Demand-Side Populist Policies (DSPPs), Futile Economists, and Self-Interested Politicians

DSPPs have played a big part in Thai politics in the last two decades. Thaksin Shinawatra and his colleagues from the Thai Rak Thai party (TRT), amidst the campaign for their first general election in 2001, are allegedly the first who escalated the role of DSPPs in Thai politics. The government designed such policies—Debt Moratoriums (Pak Chamra Nee), Village Funds (Kong Tun Moo Ban), Generosity Programs (Eua Arthorn) for taxis, houses, loans, and insurance, and People's Bank (Thanakarn Prachachon)—to stimulate investments of low-income people who were also called “the grassroots” (Anek Laothamatas Reference Laothamatas2006). Some of them were farmers, some were small business entrepreneurs, and some were wage workers. Different in professions, most of them shared the characteristic of being debt-stricken. Although aiming mainly at enhancing investment, such policies could relieve some debt burdens and encourage consumption. Even though the relationship between a TRT landslide victory in 2001 and their policy proposals was not decisive (McCargo and Pathamanand Reference McCargo and Ukrit2005: 89-93), Thaksin's populism arrived in Thailand after several decades of export-oriented and business-focused development strategy (Pasuk Phongpaichit and Baker Reference Phongpaichit and Baker2008).

The Thaksin administration invented more DSPPs such as the SML village fund, Million Cows (Wua Laan Tua), and Asset Capitalisation (Plang Sinsup Pen Tun). These policies helped keep him in a full office term from 2001 to 2005 and later handed him a landslide victory in his run for a second term in 2005. Afterward, other political parties usually had their own sets of DSPPs for their general election campaigns, deemed necessary for gaining popularity. The People's Power Party (PPP), following its predecessor, the TRT, adopted almost all of the TRT's policies with some minor alterations. The Pheu Thai Party (PT), the reincarnation of the TRT and the PPP, implemented some controversial policies such as the Rice-Pledging Scheme and the First Car Policy. However, it also kept the TRT legacy alive by keeping SML Village Funds in place. As a result, the DSPPs played a significant part in the PPP's victory in the 2007 general election and the PT's success in 2014.

Even the governments that came to power without winning an election also employed DSPPs to gain popularity and hold onto their political power. The year-end tax break measures of the Prayuth administration mentioned in the first section are an example. In our opinion, the aims of such measures were twofold. First, the government expected that they would boost the figures of economic growth. The higher GDP growth would imply a better economic performance managed by the government. Second, the government intentionally labeled them as its new year gifts to the Thai people because it expected the citizens to express their gratitude in votes. Both aims ensured the popularity of the government.Footnote ² In addition, the Prayuth administration co-opted many policies, such as tax cuts and subsidies to farmers, from the Yingluck administration (Hookway Reference Hookway2014). These policies were a part of the junta's campaign “Returning the Happiness to Thailand.” The 2000-baht cheques to low-income people (Cheque Chuay Chart) during the Abhisit administration in 2009 were another example. The official reason behind this policy was to help people financially during the world economic recession. However, the government enacted this policy amid political turmoil to earn support from urban lower-middle-income taxpayers and cool down the red-shirt mob (MGROnline 2009).

DSPPs, however, did not always yield positive political outcomes. The People's Alliance for Democracy (PAD), led by the media tycoon Sondhi Limthongkul, often criticised the DSPPs at the protest sites before the 2006 coup. Later, the Council of National Security, led by the Royal Thai Army commander-in-chief, Sonthi Boonyaratgalin, ousted Thaksin from office in 2006. The coup was justified using conflicts of interest and corruption regarding the DSPPs, among other reasons. Not very much different, people also criticised the Rice-Pledging Scheme and the first-car policy initiated by the Yingluck administration on the stages of the People's Democratic Reform Committee (PDRC) rallies from 2013 to 2014 (Fuller Reference Fuller2013). The PDRC movement, closing many voting stations in many areas around the country, paved the way for the military coup in 2014. The National Council of Peace and Order, led by General Prayuth Chan-O-Cha, who then became the prime minister, ousted Yingluck and assumed power. Worse, Boonsong Teriyapirom, the Minister of Commerce in the Yingluck administration, was sentenced to 48 years in jail due to the scandal in the Rice-Pledging Scheme in 2017. The Supreme Court also convicted Yingluck for failing to stop Boonsong and sentenced her to five years in jail. Yingluck had fled the country before the verdict, but Boonsong is currently in prison.

