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Anarchy in Streets Builds When GDP Isn’t Shared: William Pesek
Commentary by William Pesek
April 15 (Bloomberg) -- It’s easy to dismiss protesters wreaking havoc in Thailand as misinformed anarchists.
They don’t understand the wonders of globalization, you may be thinking. If only they had more reverence for the splendor of capitalism. If only true democracy were able to work its magic in Asia’s eighth-biggest economy.
If only any of these assumptions got at the crux of Thailand’s crisis. The problem is the “Cult of GDP.” An obsession with high growth rates and failure to use them to narrow the gap between rich and poor are graphically playing out on Thailand’s streets. People are angry, and rightfully so.
It’s a far bigger risk than governments and investors realize, and it may be with Asia for a long time. The region didn’t use the fat years of the early-to-mid 2000s to spread the benefits of 6 percent or 8 percent growth. Now, the global financial crisis, political tensions and widespread discontent are fusing together.
This dangerous dynamic has come up in this column before, and Thailand’s woes demonstrate why it deserves more attention.
Protests there are essentially a feud between the rural poor and urban rich. The former group rues the 2006 ouster of Prime Minister Thaksin Shinawatra, who it believes bettered its economic situation. The latter group championed the coup that removed a billionaire they say bastardized Thai democracy.
Forget Thaksinomics
The truth lies somewhere in between. “Thaksinomics” did pump government largess into rural communities. Thaksin centralized power and removed government checks and balances. The urban rich allege that his family and business associates benefited most from his 2001-2006 tenure.
The disconnect between the better-off and the struggling masses can also be found in Indonesia, Malaysia and the Philippines, as well as in China and India. It will come to a head as the fallout from the credit crisis heads Asia’s way.
It’s often said that in a world awash in recession and toxic assets, Asia is the least ugly region. That’s true only if the U.S., Japan and Europe bottom out in 2009 and are growing in 2010. Export-driven Asia can only live without U.S. growth for so long without dire socioeconomic consequences.
Thailand’s crisis is a complex one and involves many moving parts: economic hardships, class tensions and the role of King Bhumibol Adulyadej. There’s also a powerful establishment versus anti-establishment angle.
Old Elite
Thaksin’s supporters see U.K.-born and Oxford-educated Prime Minister Abhisit Vejjajiva as the face of the establishment. There’s a perception among Thais that politics is increasingly controlled by an old elite. That’s why protesters are going after both Abhisit and the political establishment.
Abhisit is standing firm, refusing to step down even after a decidedly humiliating weekend. Protesters forced the cancellation of the Association of Southeast Asian Nations summit. It cost the region a rare chance to cooperate amid the global crisis. It cost Abhisit even more.
The ease with which demonstrators overwhelmed security forces at a conference venue that should have been easy to protect made a fool of Abhisit’s government. Asian leaders who fled by helicopter and boat won’t soon forget it. Nor will international investors watching the chaos unfold on CNN.
Fitch Ratings joined Moody’s Investors Service and Standard & Poor’s in saying they may cut Thailand’s foreign-currency debt ratings. Instability is hurting government revenue and spurring capital outflows at the worst possible time. Fitch and S&P have BBB+ ratings for Thailand, a level similar to Moody’s.
Risk of Unrest
Thai protesters yesterday ended their siege of government offices in Bangkok. The risk of renewed unrest is undermining markets as the economy confronts its first annual contraction in 11 years. Thailand’s vital tourism industry is targeting 14 million arrivals this year. Well, good luck with that.
Thailand has had a dizzying four prime ministers in a year. Imagine if Abhisit, premier since December, were to step down. How can investors be sure his replacement won’t face the same dubious honor as all the others? Thailand is caught in a vicious cycle in which any leader is likely to lack enough legitimacy to lead the nation of 66 million people.
Just four years ago, Thailand was an economic success story. Leaders in Indonesia and the Philippines were considering Thaksinomics for their own populations. Not anymore.
Rich Versus Poor
One problem is weak institutions. A more independent judiciary, central bank, media and freer watchdog groups to weed out corruption would serve Thailand well. Yet there’s an even bigger problem: high growth rates haven’t enriched enough Thais on a consistent basis over the last decade.
Big increases in gross domestic product get headlines and cheer investors. All too often, though, they are used to conceal poverty and widening rich-poor divides. Thailand’s recent experience suggests those strains are bubbling to the surface as rarely before.
That should be a warning to governments in Asia and to investors, too. It’s one thing to spread the gospel of rapid GDP. It’s quite another to deliver by divvying up its spoils. It’s time for Asia to practice what it preaches.
(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)
-----------------------------
Latest Updates At Singapore News Alternative:
1. Singapore suffers record contraction
2. Anarchy in Streets Builds When GDP Isn’t Shared
3. UBS Expect To Post US$1.75 Billion Losses For 1st Quarter
4. Hong Kong Beat Singapore In Foreign Trade Survey
5. Singapore Retail Sales Fall Further In February
6. Of migration and the Singaporean diaspora
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Anarchy in Streets Builds When GDP Isn’t Shared: William Pesek
Commentary by William Pesek
April 15 (Bloomberg) -- It’s easy to dismiss protesters wreaking havoc in Thailand as misinformed anarchists.
