Thursday, May 20, 2010

People like me in Thailand

This post is motivated by my local dead-tree (the Sydney Morning Herald) wasting good column-inches on Kriangsak Kittichaisaree – the Thai Ambassador to Australia.

Once upon a time I unfortunately purchased a stake in Bangkok Bank. The bank – a survivor from the Asia Crisis – is a run really well by a Thai-Chinese family. Its loan book was conservative – and was working through the last of the Asia-crisis problems.

Bangkok Bank’s biggest problem was that Siam Commercial Bank (a bank controlled by the Thai Royal Family) was trying to grow like topsy especially in consumer loans after bringing in some McKinsey consultants who thought that American style consumer lending was exactly what was needed in Thailand. Siam Commercial had imbibed the banking philosophy that was to lead the world to ruin. Bangkok bank was actually run by sensible people who behaved as owners. I never met them – but I suspect I would really like them.

As part of the research I chatted to the investor relations or CFO of every reasonably sized Thai bank. I also chatted to some people at GE Finance who had been involved in the purchase of Bank of Ayudhya.

My problem was that I failed to heed the elephant in the room. Every Thai person I spoke to identified what they saw as the risk - Thaksin Shinawatra. Thaksin was a populist and popularly elected politician who was modestly corrupt (at least by the standard of developing countries) but who had a patronage network outside Bangkok (especially outside the Bangkok elite). Stylistically the comparison (made by many and I do not think too unfairly) was to Mussolini. More fairly he was in the mold of Berlusconi – the richest guy in the country using his power as such to win elections and rig the game in his favor.

Every single person I spoke to hated Thaksin. These were the educated finance professionals and managerial class – people like me. Many of them were liberal-democrats in the soft-liberal sense – really like me. Sometimes the hatred stretched to loopy conspiracy theories – but generally they just thought it was something worth ear-bashing a foreigner for about twenty minutes on. Everybody had an opinion – and it was the same opinion.

The elephant in the room of course was not Thaksin – it was the views of the elite about him. It was a view tainted a little with racism or at least regionalism – with the Bangkok elite looking down on people from the provinces (especially those from Issan whose first language was sometimes Khmer but more often a dialect of Lao and who they would suggest had darker skin though I never noticed the skin tone). [For those who study these things young women from Issan dominate the sex-tourism industry in Thailand reflecting their origin from poor and less educated rural areas. These are not the Bangkok elite.  Rural lightly educated or uneducated poor were the core supporters for Mussolini too.]

Still – as a keen observer of the United States I was getting used to seriously polarized politics. There were plenty of liberals (sometimes liberal-elites) who hated George Bush with similar vehemence. There are plenty in America who hold similar ill-will towards Obama. The big difference was that in Thailand I could not find a single Thaksin supporter amongst the people like me whereas there are many conservative (or more commonly libertarian) people in the American financial elite.

When the coup happened I was not particularly surprised – and (foolish me) not particularly alarmed. After all the people who supported the coup – at least tacitly – were people like me. The military decorated their tanks with yellow ribbons – signifying their loyalty to the King (and hence – as someone who comes hails from a democratic-constitutional monarcy) to some loyalty to the framework of democratic-monarchy. 

bloodless coup

When the Thaksin’s party (the Peoples Power Party) won the post-coup election I suspected we would just get back the same politics minus some of the corruption.

Alas it was not to be. The Orwellian named People’s Alliance for Democracy - the Yellow Shirts who don’t want to accept that Berlusconi (sorry Thaksin) was democratically elected – set out to make Thailand ungovernable if elections were fair. [Remember the occupation of Bangkok airport which did not end with snipers and hail of government bullets.]

But be clear what people like me have done in Thailand now. They have subverted democracy with a military coup and a refusal to accept the result of the subsequent election. And they have shot people that have disagreed with them.

An American equivalent would be if (say) the Tea Party (displacing its predecessor Republican Party) won the US Presidential elections and – like many demagogues – turned out to be modestly corrupt. In response a coup was organised by the displaced elites (Democrats and non-Tea Party Republicans) and Tea Party protestors were subsequently shot in the street.

