Subsidies are addictive and do more harm than good
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It has been two weeks since rubber farmers took to the streets with demands for help from the government. They have blocked roads in several southern provinces, and blocked train services to the South. Their actions may be stepped up as they attempt to fo
Have they committed a crime? They are citizens of a country where everybody, except taxpayers it seems, has the right to stage a rally. Most people in the agricultural sector of Thailand are now used to receiving subsidies of some kind, as governments, and especially this current one, act as if money is falling from the sky and is free to all (except taxpayers).
During the Democrat-led government, I remember the handout of Bt2,000 cheques to everyone earning under Bt15,000 a month. At first, the scheme was aimed at workers in a handful of private companies. Later, it was extended to cover some low-paid state officers. Then, rice farmers – who feed us – started to benefit from the pool of “free money”.
Rubber farmers are agitated by the government’s rice price-pledging scheme, particularly as global rubber demand has slumped and caused the price to fall below Bt90 per kilo. There were no complaints when the price was as high as Bt120, as the booming auto industry sparked high demand for rubber used in tyre production.
The rice scheme is benefiting about 3 million households, mostly in the North and Northeast, the political strongholds of the Pheu Thai government. The rubber farmers, mostly living in the South, ignore the fact that they can sell rubber every day while most rice farmers have only one harvest a year.
The rice scheme is poorly structured and is expected to cost about Bt100 billion a year in taxpayers’ money. The sum is huge given the zero subsidies to rubber farmers in recent years. The government’s agreement to provide fertiliser subsidies to rubber farmers is estimated to cost about one tenth of the rice scheme. That explains why the rubber farmers have stepped up their demand; they have agreed to the fertiliser subsidy but also want price intervention, which surely will cost more. Either that or they will close main roads and major ports in the South. They are ready to take businesses as hostages.
They are acting like other farmers who grow corn, tapioca or pineapple. Blocking roads – sometimes dumping low-priced corn or pineapple on the tarmac – has been a successful tactic in winning government attention.
Some consumers have also taken to the streets recently ahead of the hike in cooking gas price. They ignore the fact that they are consuming gas at a price three times cheaper than people in most other countries. Some of the gas we consume comes from the Gulf of Thailand, but should we use up all our reserves just because it’s free? What about our children?
Factory workers also resort to similar strategies, but with few in number their voice is not that loud. Office workers? Though they might want toprotest for fairer pay and conditions, they cannot amass much support and most don’t want to cause trouble and risk losing their job. Importantly, they are not subsidy addicts.
Like nicotine, subsidies are addictive, and the addicts want more and more. No matter how good in essence such policies are at the start, along the way they can cause more harm than good. And the harm can be direct or indirect.
This reminds me of the great healthcare benefits that developed countries provide to their citizens. To the people, such cover is like a gift from heaven, given the exorbitant insurance premiums they face if they seek insurance on an individual basis. Now, such social welfare policies are hurting the public finances in some of the developed economies; to keep their finances in balance, they are slashing jobs and cutting spending. That dampens confidence and makes these countries seem unattractive.
All countries need to learn more from their mistakes. We learn that subsidies are no good. Policies are introduced to amend that, but then amendments are necessary due to the backlash.
The US is cutting its health expenses in the “Obamacare” scheme, which requires companies with 50 full-time employees to provide insurance packages to workers. The policy seems good, to help reduce the wealth gap and strengthen the deficit-laden economy. Yet, some American companies are now cutting jobs, to keep the full-time workforce below the threshold. Now, some 57 per cent of all companies offer insurance packages (introduced after the Second World War, to attract workers) to employees.
More needs to be done to ensure that citizens of all countries are happy. But first, governments need to admit that free gifts are too addictive. What’s more important is helping people learn to stand on their own feet.
