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.
Mong Palatino
Business & Investment Opportunities
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