In most civilised countries the actions of the past-elites would be called Treason. In America the military leaders of any such attempted coup would be court-martialled and receive the death penalty. What is more – even as someone who opposes the death penalty I would shed no tears... the alternatives are Hobbsian.

And that is where people like me have got to in Thailand which is a rather sobering thought indeed.




PS.  If you do not think the Government looks like a collection of liberal-elite then look at on Kriangsak Kittichaisaree’s CV which lists amongst other things a specialisation in law of international human rights at Harvard.  I wonder where they taught him that it was acceptable to be the Ambassador for a Government that shoot in the streets people who want the re-establishment of a popularly elected (albeit corrupt) democratic government.  I look forward to his resignation on principle. 

Post script:  many people have complained about my analogy of Thaksin to various Italian leaders.  This analogy is often used by the Thai elite – and is not mine.  The fair comparison I think is Berlusconi – who used his control of the main media to get elected – whereas Thaksin used methods more akin to vote buying.  [My Italian friends – again people like me – hate Berlusconi with a similar vehemence but they would not have condoned a coup.]  That said the Thai Foreign Minister just the other day was using the Mussolini comparison.  I do not want to get into direct analogies of policies – because – frankly they fall down.


tooearly said...

sophistry should also be punishable by death

bonerici said...

your analogies are horrible, I'm not sure if democrats are mussolini or if the tea partiers are berlusconi, so I guess the yellow shirts are liberate elites that sponsor coups? Liberal elites in the usa hate coups, it's the CIA that loves them so much.

the best analogy I have heard so far about this is that in the west we dont riot, smash businesses and turn over cars when we lose elections.

no, we save that for when we win sports games.

Pat said...

As an Aussie expat in Bangkok, I find myself completely agreeing with your comments about the crisis in Thailand. Out of the events of the last few years, however, the one positive aspect is that people at the lower levels of the economic/social ladder have "woken up" - the first responder to the article on this blog articulates the perspective pretty well.

I actually believe that the country is on the verge of a significant restructuring due to this long overdue enfranchisement, which is certainly likely to be tumultuous, and probably violent. The result, in economic terms, might surprise a lot of people in a positive way, I suspect; imagine a Singapore (note, I'm speaking economically, not politically or socially) with natural resources. The only real alternative scenario is for Thailand to head further in the direction of Myanmar.

I am interested to hear a little more about your Bangkok Bank investment?

PS: As far as resignation on principle, there's an obvious precondition that remains unsatisfied...

Phil said...

I am not Thai but live in Thailand and think the Western press reports about Bangkok are neither balanced nor fair. Journalists follow the "poor good people shot by bad military" story which is simply not true! These protesters are militant and extreme; not peaceful at all. A large part of the Thai population agrees on the need for social reforms but yet has little sympathy for these rioters!
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Anonymous said...

Not entirely sure about the analogies, but I agree with the argument about the Bangkok elites.

Thailand's elites, besides their corruption, are deeply feudalistic. Deep down, they do not believe in "one person, one vote". It is actually the city elites who are coming to the realization that democracy will be an expensive proposition, because they might have to not just match, but improve on some of the social benefits that Thaksin actually provided (I deeply dislike Thaksin, but he did address some legitimate needs of the poor). Their resistance to improve the lives of the Northern poor is blatantly obvious as the current government has only grudgingly agreed to address issues such is improved universal healthcare and education and have behaved as if this were a 'concession'.

While Thailand, Malaysia, Philippines and Indonesia are each quite different in some respects, they all share a deeply entrenched feudalistic culture that cannot evolve in parallel with expectations of democratic egalitarianism.

Thailand's current social "rift" (the Bangkok elites really need to smell the coffee) is compounded by a lack of proper systems of government and profound succession uncertainty as the King (who has nurtured a cult status, though couldn't match the benefits Thaksin provided up North) does not appear to be in a position to make coherent statements.

Clearly, this is not just another Thai coup.