Economists and their criticisms played a significant role in the downfall of the politicians from the Thaksin clan. Roo Tun Thaksin (Jermsak Pinthong Reference Pinthong2004a, Jermsak Pinthong Reference Pinthong2004b), a book series whose main contribution was to criticise Thaksin, was a best-selling collection of essays by several Thai academics. Among its several topics, the inefficiency of DSPPs was undoubtedly one. The book was undeniably powerful in kicking off the anti-Thaksin movement among middle-class urban people. Jermsak Pinthong, a former faculty member of the Faculty of Economics, Thammasat University, who was a senator at the time, edited the book. Prominent economists from the Thailand Development Research Institute (TDRI) were also leading critics of the DSPPs of the Thaksin administration. One of their studies (Prachatai 2006) showed that the village funds were inefficient because the villagers did not eventually receive higher incomes. The accessibility of loans could not protect them from other negative shocks. Indeed, the loans even encouraged them to overspend, so their debt burden was greater. Also, the debt moratoriums just postponed payment dues for the existing debts, but they did not relieve the debt burden. In addition, they did not have any impact on farmers’ extended investment decisions. Later, Nipon Poapongsakorn's research (Nipon Poapongsakorn, et al. Reference Poapongsakorn, Puntrakua, Nantajit, Arunkhong and Janepeungpal2016) on the Rice-Pledging Scheme of the Yingluck administration played a part in the prosecution of Yingluck and Boonsong. The Anti-Corruption Commissions’ report concerning the wrongdoers referred to the research. In addition, the Supreme Court summoned Nipon as a witness in one of the hearings in 2016. It was very unusual to see an economist playing a part in the judicial prosecution of politicians.

However, the attacks were not only on DSPPs from the Thaksin clan. The non-Thaksin side also received criticism, and the critiques had some impact. Spread via social media, economists’ critiques of Prayuth's DSPPs might have contributed to his decline in popularity among some groups of people. As mentioned earlier, Prayuth's tax breaks often received negative feedback from economists. Also, economists’ comments on the inefficiency, inequality, and leakage of the tax break measures and the state welfare card (Baat Sawasdikarn Haeng Rat) often surfaced on the sites of protests in the White-Ribbon Movement in the second half of 2020. Still, the impact was less noticeable, as the mob focused more intensely on other vital issues.

In sum, Thai economists’ opinions on DSPPs impacted the popularity of politicians who implemented them. However, they have been invisible in the design of DSPPs. For example, as we mentioned earlier, Prayuth's year-end tax breaks kept coming out despite resistance from economists. For decades, economists opposed DSPPs, such as subsidies for some agricultural products, among many others, but every government implemented them in different formats. Some questions follow. How can we understand the critiques of most Thai economists concerning DSPPs? Why were those suggestions irrelevant in the eyes of politicians? And what is the framework or paradigm that dictates their analysis and suggestions? In our view, the conventional view of economics—neoclassical economics—constrained their train of thought and discouraged them from proposing alternative DSPPs that align with the long-run economic goals.

The Neoclassical View as a Constraint

The conventional approach in economics taught widely and dominating almost all universities worldwide is neoclassical economics. Neoclassical economics presupposes market efficiency as its foundation, so uninterrupted market mechanisms are the most efficient order that yields the best results for society. Even though reality shows that markets fail to yield the best outcome most of the time, a market failure is due to external factors such as externality, moral hazards, and government intervention. These causes occur from outside the market system. They interrupt how markets function, implying that deviations from the best case scenario never occur within the free market system.

We can extend neoclassical economics to address the problem of economic development. Like an individual, an economy also encounters limited capacity constrained by resource endowments such as capital, knowledge, technology, etc. Whereas markets are the best tool for the economy to reach full capacity and draw maximum benefits from those limited resources, development is how the production capacity expands. In Solow's growth theory (Solow Reference Solow1956), an official forebear of economic growth in the conventional view, the main factor determining the expansion of the economic growth path is the improvement of technology or total factor productivity (TFP), which is determined exogenously. Later, endogenous growth theories extend the Solow growth model to include the possibility of deciding technology endogenously (Romer Reference Romer1986, Reference Romer1994). People can accumulate technical know-how in a company or from generation to generation. Thus, technological progress is a continuous process of accumulation of knowledge, not an external shock. From these ideas, the source of development is entrepreneurs, workers, businessmen, and all people in the economy, but not the government. Again, government intervention usually interrupts the market process and disturbs the path for economic development.

