Assessing the Government’s Response to the Economic Crisis

After the best part of a year, the Democrat-led coalition government is now not much less than three months away from starting to award the contracts that are the basis of the Keynesian-stimulus package. The so-called ‘Strength to Strength’ campaign will begin with highway construction, rubberized asphalt road construction and similar projects. Companies will bid for these projects, presumably, and the most satisfactory bid selected (obviously, there is no room in such a process for politically-influenced judificial decisions).

Is this good enough? Well, nothing is ever going to be enough considering the size of the economic crisis but at least something is better than nothing and at least we do not have here (influential) people spouting the kind of nonsense that there are in America and elsewhere that spending money is the wrong thing to do. For whatever reason they have come to it, all elements of the political class have accepted that there is a need to invest in the future.

Has the response been quick enough? Obviously not – this kind of project could have been rushed through the best part of a year ago – there has not been any real debate as to what to do, although some about how to do it. So why has it all taken so long (and it is unlikely any money will be released this year, on current schedule)? It is not just Abhisit’s indolence and the incompetence of the Democrats generally (although these factors have not helped), it is the result of the weakening of the political classes vis-à-vis the unaccountable secret hand of power – by relentlessly accusing politicians, nearly all politicians, of being corrupt as a category of person (not without justification in some cases, of course), so many hedges have been put on their actions that it takes an enormous effort to do anything at all. Inevitably, the poor and most vulnerable have suffered while the elite use these tactics to hold on to their money, power and status.

Are the projects well-designed? To a limited extent. Building or improving roads is always going to be useful in Thailand and even though there are more urgent problems needing attention this is not the worst thing to be doing (assuming that it will be handled properly and transparently). Has it properly taken into account the environmental impact? It would seem not. Has it addressed the gender issue? Again, apparently not. Most jobs are being lost in the manufacturing industry (where women predominate) and new jobs are being created in the construction industry (where men predominate).

The Crisis and Women Workers

As a result of the 1997 financial crisis, 95% of those workers laid off from the garment sector were women and 88% of those who lost their jobs in the toy sector. Women are disproportionately affected by such a crisis (including the current one) because, as Amelita King Dejardin of the ILO pointed out, women are more likely to be concentrated in the manufacturing jobs feeding the export industries and to be at lower levels in those factories. They are more likely to be sub-contractors or temporary or casual workers than men and, hence, usually the first to be laid off in bad conditions.

As she points out: “The consequence of losing a job also affects women differently and more severely. Research shows that the poorer the family the more important the woman’s earnings are to the family’s subsistence, children’s health and education. And because women workers in Thailand, the Philippines and Vietnam – among other countries – are concentrated in lower paid jobs they tend to save less; so a small pay cut or price rise can severely damage them and their dependants.”

Of course, there are some occasions or sectors in which women are better treated than men, which means that it is important to consider the impact of gender issues in addition to all other perspectives. In 1997, for example, women were not included in the social dialogue and the jobs that were created, through investment in infrastructure, tended to be more likely to go to men than women. Consequently, as she observes: “… the concept of what are public works should be expanded to incorporate social services, healthcare, education, child and youth development. Recruitment strategies must be created to reach women. Child care facilities must be included. Initiatives specially targeting unemployed women are needed. Economic and fiscal stimulus packages must include support for microfinance –which has been extremely effective in helping women start small businesses.”

So far, the current government seems to be no more alert to what is required than the incompetent Chuan Leekphai administration that was in power in 1997. However, there is still time for Abhisit to do something useful.

Krugman on the Cause of the Crisis

Nobel Prize-winning economist Paul Krugman recently wrote an article in which he identified as one of the principle causes of the current economic crisis the glut of savings here in Asia. His argument is that, after the 1997 crisis, people and institutions here in East Asia were so disturbed that they resolved never to let it happen again and, to that end, started creating large amounts of savings so as to prevent further predatory attacks on their currencies.

That money could not just be left in the banking equivalent of a sock under the bed and so it was invested in countries around the world. The countries which most willingly accepted the investment were Iceland, Ireland and Estonia, as well as the US and the UK – those countries which now, of course, are suffering most badly after having been lauded as the leaders of the 21st century revolution. Deregulation, therefore, was the main cause of the problems now being suffered.