Comments about the current situation and anarchy being 'un-Thai' should be dismissed. Thailand is a wonderful place and in the long-term I believe has a very promising future. But everything we are witnessing here is also a reflection of Thai culture. This is also Thailand, land of smiles.


Your POF buddy said...

John - Fascinating how you tied in finance and politics in one post. Completely agree that protesters being shot by troops in the middle of Washington, D.C. would not stand.
Phil - In regards to militancy of the protesters - the escalation occurred once the troops became involved, using live rounds, as many foreign journalists can attest. Further escalation occurred once snipers assassinated a protest leader, so on and so on.

Bruno said...

Someone who hasn't lived for many years in a village in Isan, with a population 99% pro-Thaksin, should be careful before reaching any conclusion.

The truth is that Thaksin corrupted, in many ways, the Isan population, in order to access to power.

He implemented the vote buying, which is how he got elected in the first place. Thanks to him, buying votes has become the only way to get elected nowadays, even for the smallest posistions.

Of course, this has led to more corruption, because candidates go into debt to get elected. Debts which cannot be repaid with the modest salaries offered to elected representatives.

Thaksin also corrupted the minds by letting uneducated populations believe that they could get money for nothing from the government, most notably through the famous 1 million bath scheme.

As of today, Isan villagers are still thinking about the good old times of easy money. They really don't care about anything else and would probably turn democrats if this party decided tomorrow to implement a 2 million bath scheme.

But the elites, behind the democrats, are too greedy and will never give 1 bath for Isan, even for the sake of national reconciliation and peace.

Sir G said...

Hello John

you are right, of course... the red shirts have the ballot box legitimacy... and now the yellow shirts have blood on their hands... fie on them...

yet... there is another aspect to the story... and it changes the picture considerably when you think about it this way...

in Thailand the numerically small middle class -- perhaps no more than 10% of the population -- are taxed at 35% rates while the poor pay nothing at all... plus the poor get free health service... state sponsored loans for farm projects, to buy cars, etc....

the middle class sees this and is appalled... it is simply refusing to be tax-milked in order to finance govt subsidies which it sees as vote buying...

seriously... what else can the middle class do but... fight?

emigrate? where? will Australia take them?


do you see the problem? some western countries are going the same way... the US is very close to having majority of its people paying no income tax at all...

when the minority taxed the majority it was called aristocracy and was deemed bad... what do you call a system -- and is it good -- when the majority pays no tax at all and uses its power at the ballot box to tax the minority at very high rates in order to pay itself?

John Hempton said...

Sir G

You have a deep red herring - by world standards most lower-income American tax incidence is fairly high - it is payroll tax. Australian tax incidence is through income tax and a value added tax. US tax incidence is through payroll tax.

But Thai lower income tax incidence is low... that is true.

And yes - democracy sucks - it is just better than all the alternatives.


Charles said...

John, the real elephant in the room is the fact that functional democracy is not always the same thing than majority (even people's majority) rule.

Modern democracy was born in the enlightenment century, and primarily involved the precedence of REASON and MORALITY above the will of the king, not popular elections.
Efficient democracies must avoid jumping from the frying pan of a capricious and inconsistent king to the fire of a capricious and inconsistent popular majority.

The most best check and balance is through an independent and rational judicial system enforcing a strong constitution. The successful Asian countries (and some other like France !) rely more on bureaucracy than on the judiciary. It can work also, but it is the second best IMHO.

Where is Thailand in this matter, I don't know. The Thai elites are certainly not beyond reproach, but as the General de Gaulle during the 68' events "Reforms yes, Chaos no !"

John Hempton said...

Sir G - more to the point - are you suggesting that it is justified to (a) deny them a vote and (b)shoot them because they earn less than USD500 per year?


Anonymous said...

john, your financial knwoledge and insights are first rate and i always learn a lot. but your udnerstanding of mussolini and berlusconi is as good as CNBC's market analysis

John Hempton said...

The Mussolini comparison was not mine - it was common - rural populist demagogue...

It is in fact the comparison made by many of the Thai elite themselves...