Therefore, the linchpin of the neoclassical growth theory is laissez-faire capitalism. The foundation of the model disregards asymmetric power between labour and capital. Preferences, technology, and population growth determine income distribution and economic growth (Marglin Reference Marglin1984: 23-51). The price mechanism plays a central role. When government does not intervene, the price mechanism clears the labour and capital markets. As a result, the economy automatically reaches full employment, with a subdued income distribution or inequality. Neoclassical economists would not see inequality or perverse income distribution as an issue because it does not directly affect long-run economic growth. Sustainable long-run economic growth, for neoclassical economists, depends on exogenous positive shock or cutting-edge technologies from brilliant entrepreneurs. The demand side can stimulate the economy in the short run; however, those policies are fruitless and may cause runaway inflation in the long run (Friedman Reference Friedman1968; Phelps Reference Phelps1967).

The above frameworks shape how many Thai economists understand the impact of DSPPs. The Sub-Committee on Monetary, Fiscal and Budget Policies (2011), under the guidance of Thailand's Standing Committee on Monetary, Finance, Banking and Financial Institutions of the Senate, published a study about the effects of populist policies, especially on a minimum wage raise (to 300 baht per day) and an increase of college graduates’ income (to 15000 baht per month). The report said that such policies are “disturbing the market mechanism and interfering in the operation of the private sector by forcing the transfer of money from the pockets of the employers to the employees” (The Sub-Committee on Monetary, Fiscal and Budget Policies 2011: 15). Furthermore, the report states that a raise in those two types of wages could play some role in increasing inflation, slowing down domestic investment, and eventually dampening GDP growth. In conclusion, a populist policy can be a good policy if it satisfies two conditions. First, it must follow Pareto improvement, or it does not directly transfer income from the rich to the poor. Second, “the policy has to be a policy that will benefit the economy in the long run. A policy that benefits the economy just for a short while is not a good policy” (The Sub-Committee on Monetary, Fiscal and Budget Policies 2011: 18).

Nonarit Bisonyabut (Reference Bisonyabut2016), an economist from TDRI, emphasised the shortsightedness of policymakers who embrace populist policies. He claimed that those who benefit from the populist policies do not concern about the downsides coming in the future, and this is prone to an economic crisis as it happened in Latin America. Somkiat Tangkitvanich (Reference Tangkitvanich2015), also from TDRI, defined populist policies as policies designed to gain political popularity and emphasise income redistribution, but they fail to enhance production capability. From his definition (Somkiat Tangkitvanich Reference Tangkitvanich2015):

Veerathai Santiprabhob (Reference Santiprabhob2013), who later became the Bank of Thailand chairman, echoed the neoclassical-synthesis doctrine: demand stimulus can have a positive impact in the short run, but not in the long run. He argued that such policies are effective only to gain votes and win an election, so they resemble marketing ideas more than to improve social welfare.

However, according to the neoclassical view, it does not mean that there is no room for the government. On the contrary, even though some government interventions could cause markets to fail, the government should step in if the failure from other causes is too overwhelming. For example, private property is essential in the process of development in a market society. However, property rights require strict enforcement from the government. Hence, government intervention in law enforcement regarding private property, if complementing private sector activities or stimulating knowledge spillover, is therefore encouraged, as it can expand economic capacity.

Hence, an ideal policy for those Thai economists would directly point to supply-side policies. For example, Narongchai Akrasanee (TDRI 2013) espoused the neoclassical view of nurturing competition, innovation, and efficiency only from the supply side. He argued that populist policies distort market mechanisms. The Thai economy should rather improve market efficiency in three ways. First, let market mechanisms work by itself coupling with justice. Second, the private sector should invest more in production capabilities. Third, the private sector should innovate and think about new designs, branding, and marketing. Ammar Siamwalla (TDRI 2013) followed the same argument but added human capital, which is considered one of the pillars of the neoclassical development paradigm. He argued that if the Thai economy cannot improve labour skills, its opportunities to increase growth will reach a dead-end. Therefore, it is time for Thai to reform their productiveness.

Meanwhile, politicians also occupied by the neoclassical view understood that their DSPPs could potentially benefit the economy only in the short run. For example, in the Policy Statement of the Council of Ministers delivered after the official appointment to the government, all the prime ministers barely mentioned DSPPs. If they mentioned DSPPs, they abstractly explained DSPPs and emphasised that DSPPs’ goals are not to promote a long-term impact on the Thai economy. For example, Prime Minister Abhisit Vejjajiva in 2009 said that injecting public expenditure “into the economic system [would] . . . alleviate the difficulties faced by the people and business sector” and “rejuvenate the economy which is facing problems” (Abhisit Vejjajiva Reference Vejjajiva2008: 4). Prime Minister Prayuth Chan-o-cha in Reference Chan-o-cha2014 said that:

The statement by Prime Minister Yingluck Shinawatra in 2011 was somewhat different from those mentioned above, as it referred to DSPPs such as the SML Village Funds, the First Car Policy, Debt Moratoriums, and First Car Policy. Yet, their goal of “raising people's standard of living by enhancing domestic purchasing power and creating balance and strength with quality in the macroeconomic system” still focused only on the short-run effects (Yingluck Shinawatra Reference Shinawatra2011: 6).

