The new alignment in Thai politics

17 April 1999

Until very recently, Thai politics seemed to be a contest between competing business gangs. The 1997 constitution sets out to change all that. But the stresses of the crisis may make the changes even more radical.

The crisis has highlighted two divisions – one within the business elite, the other within the society at large. The first division separates creditor and debtor, banker and client, the financial sector and the real economy. The second runs between rich and poor, urban and rural. These divisions are being reflected in a new alignment of party politics.

In the recent past, Thai bankers and their clients clung together in groups. Each of the main banks developed a circle of people they knew and trusted. The bankers invested in their businesses, lent them money, gave them advice, and shared in their success.

This world has been blown away by the crisis. The smaller bankers have disappeared in a puff of smoke. The larger bankers and their debtors now face one another across the debt-negotiating table. They are fighting one another over the scraps of Thailand’s shattered urban economy. As the NPLs increase, the battle becomes more emotional. The debtors say they can’t do business because the banks are hoarding credit. The banks say they can’t lend because they don’t know who to trust to make a profit.

As this gap has widened, the Democrat party has been stranded on the side of finance. For better or worse, the party fell in with the IMF policy to restructure the financial system in the eye of the crisis. Tarrin stated clearly a year ago that he believed solving the banking crisis was the key to recovery. But this focus has had two consequences. First, the government has paid little attention to Thai firms in the real economy. Many firms have already been bankrupted or bought over by foreign partners. Calls for help have brought little response. When it has to choose – as it did over the bankruptcy legislation – the Democrat-led government plumps for finance. The Democrat party has become the defender of finance, the partner of the IMF, the proponent of further liberalisation as the solution to the crisis and the route to the future.

This has created a political opportunity – to champion the neglected and punished real economy. Several parties have dabbled with this idea. At the no-confidence debate in January, Chavalit’s New Aspiration party went beyond the conventional litany of corruption scandals. It targeted Tarrin and the government’s relationship with the IMF. By far the most exciting part of the debate was the issue of the ‘side letters’. This issue, and the suggestion that the agreements with the IMF are ‘treaties’ are coded assertions that Tarrin and the Democrats are the creatures of the IMF. Recently, Chavalit has openly criticised the US for interfering in Thai politics. In its policy statement, the NAP says it will exit the IMF programme.

However NAP’s major focus may be elsewhere (see below). Two other parties have a better chance to grab this opportunity. The Chat Phatthana party traditionally has good links with real-sector firms. It has tried to champion their interests by arguing for a broadening of the anti-crisis strategy. But it is hampered now by being part of the Democrat-led coalition. It also seems dulled by its leadership succession. More interesting is Thaksin Shinawatra’s Thai Rak Thai party. In his manifesto, Thaksin positions TRT as the party of small and medium business. The adjectives are not so important. All Thai businesses have become medium, small or tiny. The important thing is that he has positioned TRT as a party of business, and that Thaksin himself has no direct association either with finance or with the IMF-led strategy for Thailand. He has put together the technocrat cadre which is a prerequisite for a business-led party. Early polls suggest he can rely on the fickleness and short-term memory of the Bangkok electorate. TRT looks set fair to become the party of domestic capital mauled by the crisis and ignored by the Democrats.

The division between rich and poor, city and village is nothing new. What is new is the potential for this division to be reflected into party politics. Over the last decade – and especially over the last five years – rural politics have become much more assertive. Organisations have spread. Attitudes have changed. The politics of the tambon councils – however messy and imperfect – have increased both self-confidence and ambition. The economic crisis has increased levels of hardship and resentment. It has also demystified the urban economy and urban-based politics.

The crisis has laid bare the old-fashioned attitude of Chuan and the Democrats to managing the poor and administering rural Thailand. They refuse to talk to protestors and redirect them to bureaucrats. But protestors know that the real power lies with the ministers and they are fed up with talking to useless bureaucrats. To combat the crisis, the Democrats have scooped up the ideas of ‘self-sufficiency’ and ‘self-reliance’ which were integral to the movement of rural self-strengthening. The Democrats are now trying to apply these ideas through the Ministry of Interior, the prime agency of top-down bureaucratic domination. From the angle of the village, the Democrats seem to have a split view. Democracy and participation are right for the city. But the villagers still need to be managed through old colonial-style paternalism.

The NAP is being pulled towards populist claims to represent the poor whose voice is excluded from the mainstream parliamentary institutions. This is new. During the time he was prime minister, Chavalit liked to imagine the NAP as a conservative-centrist party on the model of Japan’s LDP. He presented himself as a ‘son’ of the poor northeast and championed the region’s interests. But he also lured liberal academics, telecoms tycoons, and big provincial godfathers. Over the last eighteen months, the city has thrown him out of power. Many of the godfathers and tycoons have drifted away. More and more he projects himself and his party as the defenders of the poor. Since the issue of the financial decrees in May 1998, he has taken every opportunity to accuse the Democrats of bailing out the rich at the expense of the poor. The recent New Aspiration party manifesto highlights helping the poor through decentralisation and redistribution. At the same time, Chavalit has recruited Thailand’s most promising populist stump orator, Chalerm Yubamrung. And the party is developing a new style of populist campaigning combining political theatrics with local cultural shows.

Think back four years to the age of Banharn. Thai politics seemed to be an affair of competing, look-alike business gangs. The gangs may still be with us. But this old-style politics has been overlain with a new party alignment dictated by the social and commercial strains of the crisis. The Democrats as the party of globalisation and its IMF-led consequences. TRT as the saviour of the battered remains of domestic capital. NAP as the standard-bearers of a rising rural-based populism.