As I said - I thought the better comparison was Berlusconi- a democratically elected mildly corrupt guy - who used his wealth to get elected and was hated by the elite of Milan...

There are no really good comparisons...

But the Thai themselves use the Italian comparisons...


Anonymous said...

you and others keep talking about "elites, elites" but never get around to mentioning two key points: (1) The yellow shirt movement was and is comprised mainly of middle class working people who were the ones squeezed by Thaksin's corruption, and (2) no one in the country was more elite than Thaksin, the man who started the Elite card, the man with his private jets and golf courses built on public land, etc. etc. The other thing that really irks me is all this talk of Thaksin being democratically elected. Do you not remember that his part was disbanded by the Supreme Court for electoral fraud? Do you not understand that his precinct canvassers paid 500 baht per vote and those canvessors whose precincts were at variance with the amount paid were often snuffed out by his gunmen. Then dont even get me started on the 2500 Thais Thaksin had wiped out in his war on drugs, without any trial. Some democracy. There is a reason people hate Thaksin.

Unknown said...

Protesters shot in the streets of DC has happened in this country. Look up the Veterans march in the 1930's. And shot by no less that George Patton under the command of MacArthur.

kaisergaetano said...

I believe that you misapprehended your Thai colleagues. They may believe and practice economic and other Liberalism, but when their privileged position in their own economy of scarcity is challenged, they will watch approvingly while the challenge is suppressed, however ruthlessly.
That being said they live right on the global fault line between privilege and underprivilege. Most of us blog readers live in more isolated privilege away from the fault lines. We can't easily sit in judgment of your colleagues.

Sir G said...


My comments on the US may be a red herring for all I know... (aren't US payroll taxes really social security and therefore... pension?)...

and i agree that it's hard to beat democracy as bad as it may be...

yet, i think the Thai middle class are justified in feeling that the system is rigged against them, would you not agree?

the problem is in a way of thaksin's making... (all politicians are responsible for their own downfall, are they not): he should have thrown the middle class a sop when he still had the chance. instead, he chose confrontation and he got -- a REVOLUTION. which, you will remember, is "a violent act by which one class overthrows another" -- i.e. no more parliamentary niceties and no fuss about procedure. as revolutions go, this one isn't especially bloody. yet. (let's hope it does not end like... 1649)

the talk about thaksin's corruption et al is all BS since the real issue for the middle class is taxation... this is a pity for there were very serious reasons to object to thaksin's rule: such as some 1200 "extra judicial killings" (i.e. murder perpetrated by the state) during the infamous "anti-drug campaign" (aparently a tacit shoot to kill policy), his attempts to stifle freedom of the press, etc.

but that's the way our favorite political system works, isn't it?

anyway, congratulations for having picked a topic that's guaranteed to generate a sea of comments... even if i would be more interested to hear from you about what is going on in europe...

btw... knowing thailand first hand, i have never been tempted to put any cash in her stock market... but thai real estate tends to be a good buy when you can get it at 14%+ rent yields.


Sir G said...

"Sir G - more to the point - are you suggesting that it is justified to (a) deny them a vote and (b)shoot them because they earn less than USD500 per year?"


Your reply is neither fair to me (read my initial comment again) nor, I think, relevant to the situation.

Parliamentary and ballot box procedures work when there is a certain balance of political interests and a desire among political players, however tenuous, to cooperate. They are not *moral rules, they are... practical political techniques.

Thanksin has managed to alienate a substantial part of the society to a point at which they simply refuse to cooperate. This is no longer parliamentary democracy in action: this is class warfare. I am not sure whether there is anything either right or moral or justified aboout class warfare and I cannot imagine why you would ask me that. Why do you ask me that?

John Hempton said...

Sir G

I was being unfair - but only insasmuch as some Red Shirts would see it.

There was a group who never accepted the legitimacy of Thaksin or his policies.

There is a group who never accepted the legitimacy of Obama... (do I need to say birthers?)

I am not being any more harsh on you than say a red-shirt might be.

Democracy requires some homogenisation of the population to work... you have to all buy into it...