However, no political party is likely to follow those economists’ suggestions. Even though those from some institutions such as TDRI were politically motivated (Ekkasit Nunphakdi Reference Nunphakdi2020: 240-253), their political supporters still largely ignored their comments and suggestions. For example, Nonarit Bisonyabut (Reference Bisonyabut2016) distinguished Yingluck's populist policies (prachaniyom) and Prayuth's populist policies (pracharath) and pointed out that the latter was superior because they targeted supply-side competitiveness and a long-run impact. However, he also suggested that the money transfer program from the Prayuth administration was ill-designed due to its debt-provoking aspect. He advocated that a better-designed policy should target changing people's spending habits (Nonarit Bisonyabut Reference Bisonyabut2016). However, the government turned down this suggestion completely, as such a program kept coming out for six years in a row.

In our view, politicians gave two reasons to justify their neglect of these suggestions. First, every government proposed supply-side policies, such as transportation development, business-friendly enhancement, and improvements in education. In other words, both supply-side and demand-side policies were always together in the national economic plans. They already had the supply-side policies that provided the long-run impacts, so having demand-side policies addressing the short-run impacts made sense. Second, as already explained, DSPPs have become a necessity to gain popularity for Thai politicians. However, despite these two reasons, the root of the politicians’ neglect, and, on the other side of the same coin, the futility of economists’ suggestions, was the conventional wisdom of neoclassical economics that constrained them to perceive that DSPPs could yield a long-run effect to the economy.

The Transformational Growth as an Alternative ViewFootnote ³

Adam Smith begins his famous The Wealth of Nations by discussing how a division of labour can improve labour productivity in a particular economy (Smith Reference Smith2003 [1776]). He moves on to argue that a division of labour is “limited by the extent of the market.” In his own words:

However, economists interpreted this remark as advocating for free trade and laissez-faire economics. At the same time, there was relative neglect to the other aspect—how to extend demand in a market such that the division of labour can further deepen its power to stimulate economic growth.

It was Allyn Young who brought aggregate demand into the limelight regarding macroeconomic theory. In his work, cumulative causation implies that positive feedback results from interactions between demand and productivity among firms in an economy (Young Reference Young1928). Hence, productivity is endogenous in the system. This idea influenced Petrus Verdoorn (Verdoorn Reference Verdoorn1949, Verdoorn Reference Verdoorn1980), whose works describe the relation between productivity and output growth. Nicholas Kaldor (Kaldor Reference Kaldor1966; Kaldor Reference Kaldor1967; Thirlwall Reference Thirlwall and Thirlwall2015) later merges Verdoorn's notion into his famous growth laws, focusing on the potential of productivity growth in a manufacturing sector and how it can spill over to other sectors. Before the 1990s, these ideas were like several pieces of a demand-led growth theory puzzle never assembled. Edward Nell (Reference Nell1994) said, “there is no systematic theory of the growth of demand . . . This seems to me a very serious shortcoming” (110). The lack of solid demand-led growth theory is perhaps why the conventional view of economic growth has dominated economic thought, regarding DSPPs as nothing but a burden for economic progress. In our view, in the 1990s, Nell successfully put these pieces together in his theory of transformational growth.

Transformational growth is a history-based theory derived from the observation that market expansion and demand growth drive economic development under capitalism. As demand grows, market equilibrium is unlikely in the conventional view in which demand and supply are equal. Instead, an imbalance of demand and supply moves the chain and pushes the economy forward. For example, as a growing urban economy attracts people from the countryside to become wage workers during economic modernisation in almost every country, the denser urban population, which earns more income from their urban jobs, demands more goods. Furthermore, as people spend more time outside their houses in this modern society, common household jobs, such as child-raising or cooking, are less appealing. Those activities, once commoditised, create repercussions for other new economic activities, as some people open a restaurant and a kindergarten.

Nell (Reference Nell1994) added that “the structure of the economy is going to respond to changing demand pressure, and in doing so, it is going to generate further changes in demand pressure” (110). The impact of the transformation is usually not proportional. Different people, firms, and economic sectors may benefit (or lose) more than others. For example, workers struggle to learn new skills to keep up their bargaining powers and earn higher wages. Meanwhile, capitalists struggle to stay competitive and profitable by applying new techniques and technologies to their production processes. Changes in nominal wages and prices, leading to changing real wages, cause a further shift in workers’ consumption patterns, creating new demand for new products. From this process, organizations create innovations that boost productivity due to the interactions of all economic agents.

