InAsia
Insights and Analysis
A Common Challenge: Geography and Inequality in Thailand and America
June 19, 2019
Economic inequality has become a major roadblock in Thailand’s path to prosperity and democracy. The massive development gap between the prosperous central and eastern seaboards and outlying agricultural regions has been a source of political division and unmet economic potential for decades. In Thailand’s northeast, the 20 provinces commonly known as Isan, home to a third of the nation’s population, have for generations been ground zero for this daunting national challenge.
Bangkok is thriving as Thailand reaches for high-income status.
Thailand is not alone in this problem. As an upper-middle-income country, it is confronting circumstances that often come with growing national wealth: rising production costs that discourage investors, an aging workforce, outdated infrastructure, and growing inequality. Rising incomes have made many people better off, but rising wages have made Thailand less competitive in export-oriented manufacturing. Thailand’s push to compete in higher-value-added sectors has led to the concentration of infrastructure investment in coastal areas and an education system that prioritizes high-performing schools, especially in technology and science, instead of raising the standards of basic universal education. For Thailand’s journey towards high-income status, the northeast is often seen as a burden, exacerbating unfair stereotypes and political divisions.
Isan, home to roughly eight million farmers, is often seen as an economic and political burden.
There is another country (that I know well) where regional disparities and growing inequality have become a central domestic challenge and a source of political discord. Agricultural heartlands, far from coastal urban centers, have been in long-term relative decline. Unable to keep up with the rapid pace of economic and social change, these agricultural regions have seen their young people and many of their most capable citizens leave for a brighter future. A single country, with two divergent regions—a heartland frustrated by stagnant or declining incomes and a growing sense of vulnerability, and more prosperous coastal regions that are increasingly disconnected from the “fly-over” regions in the heartland. The result is a deeply divided country, with increasingly tumultuous politics.
The country I’m describing is, of course, the United States, and its similarities to Thailand and Thai politics are striking. In the U.S., working-class family incomes have been stagnant for decades, and only recently recovered from the 2008 financial crisis. Wealth has become increasingly concentrated in coastal cities, as “rust belt” states like Michigan and Ohio and agricultural states like Nebraska and Mississippi have fallen further behind. In 2015, for example, the average income of the five wealthiest American states—all northeastern, coastal states—was 70 percent more than the five poorest—all rural, agricultural states. In 1980, it was just 46 percent. Social mobility in the U.S. has been in decline as well. In The Fading American Dream, Chetty et al. cite statistics showing that the percentage of offspring with higher incomes than their parents has been in steady decline since the 1950s.
Lagging regions and growing inequality are confronting Thailand and the United States with many of the same policy challenges. I’m currently reading The Forgotten Americans: An Economic Agenda for a Divided Nation, by the Brookings Institution’s Elizabeth Sawhill. Concerned by growing political divisions, Sawhill has sought to better understand the situation of working- and middle-class families in America’s rural and midwestern heartlands. “Too many Americans,” she argues, “feel they have been left behind by an economy undergoing rapid change. And the lack of well-paid jobs is at the heart of that problem.” She documents this widening gap in indicators such as falling life expectancy, declining workforce participation, and the spread of single-parent households. What to do about it, and particularly the role of government, has been at the heart of America’s divided politics, and was a major factor in the 2016 U.S. elections. Sawhill proposes policies and programs that align with the culture and values of these regions, including improved training and education, tax credits to increase wages, and a social safety net that incentivizes education and healthy families.
Raising livestock in Isan, home to a third of Thailand’s population.
These debates in the United States have clear parallels in Thailand. The Asia Foundation’s newly released study, Thailand’s Inequality: Myths and Realities of Isan, attempts to move beyond the antagonisms roiling contemporary Thai politics to understand the real-life challenges that people in this region are facing. (For an overview of the report, check out the most recent post by my colleague Dr. Rattana Lao.) For example, most of the roughly eight million farmers in Isan still earn their livelihoods from unirrigated land with poor soil. With unpredictable rainfall and depressed crop prices becoming the norm, farming families in Isan are falling deeply into debt. By our estimate, 88 percent of households in Isan are in debt by an average of 75 percent of their annual income.
The study also examines how people view government programs, and how much impact these programs have actually had on reducing the vulnerability of this disadvantaged population. More than any other segment of Thailand’s population, the people of Isan must rely on government programs to survive. Over the past 15 years, successive administrations have introduced wide-ranging programs and policies to improve the lives of those who are not benefiting from Thailand’s prosperity, and by some measures, Thailand has been moderately successful in reducing inequality. From 1990 to 2014, income inequality actually declined by 38 percent, and Thailand’s 2017 Gini Coefficient of 36.5 puts it in the middle of the pack of the Association of Southeast Asian Nations.
But behind these numbers, the Thai government also faces significant trade-offs. Many experts point to Thailand’s declining economic growth as the nation’s central challenge, arguing that public policies and investments should focus on Thailand’s more productive sectors and regions to help the Kingdom emerge from its looming “middle-income trap.” Policy debates often deploy the politically charged term “populism” to criticize government programs for people in lagging regions, implying that their purpose is to buy votes. This oversimplification distracts from the real issue: how to integrate lagging regions into the national economy so the whole country benefits.
A building burned during political street protests in Bangkok.
The biggest consequence of regional disparities in Thailand has been enduring political instability. For the past 15 years, Thai politics have been buffeted—and, indeed, transformed—by bitter partisan conflicts between forces representing the interests of lagging peripheral regions and those representing political constituencies centered in Bangkok, including the public sector and the military. Thailand’s recent political struggles have had a detrimental impact on the whole country. If Thailand is going to advance to high-income status in the coming decades, it must resolve the problems caused by regional disparity.
As I argued in my last post, Thai politics may finally be moving toward a more forward-looking debate on inequality. In the 2019 election, nearly all political parties had planks in their platforms addressing regional disparities, and they all proposed initiatives to improve poorer people’s livelihoods and expand the social safety net. There is clearly a growing political consensus that policies and programs to better integrate Isan into Thailand’s economy are a legitimate use of government resources.
The experiences of both Thailand and the United States show that the problem of lagging regions and inequality, if unaddressed, will sow the seeds of political division and turbulent partisan politics. And that’s not good for any country, especially one trying to escape the “middle-income trap.” In Thailand, the best-case scenario for all Thais is to ensure that Isan becomes a productive and prosperous region that can contribute to Thailand’s progress towards high-income status and lay to rest the instability and divisions of the past.
Perhaps the U.S. and Thailand are on a similar journey.
Thomas Parks is The Asia Foundation’s country representative in Thailand. He can be reached at [email protected]. The views and opinions expressed here are those of the author, not those of The Asia Foundation.
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Great and thoughtful blog, Tom. Regarding the indebtedness, Cambodia are facing similar issues as Isan people, about 2/3 of Cambodian population are in debt — majority of loans are non-investment loan, and with high interest, it easily to slip people into poverty. Poor or almost lack of ineffective social protection system — easily trapped people debt as they need to addressing the surviving needs including spending for health treatment of their loved one. One solution for debt payment is taking risk for labor migration.