Fungus the Photo! said...

It is clearly in Thailands interest to share the wealth more evenly as it induces competition, which the cosy fat "liberals" at present dominate. No doubt the King, once his health recovers, will agree.

The red shirts were also aided by black shirts. They occupied and obstructed the city centre. They threatened to burn it, too. That got a response. As always innocents suffer, but it is progress and both sides are due honour for their decisions of restraint.

I hope a civil war is averted.

Taksin was clearly corrupt and his involving his supporters was a calculated move. Not a statesman.

Anonymous said...

funny, so many people who so passionately supported the invasion of Iraq supported Chen Shui Bian a few years ago and are now cheering on Thaksin's red shirts - and all in the name of democracy. not funny at all really.

Anonymous said...

Is the SET a buy?
Market seems to be relatively unaffected from the current mess.
How will the King's succession proceed? How is this coup different from the many others that the country has faced?

Nemo Incognito said...

Perhaps the most absurd problem in most of these countries in SE Asia is that their tax revenue base is terrible on corporations and capital gains. Look at how little tax a company like Berlian Laju Tanker pays, or, for that matter, Berau Coal and the like.

Once you own the means of production and pay sweet-f*&k-all tax on the income and dividends its pretty damn hard to do anything else but squeeze the middle class.

On an entirely unrelated point, doesn't it seem obvious that having inheritance/estate tax is the best way to avoid entrenched elites? Even with a pretty high threshold ($30-50mm USD) you'd avoid having the kind of concentration of power that can be so destructive.

Ian Whitchurch said...

The other elephant in the room is the succession.

Can anyone give me any evidence of the Crown Prince having the temperment and morality to do a good job as King on the death of his father ?

Ian Whitchurch said...

Sir G said,

Thanksin has managed to alienate a substantial part of the society to a point at which they simply refuse to cooperate. This is no longer parliamentary democracy in action: this is class warfare. I am not sure whether there is anything either right or moral or justified aboout class warfare and I cannot imagine why you would ask me that. Why do you ask me that?

Now, lets replace Thaksin with 'the Bangkok elite' and you'll see the stakes the Palace is playing for.

I mean, if you can vote for any candidate you want, but they'll be fired if they oppose the established interests, then, well, I guess we need to talk 1776 then ?

Jonathan said...

Good article, which from my limited understanding makes sense. Certainly the difference between what happened to the Yellow and Red shirts is striking.

We seem to now have a situation where democracy has taken root in a number of countries - but it is a winner takes all democracy with the majority imposing their will on the minority - rather than a liberal democracy (in the best sense of the word), where both the winners and losers are subject to higher constitutional and legal restraints.

Incidentally, there was a good article in the Guardian the other day talking about the recent election in Ethiopia (97% for the winning party) and the tendency in Africa for one party democracies. No clear reason for this was given - possibly a cultural dislike of being associated with a loser - but again it was a reminder of the way that just having elections does not necessarily make a country democratic.

SG said...

hello John

since we all know you are short stantander... or was it bbva... or was it... both... what do you make of this news:

"Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest bank, has been unable to renew about $1 billion of short-term funding, the Wall Street Journal reported May 26. The bank still has substantial European-based funding and deposits and about $9 billion in U.S. commercial paper, the newspaper said. A spokesman for BBVA in Madrid, who asked not to be identified because of bank policy, declined to comment. "

Taffy said...

hey co !!!!!!!!!!!!!!
we may withraw our ambassadors from Aussie and N.Zlnd!!!!!!!
becouse that Aussia and N.Zlnd have no their own people elected Head of States but have attended Governors from Monarch London as though autonomous regions!!!!!!so I don't think the Monarch can permit any openning embassies in N.Irlnd,Scotland,Wales to us .!!!!

Cymru bob amser yn annibylnnol !
meltligedig frenhiniaeth !

John Hempton said...

I don't much want to comment on the BBVA news. Sort of a policy of the blog not to pour gasoline on a fire if not needed.

But obviously if BBVA has trouble raising money then Spain has trouble.

