Governments are spending vast sums to reduce crushing poverty. While the cause is a noble one the reasoning and approach may be faulty.
Populist economics is on the rise in Southeast Asia. Politicians have been actively adopting policies that aim to impress upon the poor that governments are doing something, however trivial, to improve their conditions. It is generally a positive development but is it sustainable?
Thailand’s Thaksin Shinawatra was ousted as Prime Minister in 2006 but has remained popular among the rural poor. In fact, his younger sister is the country’s incumbent head of state. What is the reason for his enduring appeal? Maybe the great majority, especially the poor, have not forgotten his various ‘gifts’ to ordinary Thais.
Under his watch, Thaksin provided a life insurance scheme for the poor, bicycle loans for students, scholarships for indigent students, loans for low-priced TV sets and computers, loans for the purchase of taxi cabs, and cheap housing for middle income urban families. Thaksin also built fitness and day care centers in rural villages, gave educational gift packages for every newborn baby, and lowered the school fees in the country.
The targeted delivery of high-impact services to the very poor segments of the population was a component in Thaksin’s economic program which came to be known as Thaksinomics. This proved to be highly successful, at least politically, in boosting the image of Thaksin as hero of the masses.
As expected, Thaksin’s critics accused him of resorting to populism to win the political support of the poor. But Thaksin was perhaps vindicated when his political enemies adopted his approach of giving special gifts to the poor. The administration of Abhisit Vejjajiva not only provided free bus and train rides and free water allowances to poor citizens, it also unveiled what it called nine “New Year gifts” to the people which involved, among other things, loan access for informal workers, registration of motorcycle-taxi drivers, recognition of street hawkers, maintaining the price of cooking gas and free use of electricity.
Yingluck defeated Abhisit’s party in last year’s elections and following her victory she immediately signaled her intent to continue the legacy of her elder brother when it comes to social welfare programs. Aside from reviving some of Thaksin’s programs like the rice mortgage policy, Yingluck has some new gifts to offer to her constituents. Some of the more to controversial among these include the commitment to raise the minimum wage and the entry salary for university-educated civil servants. Yingluck also vowed to distribute free tablet computers to first graders. She also set-up a women's development fund to promote the well-being of the women sector.
Similarly, Malaysian Prime Minister Najib Tun Razak has expanded the assistance schemes, cash handouts, housing and healthcare initiatives that are conceptualized to help the needy and jobless. The Bantuan Rakyat 1 Malaysia 2.0 program, which will begin dispensing aid in early 2013, is expected to cover 4.3 million households and 2.7 million single individuals aged 21 and older. 4.78 million households are said to have benefited from the program, BR1M, which didn’t cover single individuals.
Under the program, households with outcomes under RM 3,000 receive an allocation of RM500 (U.S. $167.48), while single individuals aged 21 or older who have a monthly income of RM 2,000 or less also receive aid.
Health care is another aspect of the program. It was already announced that 70 new clinics will be set-up next year. The facilities are expected to provide blood test services including cholesterol, glucose and urine tests. The government also plans to upgrade 350 clinics nationwide and distribute 150 dialysis machines in public hemodialysis centers nationwide.
In the states of Sabah, Sarawak and Labuan, the government also is seeking to uplift the poor by building 80,000 new houses with selling prices between RM100,000 and RM400,000 per unit.
Under the 1Malaysia Welfare Program, funds will be allocated to assist senior citizens, children, disabled workers, and the chronically ill. The government is also providing funding to train the children of Indian estate workers who do poorly on their exams.
Similar to Malaysia and Thailand, the Philippines has its own version of providing specific services to the poor. Known as Pantawid Pamilyang Pilipino Program or the Conditional Cash Transfer, it aims to help 4.3 million poor households by 2016. The program enrolls beneficiaries who are required to attend seminars before receiving cash gifts from the government. Parents are also required to send their children to schools and to report to the nearest health center for vaccines and medical check-ups. The program has been praised by the World Bank and, as of July 1st of this year, it had provided support to “3,041,152 household beneficiaries in 1,400 cities and municipalities in 79 provinces in all 17 regions nationwide” according to a government statement.
It’s quite possible that the Southeast Asian governments decided to adopt these populist measures to enhance their electoral and political success. But this does not work all the time. For example, Thaksin was still booted out of power by a military coup despite his popularity, while his successor, Abhisit, lost badly in the polls despite his administration’s New Year’s gifts to the poor.
Regardless of their real impact on electoral politics, there’s no denying that the so-called populist measures in the region have tended to strengthen national leaders’ ties with the poor.
After witnessing the poor conditions in Kampung Bantal, Najib offered his 1Malaysia Welfare Program as a key intervention to uplift the lives of the people there. “Folks here survive on basic necessities and their low income makes life even harder for them to cope. As a responsible Prime Minister, I must never allow people like the folks in Kampung Bantal to be left out from the country’s development,” Najib has said.
“Hardworking Malaysians should not be punished by the escalating cost of living. Therefore my government, while working hard to ensure persistent economic growth, will not compromise the interest of the poor and the working class,” he added.
Similarly, facing criticism for the supposed ineffectiveness of his cash transfer program, Philippine President Benigno Aquino III challenged the opposition to take their case directly to the poor. During his annual state of the nation address last July, Aquino said: “If you take issue with the fact that 5.2 million of the country’s poorest households can now avail of quality healthcare services without worrying about the cost, then look them straight in the eye and tell them, ‘I do not want you to get better.’ If it angers you that three million Filipino families have been empowered to fulfill their dreams because of Pantawid Pamilya, then look them straight in the eye and tell them, ‘I will take away the hope you now have for your future.’”
Populist measures often do benefit the party in power which is why scholars commonly discuss the possible politicization of poverty alleviation programs. In Malaysia, for example, some NGOs are questioning why politicians, instead of welfare agencies, are distributing the cash vouchers to beneficiaries.
Another concern is the sustainability of these programs which require a large amount of financing. This is being made clear in Thailand where Yingluck is facing a lot of difficulties in fulfilling all her campaign promises, in particular the commitment to raise the minimum wage.
Other academics are also arguing that that cash transfers and other dole outs are unimaginative and “band-aid solutions” to the chronic and systemic problem of intergenerational poverty. They want public funds to be used instead to build schools, health centers, and mass housing. Activists in the Philippines in particular have decried the expansion of cash handouts at the expense of other social service expenditures.
The rise of populist policies in Southeast Asia aimed at uplifting the disenfranchised is depressing proof that the impressive economic growth in the region has not been inclusive. Behind the glowing statistics revealed by robust stock market indexes, export numbers, and rising GDP rates is a story of a region suffering from extreme economic inequality. It is no accident that Thailand, which suffered badly in the 1997 financial crisis, was among the first to experiment with policies that seek to bridge the gap between the poorest of the poor and the rest of society.
Populist economics has its clear benefits but remains an inferior alternative to the more comprehensive approach of finding long-term economic solutions to the age-old problems of poverty, inequality, and deprivation.
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