The IMF, meanwhile, observes that we are now entering the third phase or wave of the crisis and this is now more seriously affecting the poorer countries of the world, which are now more integrated into the global system than was previously the case (Vietnam is included in this category). The poor, in other words, suffer the most and receive the least assistance. It is the same story in Thailand: the migrant workers will be displaced, the informal workers get squeezed, the poorly-paid receive no assistance and so forth.

ILO’s Response to Job Losses

With more than 17,000 jobs having been lost in February so far, making 26,000 this year with another 132,000 factory jobs already scheduled to be lost, it is clear that Thailand is facing a severe economic crisis. Total job losses will increase as suppliers and other stakeholders suffer when these factories contract or close down. As I have written before, Thailand is particularly vulnerable to economic crisis because of its openness to the world and its reliance on exports and tourism.

The International Labour Organization (ILO) has outlined the principal problems: “Of concern for countries were sectors dependent on exports and remittances and the knock on effect of decline to other economic sectors and to the most vulnerable and poorest. Potential loss of jobs and threats to decent work affecting many millions in the region was the central preoccupation of forum participants. Capacity to address this through stimulus packages was particularly worrying in countries with limited fiscal space or reserves to call upon.”

Some urgent policy areas were also identified:

§        Protecting and supporting decent jobs;

§        Collective bargaining and social dialogue particularly in negotiating flexible hours, wages, temporary lay-offs and severance packages;

§        Rolling out quickly infrastructure and labour-intensive public works projects, to keep men and women in work, particularly those retrenched;

§        Enterprise support measures including access to credit to focus particularly on small and medium sized enterprises (SMEs) and entrepreneurs.

§        Targeting support to specific sectors such as the rural and agricultural economy, and for vulnerable groups of workers – international and internal migrants, informal sector workers, women and young people;

§        Social security and social protection systems to be expanded to support vulnerable groups and increase disposable income levels;

§        International and regional support to include funding for developing countries and easing of conditionality in funding from international financial institutions:

The government has, to date, organized some job preservation schemes and suggested that support for SMEs and entrepreneurs will be forthcoming at some stage. A lot of money is simply being wasted for what appear to be political reasons. Few governments around the world inspire much confidence in their ability to deal with the crisis at the moment, so at least the quisling is not alone in that regard.

Woman Believes Kidney Has Been Stolen and Other Stuff

A woman has complained to police that one of her kidneys has been stolen. The woman, a factory worker from Samut Prakan, has spent some time feeling unwell and fainting and now suspects one of her kidneys was stolen during an operation to remove an ovarian cyst some time ago (not sure whether she might have noticed a rather larger scar than anticipated?). Police report that forced removal of a kidney would count as robbery and leave the perpetrator subject to a prison term of up to three years and a fine of 6,000 baht (approximately US$180).

Meanwhile the SET index fell more than 3% yesterday in line with losses across the region. It is down more than 11 points again this morning. Oil executives (some hiding behind anonymity) have criticized the government’s stimulus package – so Khun Samak must have done something right. One observed that the tax cuts were aimed at pleasing some people with ‘your’ tax money – well, Khun Oil Executive, that’s what the tax and democracy systems are all about. Political parties outline their policies and people vote for them if they agree with those policies and then the parties either follow through on the policies or get voted out. The exception is the Democrats of course, who refuse to outline any policies and stand on the platform ‘vote for us we are not the other lot.’ Bizarrely, the leader of the Democrat Party, workshy quisling Abhisit Vejjajiva, is not being challenged as leader of that once-proud party which, under his disgraceful leadership, is now little more than a band of unprincipled scoundrels. Have they really got no one better than this over-privileged, integrity-challenged prat? Amazing Thailand, indeed.

Meanwhile, the President of the Thai Condominium Association, Atip Bijanonda, has weighed in to the debate: “He said the stimulus plan would focus only on low-income earners but it could not boost the economy directly as this segment has limited purchasing power.” In reality, the opposite is true: since the people are poor, any extra income they obtain they have to spend immediately since they are in need of so many goods and services (education, clothes, medicine etc). The evidence from the USA is clear and obvious: Bush’s recent tax cut for the better off had no beneficial impact on the economy because most of the people just saved the money.