The Markets and The Poor

4 June 1998

The mini-crisis over the financial decrees was a very revealing episode. At one level, it was no more than a 3-day delay in getting approval for some technical cleaning-up operations. But the emotions, fears and ambitions which tumbled out over these three days revealed much larger forces behind.

On one side, the Democrat leaders, the business associations, and much of the urban press hit the panic button. Their cry was very clear: if we don’t pass these decrees, The Markets will abandon us. Political instability will make us look a bit more like Indonesia. International capital will run away. The IMF will hold back the next instalment. Disaster.

On the other side was the discourse of The Poor. The government is on the side of the rich. Farmers have crippling debts too and how come they are not getting bailed out. Why should everybody have to pay for the national debts when the financial crooks who caused them get off scot free.

On the one side, The Markets. On the other, The Poor. Rarely is this division revealed so clearly. But this is the key axis of the age of globalisation.

All the evidence from round the world shows that market liberalisation and the spread of international capital widens the gap between rich and poor. This proposition is no longer controversial or radical in any way. The World Bank’s own 1997 development report was devoted to just this issue. International bodies like ADB, UNCTAD and OECD have reached the same conclusion. They support liberalisation and globalisation. But they admit that the results are divisive. And they don’t know what to do about it.

The mini-crisis showed that day-to-day politics are more and more patterned by this division. The Democrat-led government has set out to be a dutiful pupil of The Markets. By the logic of open politics, the opposition falls into the role of defender of The Poor.

After the mini-crisis passed, the prime minister blasted the opposition for "creating social division". But this accusation was inaccurate. The social division already exists. The gap between rich and poor is large and getting larger. Chavalit and the opposition did not create this division. Rather, they are increasingly being driven by its political logic.

The Markets argue: if you go against us, then things will be worse for you. Capital will flow out and everyone will be worse off. The Markets, of course, are right. They have the power to make their threats come true. The Democrat-led government and the business lobby fall in with this argument. Tarrin Nimmanhaeminda has argued consistently that we have no choice but to do as The Markets demand.

But The Poor understand the divisive tendency in the age of globalisation. They understand it instinctively when they see the government’s economic team fronted by two ex-bankers and a rich tycoon. Their leaders have studied the international experience. The Poor know that they must defend themselves, because nobody else will. But they don’t have the power of The Markets to impose their will. They must wage "wars of position". They must leverage any advantage presented by circumstances and crises. They must get what they can from the political ambitions of the likes of Chavalit.

For The Poor, the decrees were not the real issue. The technicalities of managing the financial crisis are remote from their lives. Punishing some of the financial crooks is a bit more important to them. It won’t make the poor less poor by a single satang. But it will mark a small but significant shift away from a world in which the rich can get away with anything, at the expense of everybody else.

But in the short term, the fortunes of The Poor are dictated by things like land, water, crop prices and debt. During the mini-crisis, farmers rallied in Khon Kaen to demand a debt moratorium, and Assembly of the Poor leaders sat down with officials to negotiate concessions on land rights. It worked. Suddenly this government is talking about prosecuting financial crooks, considering a moratorium on agricultural debt, and accelerating the grant of land rights.

Many seemed horrified by the opposition’s role in the mini-crisis. They argue (quite rightly) that the debt was largely created by the FIDF profligacy during the Chavalit Yongchaiyudh government, and was already dumped onto the people by that government’s decrees of August 1997. They question (quite rightly) what credentials this rich, conservative, old-fashioned, devious politician has to claim leadership of The Poor. They fear (probably again quite rightly) that the return of Chavalit would make things worse for everybody, rich and poor alike.

But these arguments miss the point. The face-off between The Markets and The Poor is a fact-of-life in the age of globalisation. No amount of urban middle-class horror about the prospects of Chavalit’s return will make it go away. If you embrace globalisation, then you must accept its consequences. These include the widening rich-poor gap, and the impact of this gap on politics.

A new group of centrists fear that ahead of this face-off lies a slippery slope down to political polarisation. They fear the division will become more strained, more ideological, more violent. Their fear is framed by the memory of 1975-6. For both Anand Panyarachun and Thirayuth Boonmee, the memory is very personal. Thirayuth was a moderate student leader swept away by the radicalisation of his colleagues. Anand was a liberal bureaucrat cast as a communist during the establishment’s lurch to the right. Both know that the centre can become very dangerous ground. For several weeks, Anand has been urging the Democrats to adopt more even-handed policies. Thirayuth’s statement which sparked the crisis was couched in the same vein.

Out of the mini-crisis, The Markets have got the decrees and a confirmation of the government’s dutiful stand. The Poor have made some slight gains in the wars of position. But whether the mini-crisis marks a move forward or backward along the route of polarisation now depends on Chuan Leekpai and his understanding of what the centrists are telling him.

Chuan must be – and be seen to be – leader of a nation-in-crisis not just bankers-in-crisis.