They don’t understand the wonders of globalization, you may be thinking. If only they had more reverence for the splendor of capitalism. If only true democracy were able to work its magic in Asia’s eighth-biggest economy.
If only any of these assumptions got at the crux of Thailand’s crisis. The problem is the “Cult of GDP.” An obsession with high growth rates and failure to use them to narrow the gap between rich and poor are graphically playing out on Thailand’s streets. People are angry, and rightfully so.
It’s a far bigger risk than governments and investors realize, and it may be with Asia for a long time. The region didn’t use the fat years of the early-to-mid 2000s to spread the benefits of 6 percent or 8 percent growth. Now, the global financial crisis, political tensions and widespread discontent are fusing together.
This dangerous dynamic has come up in this column before, and Thailand’s woes demonstrate why it deserves more attention.
Protests there are essentially a feud between the rural poor and urban rich. The former group rues the 2006 ouster of Prime Minister Thaksin Shinawatra, who it believes bettered its economic situation. The latter group championed the coup that removed a billionaire they say bastardized Thai democracy.
Forget Thaksinomics
The truth lies somewhere in between. “Thaksinomics” did pump government largess into rural communities. Thaksin centralized power and removed government checks and balances. The urban rich allege that his family and business associates benefited most from his 2001-2006 tenure.
The disconnect between the better-off and the struggling masses can also be found in Indonesia, Malaysia and the Philippines, as well as in China and India. It will come to a head as the fallout from the credit crisis heads Asia’s way.
It’s often said that in a world awash in recession and toxic assets, Asia is the least ugly region. That’s true only if the U.S., Japan and Europe bottom out in 2009 and are growing in 2010. Export-driven Asia can only live without U.S. growth for so long without dire socioeconomic consequences.
Thailand’s crisis is a complex one and involves many moving parts: economic hardships, class tensions and the role of King Bhumibol Adulyadej. There’s also a powerful establishment versus anti-establishment angle.
Old Elite
Thaksin’s supporters see U.K.-born and Oxford-educated Prime Minister Abhisit Vejjajiva as the face of the establishment. There’s a perception among Thais that politics is increasingly controlled by an old elite. That’s why protesters are going after both Abhisit and the political establishment.
Abhisit is standing firm, refusing to step down even after a decidedly humiliating weekend. Protesters forced the cancellation of the Association of Southeast Asian Nations summit. It cost the region a rare chance to cooperate amid the global crisis. It cost Abhisit even more.
The ease with which demonstrators overwhelmed security forces at a conference venue that should have been easy to protect made a fool of Abhisit’s government. Asian leaders who fled by helicopter and boat won’t soon forget it. Nor will international investors watching the chaos unfold on CNN.
Fitch Ratings joined Moody’s Investors Service and Standard & Poor’s in saying they may cut Thailand’s foreign-currency debt ratings. Instability is hurting government revenue and spurring capital outflows at the worst possible time. Fitch and S&P have BBB+ ratings for Thailand, a level similar to Moody’s.
Risk of Unrest
Thai protesters yesterday ended their siege of government offices in Bangkok. The risk of renewed unrest is undermining markets as the economy confronts its first annual contraction in 11 years. Thailand’s vital tourism industry is targeting 14 million arrivals this year. Well, good luck with that.
Thailand has had a dizzying four prime ministers in a year. Imagine if Abhisit, premier since December, were to step down. How can investors be sure his replacement won’t face the same dubious honor as all the others? Thailand is caught in a vicious cycle in which any leader is likely to lack enough legitimacy to lead the nation of 66 million people.
Just four years ago, Thailand was an economic success story. Leaders in Indonesia and the Philippines were considering Thaksinomics for their own populations. Not anymore.
Rich Versus Poor
One problem is weak institutions. A more independent judiciary, central bank, media and freer watchdog groups to weed out corruption would serve Thailand well. Yet there’s an even bigger problem: high growth rates haven’t enriched enough Thais on a consistent basis over the last decade.
Big increases in gross domestic product get headlines and cheer investors. All too often, though, they are used to conceal poverty and widening rich-poor divides. Thailand’s recent experience suggests those strains are bubbling to the surface as rarely before.
That should be a warning to governments in Asia and to investors, too. It’s one thing to spread the gospel of rapid GDP. It’s quite another to deliver by divvying up its spoils. It’s time for Asia to practice what it preaches.
(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)
-----------------------------
Latest Updates At Singapore News Alternative:
1. Singapore suffers record contraction
2. Anarchy in Streets Builds When GDP Isn’t Shared
3. UBS Expect To Post US$1.75 Billion Losses For 1st Quarter
4. Hong Kong Beat Singapore In Foreign Trade Survey
5. Singapore Retail Sales Fall Further In February
6. Of migration and the Singaporean diaspora
</TD></TR></TBODY></TABLE>
