PT’s win was attributed to many factors, one of which is the party’s credibility in delivering on its election promises. As some, if not most, of their policies are considered ‘populist’, critics are quick to point out the problems associated with this kind of policy strategy. For example, it is argued that these policies will not help the Thai people in the long run. Instead, populist policies like subsidies encourage Thais to wait for government assistance rather than increase productivity. Resources are allocated away from sustainably increasing the general welfare into securing the political popularity of the ruling party. The latter criticism highlights the importance of fiscal sustainability in PT policies, an issue that warrants especial scrutiny because most of the resources involved come from public monies.

While a significant and legitimate concern, the fiscal burden of populist policies is not the only thing on which the critics should concentrate. Like it or not, populist policies would be present regardless of who won the election, as all the major parties had such policies in their platforms during the campaign. What is more important is whether PT populist policies can fundamentally reduce inequality in Thailand. An examination of these policies suggests they cannot.

Consider the PT campaign policy on rice pledging. Under this scheme, the PT government will buy practically all rice from farmers at prices at least 50 per cent higher than pre-election market prices. The fiscal cost is estimated to be very high, perhaps the highest among all PT policies. It is popular because of the common myth in Thailand that all farmers are poor. But the policy does not really benefit the poor farmers. Studies of rice pledging under Thaksin’s government found that only a small fraction of the government’s spending under these schemes went to farmers, and that among them the rich farmers benefited the most. A larger portion went to rice millers, rice exporters, and corrupt politicians and bureaucrats. These groups are among the richest in Thai society. Rice pledging is thus likely to make income distribution worse, not better.

The first-car and first-house tax subsidies are also clearly not redistributive. Only the richest 25 per cent of Thai families can afford an automobile and most of them own cheaper second-hand cars, not the brand-new ones the PT government subsidises. Even fewer families can afford newly built houses. These policies are obviously benefiting rich Thai consumers and the entrepreneurs of the two industries involved. The large associated tax credits — 100,000 baht for the first-car scheme and up to 500,000 baht for the first-house subsidy — make these two policies even worse at reducing inequality.

The most redistributive policies are proposed hikes in the minimum wage and minimum salary for new bachelor degree graduates. For example, if the minimum wage hike to 300 baht per day for unskilled workers is enforced perfectly, the unskilled workforce overall will get 250 billion baht more, equivalent to 2.5 per cent of GDP. This is certainly a huge wealth transfer from the rich to the poor. One important thing to note is that the policy might end up hurting the poor workers if the hike forces firms, especially small ones, to lay off less-productive workers.

Other noteworthy policies are additional transfers to village revolving funds, the ‘one-tablet-one-child’ policy and the increase in monthly payments under universal elderly income transfers by 20 per cent or more. The first two policies pose one-time costs to the government, while the last one could account for up to 3–5 per cent of total government spending annually. These policies are biased toward neither the rich nor the poor, as they are universal in nature.

The above examples show that, in contrast to PT’s rhetoric during the election campaign, its policies hardly favour the poor, and some are clearly designed to benefit the rich and urbanites. Why did the party choose this approach, and why do poorer voters, especially in the north and northeast, remain faithful to the party?

On the first question, it is possible that the party was confident in securing the votes of the poor anyway, so the current round of populist policies was aimed at increasing PT’s popularity among middle-income groups and urbanites.

On the second question, it might be that those casting votes for PT did not do so with a particular interest in any single policy, including populist or non-populist ones, but with a general trust in PT as representing their needs, both economically and politically.

The irony is that even if the PT government intends to fulfil its voters’ expectations, it might find its hands tied as there is no fiscal space left for the poor after spending on these rich-biased policies. Relying on the accumulation of public debt is no answer either, as the additional fiscal cost of keeping its campaign promises alone could be as high as 3–5 per cent of GDP annually. The last resort is reforming the tax system to provide more revenue by increasing the tax base and some tax rates. But doing so would jeopardise PT’s short-term political popularity, which is something held close to its heart.

Somchai Jitsuchon is Research Director at the Thailand Development Research Institute, Bangkok.

This article appeared in the most recent edition of the East Asia Forum Quarterly, ‘Where is Thailand Headed?‘.