If you check the international news about Thailand, you may see that there are many protesting in the streets again. The main protests started against a law that would grant amnesty to all political leaders involved in corruption or other crimes in the last 9 years. While the Senate voted unanimously to reject this bill, I have learned that in Thailand the Senate does not have any real authority to pass or fail a bill. This power is all with the parliament. The Senate should be made of respected persons with wisdom and experience. The parliament may head their advice or not. Thus while the Senate has rejected the bill, the parliament may still bring the bill to a vote in the next 180 days and pass it. Thus many are still protesting as the issue is not really dead. Another contested bill passed quickly and quietly while attention was focused on this protest. This bill changes the constitution to allow the leadership to negotiate agreements (such as Free Trade Agreements) on behalf of the nation without review and approval by the parliament (as was previously required). This would allow leaders to negotiate and possibly sell or trade national assets for largely personal benefits behind closed doors.
Getting back to the farmers, for the last few years, the government has had policies to buy rice at a price far above the market price. (Above even FLO fair trade minimum prices). Off-season rice that might normally sell for around 10 Baht/ kg, has been guaranteed at 14-15 Baht/ kg. Thai Jasmine paddy that would sell for around 13 baht/ kg has been guaranteed at around 18-19 Baht/kg. While these high prices do not speak of the conditions involved, which include a wait of normally 1 month to receive funds after the rice is sold and often involve non-transparent and at worst dishonest weighing and grading, they still mean farmers have been earning more than they were and more than they would in real market conditions. While this may seem to be good at least at the surface, there are more serious implications and side-effects. The high guaranteed prices have encouraged farmers to grow as much rice as they can and with less care, focusing on yield without concern for the quality of the crops. This means farmers are often spending more to produce their rice (on inputs and other costs) as they can expect to still make some profit. This in many cases has been putting more demand on the soil and ecology, meaning essentially many farmers are depleting their natural capital (more quickly) for an immediate gain. Even in some cases, the increased costs outweigh the increased income, resulting in a net financial loss.
Nonetheless, most rice farmers and other farmers have been earning more money in the last years on average. This form of subsidy has been extremely expensive for the Thai government. The rice they buy at high prices must be sold at low prices in the normal markets. They have kept the rice for long periods, waiting and hoping for market price increases that have not happened, meanwhile they have losses from pests and quality issues with the rice stored. In fact, if the scheme stored the rice in paddy form, not requiring the mill the process the paddy right away, quality loss could be significantly reduced. While recent governments have done many populist policies, this one has helped most quickly deplete government coffers to the point of bankruptcy. It is a policy that is clearly not sustainable and cannot continue much longer if at all.
At present, the policy is already looking shaky. Farmers who sold paddy to the government scheme a couple months ago, including my mother in law, have not yet received their payment as the government has been experiencing cash flow problems. Most farmers buy their farm inputs on credit expecting to pay off these loans at harvest and to get funds to start a new cropping season. Interest rates are normally 2-3 % per month. The current delay in payment is already pressuring farmers paying interest on their existing loans, while they need to find funds (borrow more money) to get inputs to start the next season. While the funds for this last crop may come through soon enough from the government, even if they do this time, will they be there next time?
The precariousness of the situation is more than this. For three years now farmers are used to artificially high prices and this increase in income. Along with this, the recent government has implemented a number of policies to encourage spending and borrowing. The most notable may be the policy last year to allow buyers of their first automobile or pick up truck to purchase it without paying any of the normal tax. As the normal tax is upwards of 100,000 Baht (about 3000 USD), this would seem like a real savings. (Increased demand meant that car dealerships and companies could increase their returns while buyers might not pay that much less). In any case this government offer greatly increased car sales. Automobiles are normally the most expensive purchases in Thailand. An inexpensive car starts around 600,000 Baht (20,000 USD). In a rural or semi-rural area it is quite possible to buy a home with some land for this cost. Automobiles however bring additional costs: fuel, insurance, repairs, while their value decreases over time. Land may have costs, but normally increases in value and may bring income from farming, rent, shop location, etc. So while this is not the only debt, many farmers, wanting to experience the luxury of a car and for a few years having enough return to make payments now are likely to wake up to see that there is no way they can afford the car they have. As the high price guarantee has encouraged unsustainable farming practices, a decrease from 14 Baht to 10 Baht per kg, is not a decrease of 28% in income, but probably 80% or more. Now farmers might be spending 9 baht per kg on production and earning 5 Baht per kg. At 10 bath they would be earning only 1 Baht per kg. The reality is there are farmers who are spending more than market value on production. This means not just a reduction, but a loss from selling at market price.
