Some people believe that Thaksin's efforts to reduce poverty mainly encouraged low-income Thais to accumulate debt; they deride such measures as "inefficient." This portrayal of Thaksin-style populism is documented in the Asia Sentinel by Ten Kate: "Many critics of Thaksin’s policies feared they were creating a culture of dependency in which people would come to rely on cheap money from the state."
My own analysis of the economic trends uncovered something important. I found that poverty reduction during Thaksin's tenure was more remarkable than his critics -- and good reporters such as Ten Kate -- have indicated. I spell it out in a short post entitled Under Thaksin, Thailand'
Yet a conundrum remained: how could one reconcile such downbeat assessments of Thaksin's lending programs with this new evidence? This perplexed me. Then I read a piece by Bangkok Pundit (BP) entitled Thaksin, Poverty and Household Debt. I recalled how previously in an email, BP had posited an intriguing idea, a possible solution to the conundrum: What if improving the ability of poor Thais to accumulate debt amounted to "welfare" by another name?
Supposing three criteria could be satisfied, a strong case could be made that liberalized access to debt served as a successful form of welfare in Thailand. First, if the decline in the rate of poverty under Thaksin really had been significant; second, if people had put easier-to-borrow money to good use; and third, if more open lending policies had not been ruinous to the economy of Thailand.
My finding strongly supports the first point. Addressing the second and third points, BP cited a 2004 paper according to which total household debt in Thailand was at relatively low levels when measured against other economies; the rate of non-performing loans was on the decline; outstanding credit debt stood at only 3%; there was "a gradual shift in household borrowing from informal to formal channels" (which mattered because "lack of access to formal credits may subject a sizable portion of households to exorbitantly high interest rates.") And home ownership in Thailand
Poverty decreased. Money was put to good use. Loans did not wreck the Thai economy. Whatever you call them, Thaksin's anti-poverty measures transferred a lot of cash into the pockets of poor Thais. In the West we would call that social assistance. But for some reason, after this happened in Thailand -- after millions of poor people actually got their hands on some money -- it got derided as "bad policy."
Largely disparaging accounts of Thaksin's anti-poverty initiatives do not jive with my own analysis of the data. The fact is that Thaksin's tenure was marked by sweeping poverty reduction, despite a relatively modest increase in GDP. And if you couple this observation with the strong evidence that broader access to debt financing gave more people access to durable goods such as housing, amounting to welfare by another name -- Bangkok Pundit's insight, a far more favorable interpretation of the Thaksin experiment in poverty reduction emerges.
