Income distribution

Today there’s a new Chang Noi’s article in The Nation, this time it’s on income distribution, and right from the start it asserts that “intense division is not caused by one man but a massively unequal distribution of wealth and power”.

I have a big problem with this.

If there was a massive interest in wealth distribution issues, it was when PAD was protesting against Thaksin and his cronies, undoubtedly the richest government in Thai history. Later in Chang Noi’s article he gives a list of the wealthiest Thai families in terms of stock holding: Maleenont, Shinawatra, Damaphong, Chirathiwat, Benjarongkul, Damrongchaitham, Asavaphokin, Liewpairat, Photharamik, Kannasut and Joranajit.

About half of them had direct representatives in TRT government, with the rest being personally very close, except, perhaps, Chirathiwats and Lewpairats. They’ve made a real fortune on SET in those days, accounting for the largest part of GDP increase at that time, and Democrats raised the issue at least once – how most of the GDP growth is concentrated in very few hands.

Now the reds, presenting themselves as the grassroots at the lower end of wealth spectrum, are campaigning to restore those fat cats back to power. It would have been ironic but it just makes me feel hopeless.

I also don’t see the poor having problems with the rich as a matter of principle – they seem to worship the money, and the richer their leaders are the better. “Rich don’t need to steal, especially Thaksin”, as they argue come election time. Or if they steal, it doesn’t matter, what matters is how much they give us back. That is an entirely different argument – it’s not the disparity that matters, it’s personal income.

Chang Noi also gives a lot of numbers to show huge income and wealth disparity in Thailand comparing to other countries. The List of Countries By Income Equality on wikipedia doesn’t look so gloomy, however. Thailand is better than Malaysia in every measurement there, for example. I’m not saying that wiki numbers are correct and Chang Nois wrong, but it seems Chang Noi was cherry picking through his statistics.

Even if Thailand has a big wealth gap – why exactly is it so bad? What is so wrong with it? It’s not like it appeared yesterday, and it’s not like the poor toil at their rice fields being consumed by envy of Charathiwats, if they know the name at all. I don’t think that urban poor care about owners of Bangkok skyscrapers either. The problem didn’t even register in public consciousness until Thaksin decided it would be a good rallying point in a battle to regain his lost billions.

Storm in a teacup.

I also don’t agree with the argument that it’s Thailand tax system that is responsible for the wealth gap. Only the relatively rich pay personal income taxes, about 20% of population of taxable age, going by Chang Noi’s data, so you can’t say that poor are overtaxed. Of course they pay VAT and excise taxes on personal consumption, and those make a bigger part of their overall income, but, on the other hand, if Thailand followed “socialist” European countries, VAT would have to be increased by another 10% at least.

There are also other implications of increasing incomes for the poor – low labor costs are still Thailand’s main advantage on the international market and unless the country can secure some global market niche where it can afford to charge extra, they have to pay the workers as little as possible or they won’t have any income to redistribute in the first place. Moving the entire country upscale is not going to happen overnight, so increasing minimum wages will have to wait.

Another point to consider is that western countries with high equality are living off the slave labor in countries like China. Those workers in Chinese factories are an integral part of the global economy, even if geographically they are thousands miles away, they need to be brought into equality indexes as well. I’m not saying that the west is hypocritical or uncaring, but it needs to be considered.

Consider some outsourcing project where some Hans or Joe or Luis was replaced by Indians or Cambodians. The positions still exists, the job is still done, the product still comes out just the same, and the wages are lower than ever, except these meager incomes are not on the books anymore. Extra profits squeezed form their sweat allow the govt to pay generous unemployment benefits, and the country becomes the model of social justice. It might not happen everywhere all the time, but remember that every Nokia phone produced in China and sold in Thailand provides social welfare for some Finn out there. In my opinion its Finland’s right to provide for their own, but I’m very skeptical when it’s presented as some sort of social ideal.

There’s a lot to think about here.

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