So as you can see, we are sitting in a house of cards. That is for most everyone who has become addicted to these artificial subsidies and is not paying attention to real costs and efficient quality production. This is pretty much the direct opposite of the philosophy and teaching of the Self-Sufficiency Economy concept developed by His Majesty the King of Thailand.
What is likely to happen now? As I see it the cards will soon fall. Farmers will be finding themselves deeply in debt without a way to pay it. Cars will be repossessed. Farmers will increasingly have to sell their land. The bankrupt government will be able to do little, but it too will face its collectors. These collectors like the World Bank may demand as they usually do, increasing privatization and opening up of assets to sell. With the new negotiation law this will be easier to get done. Land may be opened to foreign sale. Thai land values are now quite low compared to other places that are open to foreign ownership. Thai land is very productive agriculturally. Thailand is quite attractive as a tourist/ living destination. Currently productive land is very scarce. 2 billion Chinese, climate change reducing yields, soil depletion, water scarcity, wealthy countries around the Persian Gulf with much money but very little agricultural potential, increasing demand for non-food agriculture crops (rubber, palm oil, paper), and luxury foods (coffee, cacao, wine, meat). All of these factors mean good productive land is worth much more than current Thai land prices in an open market. For the Thai mega-rich, such an opening of the economy would make them far richer. However for most Thais, Thailand will become unaffordable. Where Thailand skillfully avoided political colonization, this would probably bring about effective economic colonization. Very few of those who do not own land will be able to buy it in such a future. The ASEAN economic community could mean that labor could come in quite freely. We could have foreign economic colonies throughout Thailand.
Reflecting upon this likely possibility, I have wondered was this the intention of the political leadership? To create this dependency and vulnerability, to deplete the government coffers and then pull the rug? While it does seem like a great way for the mega-wealthy to increase the value of their holdings exponentially, I do not view politicians this negatively. I think most politicians are governed by a mix of wanting to do good for their country and self-interest. Rice farmers are a key and generally poor group of Thai citizens. By paying artificially high prices for Thai paddy, this looks good in that it increases the incomes of many poor. It also looks good for self-interest as it is effectively a way to buy or keep votes as are many populist policies. So I think this is probably the motivation not a deeper conspiracy.
Talking with my wife, Yoke, she is now more worried about the desperation that may come with this bubble bursting and how that may affect our communities and safety. It does seem quite possible that many bankrupt farmers and others in economic stress could increase violence and theft.
Is there a way to avert this possible future? I think the political battle is one to be fought, to fight to keep leadership accountable and to make governance and negotiations more transparent and open. But for the economic house of cards, I see little possibility that it will not fall. Those of us who are practicing organic farming, who have fair trade partnerships, who are practicing community self-reliance, we are less vulnerable to this change as we are generally producing high quality products that are linked to special markets. We also are less dependent upon outside inputs and we produce many things that we consume ourselves and in our communities. So while I think many farmers will struggle in the near future, we may be able to help some of them get back on their feet. The expected fall out may be a wake up call for some. If they reflect and see that production that is so highly reliant upon outside inputs, artificial prices, that does not give sufficient care to protecting one’s natural capital and produces little consumed by one’s family or in the community, is extremely vulnerable, they may work to change course to practice sustainable ecological methods, and greater self-reliance.
I also think for those of us already on this course, our best protection from the potential threat of struggling farmers and citizens stealing or threatening us, is having lots of healthy food planted in our gardens and lands. It is the long tradition of Thais to ask visitors and neighbors if they have eaten and offer to share one’s bounty. If we have ample to eat and give, we can make merit by sharing our bounty. We can also share our knowledge and seeds and help those who are struggling to develop their own living food banks. I think as long as people are not hungry we will have peace. And if we feed ourselves from sharing with others in our community, I think we will have more peace and respect then if we feed ourselves from spending money in
the markets.
By Michael B. Commons, 18 November 2013