For the record I remain short both BBVA and Santander.


jupiter said...

Taffy.. my buddy,a republican Welshman like me..

like a monarch confederation .

it has few trumpcards in well known names ,which are :
2 intntnl Banks,
2 intntnl Mining Companies,
2 intntnl Oil of them has major Queen stake..
the rests are not important.

llwyddiant trwy undod .

Michael R said...

The United States?

Something like that you mean?

jupiter said...

Michael R :
note from an American Magazine ...
Texas Gov.Rick Peary raised eyebrows with comments he made at a tea-party rally in tax day 2009,saying Washington needed to be more attractive to states "demands",he asserted...
..Texas is a unique place,when we came into the union in 1845,one of the issue was that we would be able to leave if we decide to do that...

jonny said...

John, you're a talented writer and clearly very bright. But your assessment of Thai politics is...whoa. The analogies are..?

Functioning democratic systems have checks & balances to ensure that a politician cannot simply BUY omnipotence. I'm not talking about vote-buying (part and parcel of every democratic system; even if Thaksin's $28,000/village bloc vote isn't as subtle as US candidates promising industries X or union workers Y or ensuring pork prior to a re-election campaign). I'm talking about Thaksin simply BUYING up MPs at auction - Thaksin had BOUGHT the majority of Thailand's 'Congress', paying B100,000,000 per MP. And the BUYING didn't stop once he was in power.

Thaksin's oft-vaunted 'democratic mandate' was never legitimate. And once he'd purchased it (with illegitimately-acquired wealth, it's worth noting), he set about despatching pesky democratic restrictions which would otherwise protect Thailand from his unbridled ambition.

In the US, the Supreme Court stands on the last line of defence; protecting the Constitution from being used as toilet paper. Thaksin simply BOUGHT the courts. TRT was thus protected from judicial review; along with immunity for himself, of course (as evidenced by his 8-7 acquittal by the Constitutional Court). I'm not sure you could get the US Supreme Court or our High Court to accept a defence argument where you claim the billions of shares discovered in your servants' accounts were due to "innocent mistakes and, in any case, everyone does it" (oh, rest assured the obvious contradiction was noted by all & sundry).

Furious at the case dragging out when he'd already paid for his acquittal, Thaksin was quoted by saying he would simply "change the law" if convicted. He wasn't talking out of his hat. He had a huge 'democratic' mandate which enabled frequent edits of the constitution.

Thaksin had bought or bullied every constitutional 'safeguard'. Every democratic process intended to provide a check on power had been abrogated - the Constitutional and Administrative Courts, the Office of the Auditor-General, the National Counter Corruption Commission, the National Human Rights Commission...all either owned by, or otherwise negated, by Thaksin and his cronies.

Whilst it's horribly awkward to compare Thailand's constitutional monarchy with the US federal constitutional republic (the US executive branch would need to be hereditary, for a start), a more 'correct' analogy would be a Tea Party government which, having purchased a super-majority in both the House of Reps and the Senate as well as control over the Supreme Court, had set about rewriting the US Constitution (as well as enacting a host of other bureaucratic 'adjustments') to create a one-party republic with the Majority Leader replacing the President as Head of State. Vote Emperor Thaksin on your single-candidate ballot!

In the US, the President is CiC of the Armed Forces. In Thailand, the King is Head of State and CiC. With democracy beaten to a pulp, someone pressed CTRL-ALT-DEL to restart the game. And Royal Thai Army tanks rolled through the streets to give Thailand another chance at self-determination.

Thaksin's purchased MPs won a tight election; the PAD hijacked the airport. No longer under Thaksin's thumb, the Constitutional Court finally banned the TRT. The Democrats formed a (very) unholy alliance with Newin, and a parliamentary vote (of the kind electing PMs Gillard & Cameron) gifted PM Abhisit to Thailand.

Billionaire egomaniacs run, but they don't hide - not whilst the fight can still be won. And there is no dirtier fighter than Thaksin. Enter violence, arson and terror.

Your assessment is at odds with your clear intelligence. The confliction between the two is...whoa!?

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