Twelve million poor

15 September 1998

Twelve million poor people by the end of this year. A fifth of the nation. Is that possible?

Every couple of years, government counts the people below an international-standard poverty line. The numbers have tumbled down from 23 percent of the nation in 1981, to under 8 percent by 1996 (under 5 million people). Some growth does trickle down. But disaster sweeps down like an avalanche. When the economy hiccuped slightly in the early 1980s, 3 million slipped back below the poverty line. The current crisis is far, far worse. The statistics suggest a formula linking the rate of economic growth and the rise or fall in poverty. According to this, when the economy stalled last year, over 2 million dropped below the line. If the economy shrinks by 8 percent this year, another 5 million drop. That brings the total to around 12 million.

You can hear the government’s spin-doctors searching for their calculators and rehearsing their denials. It may not be that bad. The formula may be wrong. The drop may be slower. The safety net schemes may work. But let’s face it. It may be that bad. Twelve million poor.

City poor. Where will they be? Many hope that those who lose jobs in the city will melt back to the villages. The government has been relying on this. Asked recently in Australia about the social impact of the crisis, Surin Pitsuwan replied there was no big problem because migrant workers would return to the village and the family rice-bowl. Most of the social safety-net funds have been allocated to the countryside.

But things may not be so simple. A recent survey for the International Fund for Agricultural Development (IFAD) in villages in the northeast shows that most migrants are not returning. In some villages, half. In others, almost none. Akin Rabibhadana asked a northeastern villager why more were not coming. The reply: "They don’t want to create difficulty for their relatives."

Older people are more likely to return. When they lose their job, they know their age will make it difficult to find another. They still have links with their village relations. They may have a child or two who need feeding. So they get on the bus back home.

But for the younger ones, the choice is different. They left the village in their teens and have grown up in the city. They don’t know how to plant rice. They are more used to city life. All their friends have quit the village. The IFAD study shows that they may go home when they lose their job in the factory or construction site. But they don’t stay long. They soon go back to the city and look for some work. Any work. At best a casual job with low pay and no security.

Village poor. Even if many of those made poor by the crisis are staying put in the city, their poverty is still travelling back to the village.

Over the last 20 years, the economy of the villages has changed a lot. With no government support and little investment, agriculture was almost stagnant. At the same time, the urban economy boomed. More and more the village economy became dependent on the urban economy. By the early 1990s, agriculture supplied less than half of rural income. About another quarter was earned in the city - by rural migrants working in a factory, construction site, bar, taxi - and sent back to the family in the village home.

But in the crisis, the postal orders have stopped coming.

The last quarter of village income came from various sources. Casual labour in the locality. Work in the factories located in the countryside to tap local labour. Craft production of cloth, jewelry and other articles sold to tourists and urban middle-class consumers. And local service businesses. Particularly in the last few years, migrants have returned home with a little saving and sunk it in an eating house, beauty parlour, dressmaking shop, auto repair works, or drinking dive. Many villages have developed a little main street with quite an urban feel.

This part of the rural economy is being shattered. As the IFAD survey shows, some of the hardest-hit have been examples of local collective enterprise. A women’s group which made textiles and soybean paste has collapsed because of declining demand. In a silk-weaving village, only 2 out of 50 houses are still working and the place ‘has the look of a small town in depression - shops with no customers and stilled looms’. Silverware and porcelain businesses face the same crunch. A few businesses produce goods which are doing well in the crisis because they are cheap (e.g. herbal tea). But those producing for the urban and tourist markets find that demand has slumped, or the fragile marketing system has crumbled away.

The beauty parlours and eating houses face a similar fate. They offer little luxuries to the local market, and they are very vulnerable to falling local incomes. Some reported to the IFAD survey that turnover was down to a quarter or a third. Others have already disappeared, often destroying the capital saved from a long slog in the city bar or construction site, and evaporating dreams of self-improvement.

The village economy is being shrunk back to its agricultural core. This has different impacts on different areas and different groups.

With the baht depreciation, export demand for Thailand’s crops has increased. Prices have risen by 10-15 percent. For the fruit and vegetables sold to Bangkok and other towns, prices have gone up by about the same.

Thailand really has two agricultural economies. The first has good access to water. It includes the central region, much of the north, and pockets elsewhere. This zone has been involved in commercial agriculture for over a century. The farmers are seasoned entrepreneurs. Many will profit from the higher prices. Some are already reacting to the crisis by farming more intensively - intercropping, moving to higher-value crops, mobilising under-utilised land.

But in the other dry zone there is much less flexibility. Nature limits the opportunities for more intensive farming. Few of the farmers have much capital. While crop prices have gone up, prices for inputs of fertilizer and pesticide have gone up even more - by around 40 percent. For a small farmer, the economics of expanding production to counter the crisis don’t look very secure.

Many poorer farmers and wage labourers have to buy some or all of the rice they need, and now they are paying more. The UN calculates that a 10 percent rise in the price of rice forces another 1 percent of the population below the poverty line. So the 15 percent rise in rice prices alone increases the poverty level by 1.5 percent.

So some of the 12 million poor people will be in the city. More will be in the villages, especially in the dry northeast. What will they do?

Surviving. In Bangkok, some will hang around looking for work. Even more will enter the petty businesses which are the last line of defence against poverty. But the supply glut will mean low margins and low turnover. How many grilled meatball vendors can survive?

A few will take a different option. The theft of public property - manhole covers, electric cable - is on the increase. Amphetamines are booming because many youths take up retail peddling and are successfully expanding the market.

Some will turn to their local godfather for work or charity. The godfather will in turn have to look for more income. Scattered reports suggest that protection rackets are becoming more demanding.

In the northeastern villages, they will just try to survive. According to the IFAD study, they scaled down the rocket festivals this year to save money. Many have stopped making the payments on the motorcycle bought in the good times. Some have stopped paying their dues to the government’s agricultural bank (BAAC). A few have taken on putting-out work. Many more young women are falling into the flesh trade. Here too the crisis has cut demand and pricing. So the opportunities will be at the cheap and nasty end of the trade.

Many families will split up. The women stay at home, look after the children and old people, and keep the farm going. The men drift off to look for work wherever it can be found. This is an age-old pattern.

Feet. The rich-poor issue in this crisis is not just a political agenda. It is very real. And because it is real, it is political.

Last year one of the leaders of the Assembly of the Poor said: ‘The power of the soldier is his gun. The power of the businessman is his money. From our experience, the power of the poor is our feet.’

Twelve million pairs?

[Thanks to Peter Warr and Govind Kelkar.]