By Chang Noi
Published on November 2, 2009
THE POLITICAL DIVISION remains fierce and emotional. Much of the country is a no-go area for members of the government. Abhisit's delivery of a compensation check to Granny Hai required a helicopter-borne military operation that cost many times the value on the cheque. Talk of "reconciliation" has faded away.
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Little by very little, more people accept that this intense division is not caused by one man but a massively unequal distribution of wealth and power. Several worthy, middle-of-the-road institutions have found a new interest in the subject of economic and social inequality. These include the King Prajadhiphok Institute, Thailand Development Research Institute, and Thailand Research Fund.
The inequality in income in Thailand is much worse than it should be, given the relative success of the economy over the past generation. A simple way to measure income inequality is to estimate the gap between the top fifth and bottom fifth of the population. In countries like Sweden and Japan, where people value the advantages of living in a relatively equal society, the difference is 3 to 5 times. In Europe and North America, it's 5 to 8 times. Among Thailand's Asian neighbours, it's 9 to 12 times. In Thailand, it's 13 to 15 times. Almost all the countries worse than Thailand are African states with civil wars or Latin American states with endemic populist movements. The risks are very clear.
The economist Simon Kuznets proposed that developing economies would tend to get more unequal at first, because the benefits would be monopolised by a minority, but later would become more equal as many more people shared in the fruits of growth. That theory has generally been proven true, including among Thailand's neighbours. Indonesia, Malaysia, and the Philippines have all turned the corner from worsening to improving distribution. But Thailand defies Kuznets' rule. Recently, a Thammasat economist used Kuznets' method to calculate when Thailand should have turned the corner if it conformed to the pattern of most of the world. Her answer was 1994. But it still has not happened.
All these calculations are about income. But what about wealth? How unequal is the distribution of property, savings, and other assets in Thailand? Government began collecting data on this only in 2006, and the first analyses are now appearing. They are rather shocking. While the difference in income between the top and bottom fifths is 13 to 15 times, the difference in wealth is around 69 times. In terms of the Gini coefficient, a measure of inequality in which a higher figure means more unequal, the figure for income is a bit over 0.5 while that for wealth is 0.7.
What's more, we can be pretty sure that this calculation is an underestimate. It's not too difficult to count the assets of the poor. It's very difficult to count the assets of the rich because they are very shy people. If a certain former prime minister is a good guide to general practice, then the rich hide a third to a half of their wealth. That would mean that the wealth Gini is more like 0.8, and the wealth gap between the top and bottom fifths is more like 80 to 100 times.
Other data tend to corroborate this picture of a truly enormous wealth gap. According to the Bank of Thailand, there is almost Bt3 trillion in bank accounts.
Two-fifths of this total is held in just 0.1 per cent of all the accounts. Most people, especially rich people, tend to have more than one account. On a rough calculation, assuming the rich have two accounts apiece, half of the total savings in banks is owned by around 50,000 people.
The stock market is much the same. Between 1995 and 2004, the same 11 families appeared constantly as the top five holders on the exchange: Maleenont, Shinawatra, Damaphong, Chirathiwat, Benjarongkul, Damrongchaitham, Asavaphokin, Liewpairat, Photharamik, Kannasut and Joranajit.
Land is similar. In eight provinces where data has recently become available, the top 50 landholders (persons or juristic persons) hold on average a 10th of the total land. In Bangkok, the top 50 own 10.1 per cent of the land, and the single largest holder has 14,776 rai.
There are many, many reasons why income and wealth have become so unevenly distributed. One reason that is simple and can be relatively simply changed is the way the government raises revenue and spends that money.
Some countries use these mechanisms to even out equality by redistributing from the rich to the poor. Many other countries aim that the system should be roughly fair for all. In Thailand, the government redistributes from the poor to the rich.
How much is hard to calculate accurately. One study from 1981 showed that the poorest 10th were taxed over twice as much as the rich as a percentage of income. A 1994 study showed that the situation had improved but was still marginally pro-rich. Since then, nobody has looked. It's too embarrassing. The reasons for the skew are the heavy reliance on indirect taxes (VAT, excise) which fall more heavily on the poor, and the high levels of evasion. Some 8.6 million people file income tax returns, but only 5 million pay any tax, and only 4 per cent of those are taxed in the two highest brackets. The number of payees has been dropping in recent years.
Spending is similar. A World Bank study by Hyun Hwa Son showed that Thai government spending on health, education, and infrastructure benefited the rich more than the poor. So do subsidies on public utilities. The reasons lie in past development policy. Spending was concentrated on such things as Bangkok infrastructure and higher education on grounds these would have the largest impact on economic growth. Policies have since changed, but the legacy remains.
Just making government's tax and spending a bit fairer would begin to counter the trend to inequality. Is there the political will to make those changes? How much time is left?
