The past estimates on the evolution of income inequality in Thailand have been misleading. Thailand remains one of the most unequal economies in the world, and the situation has not been improving as swiftly as we have previously been told: it just stopped getting worse.
By combining data from household surveys, tax records and national accounts, a new study done by the World Inequality Lab shows that the richest 10% Thai citizens received more than half of the national income at least since 2001. The top 1% alone captured 20% of the national income in 2016, while only 13% accrued to the bottom 50%.
This means that the poorest half of the Thai population would need to work one month to earn the daily income of the top 10% — and four full months for the same daily income as the top 1%. Thailand is among a small group of economies that make up “the world inequality frontier”. The level of income inequality is just comparable to the ones observed in Brazil and India, while significantly worse than in Russia, the US, or China.
Thai economic inequality is distinctively geographical. In 2016, the richest 10% provinces’ average gross provincial product per capita were about eight times higher than that of the poorest 50%. The corresponding figure is only two times when looking at disparities between American states, and does not exceed three times in Brazil. Bangkok concentrates less than 15% of the Thai population today, but more than 30% of the national production.
These inequalities are historical fruits of a long process of uneven development, which spanned from the 1950s until the 1990s, during which successive military governments focused on distributing the gains of economic growth to a small group of economic and political elites.
The policies implemented by democratically elected governments of the 2000s put an end to this concentration of economic growth by the centre. Interventions on agricultural prices and microcredit schemes implemented by the Thai Rak Thai Party under tycoon-turn-politician Thaksin Shinawatra were successful at fostering growth in the North and the Northeast, while universal healthcare and minimum wage hikes contributed to significantly reducing poverty and labour earnings gaps. These policies have, however, been largely insufficient to tackle Thailand’s inequality legacy: between 2001 and 2016, the share of national income accruing to top 10% earners only decreased from 56% to 53%.
This failure of previous governments to truly enhance inclusive growth is two-sided. Firstly, much higher public investments are still required in poorer provinces for a genuine convergence process to occur: regional inequalities decreased between 2001 and 2008, but have remained stable at a very high level since then. Secondly, and more importantly, there is a need to combine social policies with substantial improvements in the progressiveness of the taxation system. This involves addressing the extreme concentration of capital income and wealth, especially among the very rich, which have been essentially left untouched until today and are a key source of inequality in Thailand. High top marginal income tax rates, progressive inheritance tax rates and wealth taxes are tools which have historically been proven to be efficient at both curbing inequality and collecting additional government revenue.
The reduction of regional inequality and the stabilisation of income inequality can largely be attributed to the party politics that followed the 1997 constitution. The policies implemented under Thaksin’s tenure — and later, under Yingluck Shinawatra — represent a successful politicisation of inequality which allowed them to mobilise the poor in elections. Between 2001 and 2016, the average income of the bottom 50% more than doubled, while that of the middle class and the richest 10% grew by less than 50%.
As such, the middle class and the elites that benefited most from the pre-1997 economic boom inherently became politically “marginalised”. The term “populism” was used to attack the party’s focus on pro-poor policies. To them, these moves used to “buy votes” were taken as threats against economic efficiency — an ideology held dear by the champions of neoliberalism which were not only the middle and upper classes, but also the technocrats.
As a result, there have been rising class cleavages in voting behaviour and political participation. If it was not clear yet in 2001, these divides became self-evident by 2007. According to surveys compiled by the Comparative Study of Electoral Systems, the richest 10% became less and less likely to vote for a Thaksin-linked party (People’s Power Party in 2007, Pheu Thai in 2011), relative to the rest of the population. The same can be observed for individuals with tertiary education.
But it would be these parties that would win general elections. It is only natural then that the elites would try to escape the loss of relative political and economic power through the 2006 and 2014 coups d’état, which were achieved with the consent of the established middle class amid a drop in support for democracy, falling from around 80% to just 50% in 2014 — and an equal rise in support for authoritarianism.
Is the victory of the established middle class and elites coming to an end? The military is trying very hard to not make that happen. It is understood that the Thai Raksa Chart’s move to nominate Princess Ubolratana, if not aborted, would have trumped any attempt by the military to retain post-election power. It also represents how disconnected the concerns of those that support the nomination are to democratic values. In this respect, the foundations of democracy in Thailand remain weak.
It is still difficult to predict Thailand’s post-election political economic trajectory. The outcome of the 2019 election suggests that the 2014 coup and the current military regime have — to an extent — de-politicised inequality, as the concerns now have turned rightfully on the egregious moves by the military to retain non-democratic power. This is evident in the fierce competition between the two political camps, the pro-regime and the anti-military factions. It will become clear in May after the coronation which side can take the helm.
We have gone backwards. And what is certain is that — in order to strengthen democratic institutions — the primary concern of voters should not only be economic. Instead, it’s necessary that they give attention to party platforms regarding constitutional reforms and transformation of the military that see a curbing of its power.