Handout Policies could lead to a bigger crash

EDITORIAL
Handout policies could lead to a bigger crash
By The Nation
Published on June 23, 2011


If voters become so reliant on populist promises, they will be unable to deal with the effects of any future crisis without the help of the government

Local industrialists recently indicated they were not enthusiastic about the economic policies being offered by the major political parties because there is nothing innovative about them. But a lack of innovation on the part of political parties is not a surprise to local businesses.

While the business community is not happy with the economic platforms on offer, some business people and economists are also concerned that if the future government implements these promised economic policies, they could drag the nation downhill in the near future.

Undisciplined populist spending programmes could lead to fiscal disaster, while the promises of low tax rates and wage hikes could add pressure on inflation. In addition, an unreasonable wage hike would affect the country's price competitiveness.

During this election campaign, the political parties have aggressively marketed their policy offers and tried to trump rival parties with amounts of giveaway money and handouts. The Democrats have proposed increasing the minimum wage by 25 per cent over two years. Pheu Thai has offered Bt300 per day. Fierce competition between the two largest parties has encouraged a smaller party, Chart Pattana Puea Pandin, to offer a Bt350 minimum wage.

While the Democrat Party offers to guarantee the rice price for farmers at around Bt11,000 per tonne, Pheu Thai upped this offer by proposing to pledge rice at Bt15,000 per tonne.

These are only a few examples of what the parties are now offering, including a credit card debt amnesty, low-interest loans for cars and houses, and an iPad for every student.

These populist offers have unfortunately framed the political debate into what each party can gain instead of tangible and effective economic platforms to promote capacity and competitiveness in the long run.

The business sector has never been enthusiastic about these promises because they know that most of it is simply rhetoric to attract voters.

While political parties in the past tended to outline their policies in broad terms, such as "the party will promote rural empowerment" or "strengthen business competitiveness", they now treat voters as consumers and customers. They offer aggressive marketing gimmicks and extravagant promises which could be a recipe for disaster if actually implemented.

The problem with these gimmicks is that they specify the exact amount of money each party will give, so voters can calculate the gain. Politicians now treat voters not as dignified citizens who cast ballots to take control of their future, but as customers who base their decision on how much they will receive.

It does not take a rocket scientist to realise that the business community and ordinary voters now do not set high hopes for creative or innovative policies. But if the political parties continue to lure voters with cash and handouts, they will simply lead the country to disaster. If this happens, a future crisis could be worse than the financial crisis of 1997 because people will no longer be equipped to overcome difficulty on their own, but will desperately wait for the government to rescue them.