The grilled meatball saves more people than the World Bank does

18 May 1999

One of the most important lessons of The Crisis has been that you cannot create overnight the social programmes to manage an urban economic collapse. If Thailand wants to be an urbanised, industrialised society, it needs a long-term approach to social welfare.

From the start of the IMF programme, both government and the IMF knew there was going to be severe social stress. One part of the programme was (in the new jargon) "a social safety net". Part of this was supposed to be provided by the government. But the major part by the World Bank and the ADB.

The government tried to do three things: maintain or increase its spending which will help employment (for instance, public sector construction); provide grants and loans to prevent kids dropping out of school; provide small loans to enable the unemployed to start a small business.

The impact of these programmes was mixed. To put it simply, the government machinery is not used to handling such schemes. Officials like to save money rather than spending it. They are not used to the idea of spending money to help the poor. Ministers became very frustrated that the money was simply not getting through. While the government said it would protect social spending in the 1998 budget, in fact the spending on social services dropped by 35 percent – the biggest drop for any department.

For the first year, the education loan scheme hardly got airborne. When finally implemented, the numbers of applicants were 2-3 times the number that could be supplied by the funds. By early 1999, an estimated 400,000 children had dropped out of school.

The big World Bank/ADB social-safety-net programme has been even more of a problem. At first, it was planned to start "by early 1998". But international bureaucracy grinds very slow. Also, it is far from simple to design such a programme to work in a country where such programmes do not exist. New machinery had to be invented because, as NGOs insisted, much of the money would be lost to corruption if the funds were distributed through usual government channels. As a result, the scheme was not launched until a year after the arrival of the IMF. Further, the IMF insisted any social programme must "avoid the kind of benefits schemes that could distort Thailand’s labor market". In other words, nothing too effective, nothing too permanent. As a result, relatively few groups petitioned for funds under the project, and even fewer found approval. The scheme is just staggering into operation just as the government is declaring The Crisis is over.

No wonder the government seized on the Miyazawa money. Note that when Japan announced the Miyazawa scheme last year, the main uses of the funds were supposed to be industrial and financial restructuring. But Thailand has used the funds for a mix of fiscal stimulus and social rescue. This is a measure of the failure of the attempts at "social safety nets". Moreover, Thailand is spending the funds using a framework invented and last used a quarter of a century ago. This is a measure of the government’s backwardness on social welfare.

Luckily Thailand still has traditional "social safety nets" which have functioned much better.

Many of those laid off from city jobs were the women who form the majority of the workforce in the export-oriented industries. Many of them women have a couple of children. Often the father has drifted off somewhere. Over the years in the city, these women have acquired commitments – rent on the rooms, payments on the TV, commitments to the local revolving credit fund. They might have some family back in a village somewhere, but they have been away too long to go back. They are stuck. None of the "social safety net" schemes created either by the government or the World Bank/ADB was targeted at them.

What did they do? Some dropped into prostitution, which has always been one of the more reliable "social safety nets" of the poor. Some dropped out of the factory and into the sweatshop. Surveys showed that this was the fate of around two-fifths of those dismissed from textile and other labour-intensive industries. In the sweat-shops, they earned less than the official minimum wage, usually had no job security, and often worked in very bad environmental conditions.

Others bought a pushcart. Early last year, Bangkok’s night-time pavements filled up with vendors. Most are still there. And the provincial towns now have the same effect. The stalls sell noodles, snacks, cheap T-shirts, stockings, trinkets. The passageways of shopping malls have filled up with stalls offering laundry services, clothes repair, foot massage. Spare bits of urban land have been taken over and converted into car-washes. Trash recycling has boomed.

But the most common item is the grilled meatball – luk chin ping. It’s a very common low-cost snack so it has a big market. The fixed investment is small – a pushcart, a grill. The day-to-day investment is tiny – just the meatballs, some wooden skewers and some charcoal.

Other unemployed people went home to the village. For many months, they resisted this option. They preferred living in the city. They did not want to be a burden on their families. But late last year, as more and more exhausted their savings, people drifted back to the village. There they can get fed, but not much else. Work is scarce. Because crop prices are low and the last harvest was poor, there is not much money around. Since the start of this year, the extra pressure of the city-returned people has added to the number and intensity of rural protests over prices, over debt, and over access to land. But most of the returnees see the village as only a temporary refuge. As soon as there is a chance of work elsewhere, they will leave.

In sum, the traditional "social safety nets" are doing much better than the modern ones. The humble grilled meatball has saved a lot more Thai people from poverty than the massed efforts of expensive international consultants. The village shock-absorber is still working reasonably well because family, community, and ideas about mutual sympathy and the mutual obligation of sharing are still very important in Thailand. In the end, Thailand is lucky it is not too well "developed".

Some of the results may be positive. The IMF should no longer be able, with good conscience, to add "social safety nets" to its package and assume that will take care of the heavy social costs of its conditions. The government is waking up to the fact that Thailand’s expanded urban society needs a proper "social safety net", not just one bodged together in the eye of a crisis. It is talking about proper unemployment schemes, tax reforms for more equity, more support for agriculture, and other similar reforms. Whether it will remember these ideas once the economy gets better is another matter.