have been indoctrinated that "growth" should be at the centre of all economic policies and MFP's policies exhibit no such philosophy. On the contrary, the party called for anti-growth policies like an immediate increase of the minimum wage to 450 baht per day and monthly payments of 3,000 baht to the elderly.
Moreover, I feel that MFP's economic team lacks the necessary experience to implement such difficult policies without overly harming the economy. Therefore, my vote went to another pro-democracy party that aimed to stimulate annual growth beyond 5% and jump-start the stagnated economy with a "helicopter" money strategy.
Some 14 million Thai voters, about 38.5% of people who voted, did not agree with me. It shocked me to realise that those people would throw away a chance of getting free money of 10,000 baht. Just thinking about a family of five voters shunning 50,000 baht in this time of economic difficulty for the "dream" of better lives. Their economic problems must be way deeper than I thought.
Before I go on to discuss MFP's economic policy and Thailand's new economic era, I ask for a digression with a real story I came across while working at the IMF.
I was sent on a mission to a Pacific island nation to give them economic advice. The country relied on a large annual economic grant from the US. The catch was the grant would last only 50 years and in the second half of the period the grant would be cut in half. The year that I visited was the first year in the second half period which their economy was expected to contract.
The advice, almost straight out of textbooks, was to develop the tourism industry and light manufacturing industries like garments and processed seafood.
I presented the advice to the minister of finance with a full GDP outlook. To my surprise, the proposed plan was rejected. The minister, with my full admiration for his decision, had a good reason to reject the advice. The story behind this decision is too long to explain here. But the moral of the story is that people make decisions; economists do not make decisions for them.
The people of Thailand, almost 40% of those who voted, made a decision on the future of the economy. After long consideration, I am starting to understand why many Thais are frustrated with the present economic development model and desire change. The reason is simple: their economic well-being worsens by the day.
Twenty years ago, the minimum wage was 160 baht per day but that was enough to buy eight dishes of khao kaeng (rice with curry). But today's minimum wage of 350 baht per day can barely buy seven dishes of khao kaeng.
Twenty years ago, 87% of Thai depositors had an average 4,796 baht in their bank accounts. As of March 2023, the average size of their balance has shrunk to 4,121 baht. The sad thing is the purchasing power of this amount of cash has shrunk by four times compared to two decades ago.
If the story is not sad enough, let me tell you two more pieces of information. A decade ago, farmer's debt was 1 trillion baht and household debt was 10 trillion baht. At present, both types of debt have ballooned by 50% to 1.5 trillion baht and 15 trillion baht respectively.
While most Thais have less savings, smaller purchasing power, and more debt, many Thai names have been added to the Forbes world billionaires list. A growth-oriented policy might no longer be appropriate for this country.
People demand changes of more income equality, more purchasing power, and better welfare to those in need. The MFP offers such changes and, as a result, they won the election with flying colours. Unfortunately, their economic policy comes with a hefty price tag.
The stock market was the first to react unfavourably. Before the election, the SET index was 1,570 (May 10), but recently dropped to 1,535 (May 30). Furthermore, MFP's economic policy is being criticised as anti-growth. Also, the qualifications of their would-be minister of finance are being questioned. Without allaying public and investor fears, things could get worse. The next step could be capital flight.
As a economist who has converted from the religion of growth to the religion of income equality and fair competition, may I offer some suggestions to the MFP on economic management issues.
First, the MFP needs to expand its economic team to include macro-economists. This group have expertise in calculating and designing GDP growth patterns. They are trained to utilise monetary, fiscal and exchange-rate policies to achieve the desired effects. With all due respect, I wish to see such qualifications in the MFP's team.
Second, the MFP needs to come with a big economic picture; specifically speaking, GDP growth projections after policy is applied. The public is seeing only one side of the coin -- the negative side of large wage increases and more taxes to finance welfare programmes.
For instance, not many people realise that Thai industry, on average, is paying wages of 550 baht per day. Raising minimum wages to 450 baht per day would not raise the total wage bill by 27%, only a part of it. But the other side of the coin is that rising wage costs would be countered by higher purchasing power from labourers. Once they see the whole picture, investor fears of economic collapse might subside.
Also, higher taxes to finance the MFP's welfare programme would not harm the economy as much as feared.
The (new) government would not raise taxes to pay off public debt or buy submarines, but rather advocates an "income transfer" programme. In short, money from the rich and large corporates would be transferred to the elderly. Such money would then be recycled back to the economy through higher consumption.
Third, management of transition period. Businesses cannot afford a 27% increase in minimum wages overnight. A smooth transition process must be introduced. The Bank of Thailand reports the labour efficiency index by 20 sub-sectors.
That should provide a good guideline on how much support is needed for different sectors of the economy.
Fourth, MFP needs to listen to public feedback. It will be a grave mistake to think that with a voter mandate, the government can do anything it wishes. Public support and investor understanding are key to success.
So, after the big economic picture is finished, it should be presented to the public. The first thing the public needs to understand is that Thailand will forgo some economic growth in exchange of quality of life.
The 360-degree turn around from growth-oriented policy to income-equality oriented policy is a monumental task; my best wishes to MFP.
Chartchai Parasuk, PhD, is a freelance economist.
