August 13, 2014 01:00 By Tulsathit Taptim
Say whatever you like about George Soros, but his preferred analogy on the near-collapse of the US economy is spot on. It compares the US economic system prior to the late 2000s meltdown to an oil tanker. The big ship once had watertight compartments to p
Loose regulations or blatant deregulation tempted people at the very top of the US financial sector to gamble heavily with other people’s money, or simply cheat. Rules prescribing extreme prudence on how public savings were “invested” became more and more lax, giving rise to toxic derivatives and all their disastrous siblings. Oil was allowed to slosh around freely, and the rest is history.
Thailand’s politics has been similar to that oil tanker in many ways. The division of power and constitutional deterrence of linkages between politics and business were the necessary compartmentalisation, meant to ensure that if one key part of the system broke down, the entire “ship” would still stay afloat. The idea was that if the executive branch was corrupt, we would still have the legislature, and even if the legislature was dysfunctional, we would still have the judiciary.
And there was the business sector, which was not supposed to get involved in politics, simply because if politics was in turmoil, the economy would still be able to survive. There was the bureaucracy that, clumsy as it was, should have resisted political influence and acted like a watchdog. Then there was the military, which was not supposed to be dragged into the political and economic pictures for obvious reasons.
As we already know, all the watertight compartments of Thailand’s system have been all but removed. Either corruption led to the easing of the rules or vice versa. Like the regulators in the US who turned a blind eye to the birth of weird financial instruments and carefree lending practices, Thailand’s standards on corruption became weaker and weaker. Bad elements sloshed from one key institution to another, threatening the entire system.
The lines demarcating the practices of lending and investing got blurry in the United States. The lines on corruption got blurry in Thailand, and as a result the lines on punishing political crooks and politicising graft scandals became messy, too. Accountability was washed away, because just about everyone could blame everything on something else and did not need to be responsible for anything. The United States ended up with the biggest economic bubble in its history, and Thailand its biggest political turmoil.
The most outstanding similarity with America, however, is that a badly corrupt system became “Too big to fail”, simply because practically everyone was linked together in an unholy chain. If banks went under in the United States, the entire economy would go down, too, and those standing to suffer most would be the underprivileged. In Thailand months ago, it was argued that if the government had to bow out, mega-projects would be killed and so would the concept of democracy as a whole. The well-being of the executive branch had come to overshadow the well-being of the overall system, just as a corrupted Wall Street had held the whole of the US economy hostage.
Here’s the big question: What should we do now, considering that we have already tried the idea of making things watertight? The 1997 Constitution sought to compartmentalise Thailand’s political and business systems. But “geniuses” found a way to get around the asset declaration rules, for example. The “independent agencies” could not handle simple cases of doctored declarations and tax evasions, and were accused of siding with one camp at one time and the other camp at another.
And the “toxicity” spread beyond Thai borders, just as half the world was holding rotten American CDOs (Collateralised Debt Obligations). Thailand’s terminally ill system somehow came to be linked strongly with foreign interests, be it political or business. And just as Wall Street advocates claimed they were defending the merits of the free market, capitalism, financial leverage and so forth, supporters of the seriously ill Thai system cited one word – “democracy”.
Now we see how dangerous General Prayuth Chan-ocha’s undertaking is. His coup ended a very bad episode of decompartmentalisation, but his National Council for Peace and Order risks creating a new one. That is why he faces an outcry every time there are signs the NCPO is consolidating its power. At the end of the day, the oil tanker needs watertight sections independent of one another.
Another disheartening similarity beckons, and it will take every ounce of Thai determination to prevent it from occurring. The financial “wizards” who caused the global misery still hold sway in America, fighting off protests, deafening calls for reform and President Barack Obama’s “change” agenda, which is turning out to be lukewarm.
Protests. Deafening calls for reform. A “change” agenda. Do they sound familiar?