Still, it is important to remember that this explanation of productivity improvement is just one channel. Transformational growth also adopts Young's notion of cumulative causation in which market expansion extends a process of division of labour, improves productivity, and hence lowers the prices of products. The lower prices, in turn, encourage more consumption and further improve productivity. In this sense, demand change and economic transformation are endogenous (Argyrous Reference Argyrous and Setterfield2002). Impactful exogenous shocks might occur, but the endogenous force in the system principally causes the long-run changes.

In contrast to the neoclassical view, transformational growth does not consider specific state interventions exogenous to the system. As the economy develops, consumption and investment become more collective and interdependent. For example, in the modern sharing economy, properties such as bedrooms or vehicles, consumed only in a household, are divided and put up for rent on the internet. These economic activities are done collectively by investors who own properties and consumers who pay for temporary uses. Platform intermediaries who connect demand and supply of a transaction also get involved. They create a website on which suppliers can provide their information, and the demander can shop around. The impact of this transformation goes beyond these players. The room owners must hire housemaids to take care of the room, decorate the house, or even shoot photos for an advertisement. Meanwhile, the tenants review and refer the room to other tenants. “Normal market processes, for these goods, involve multiple consumers acting in coordination, or even organised into networks, and there may also be networks of suppliers” (Nell Reference Nell1998: 265). Therefore, the government also facilitates these transactions, and the government's appropriate roles could further encourage network externalities. As economic activities become more interconnected, the role of the government must be more extensive. The government can set up rules or regulations to facilitate these emerging economic activities and step in as a player. Some governments force their citizens to connect to their applications to receive benefits because they need data on spending behaviours. In this sense, the government's bigger role is considered part of the economic transformation, so the government itself is endogenous (Nell and Argyrous Reference Nell, Argyrous, Murray and Forstater2013).

The transformational growth notion of an endogenous government can explain the increasing role of the state in the Thai economy. People's expenses from other parts of the country are the foundation of Thailand's current Bangkok-centric economic development. The early industrialisation in the 1970s relied on worker migration from the countryside who hoped to earn more income from selling their labours in the city. These hopes for better lives in the capital city resulted from a lack of opportunities as small entrepreneurs or farmers at home. Whereas an increasing number of Bangkok residents led to the further growth of the Bangkok economy, other parts of the country had relatively slower economic growth. The central government played a significant role in this biased process. The rice premium policy, for example, was used by the government to suppress the domestic price of rice, which indirectly forced farmers to leave their farms for jobs in the capital city (Dixon Reference Dixon1998: 140-213). Moreover, as the rice price was kept low, there was relatively little pressure for the wages of urban workers to increase. As a result, those who belonged to the capitalist class benefitted the most from the development process. Still, many workers, who suffered from the stagnating real wages for so long, ended up in poverty. As a result, economic development created vast income and wealth inequality that culminated in political turmoil since the 2006 military coup against Thaksin Shinawatra (Hewison Reference Hewison2014).

Several scholars have discussed the reasons for the emergence of DSPPs since the beginning of the 2000s. For example, McCargo and Pathamanand (Reference McCargo and Ukrit2005: 89) considered that when economic development allowed people to live their lives more independently from the mafia power of politicians, the patron-client relationship between politicians and people was in decline. Policies to be offered became alternatives to get votes rather than personal relationships. Selway (Reference Selway2011) and Ricks (Reference Ricks2018) attributed the explosion of such DSPPs as rice policies and universal healthcare coverage schemes to the institutional shifts from the 1997 constitution. Hewison (Reference Hewison2004) considered that populist policies were a part of the new social contract crafted by Thaksin to develop welfare for the poor and ensure growth and competitiveness for domestic capitals. In our view, derived from the theory of transformation growth, the lower-income people spend a higher proportion of their income on consumption than rich people. Widening income inequality implies that the economy may experience lower consumption growth, which leads to limited effective demand and slower economic growth. To keep the economy growing, the government had to increase its spending to boost its domestic demand. As a result, DSPPs were endogenous phenomena emerging from the uneven economic development of the country.

The Practical Principles for Future Demand-Side Populist Policies

As already mentioned, DSPPs, if well designed, can have a long-run impact on the economy and development. Unfortunately, however, governments designed many DSPPs in the past poorly. With these issues in mind, we propose the following principles for future DSPPs that can achieve long-run economic goals and satisfy political imperatives in Thailand.

The first principle, based on Smith's “division of labour is limited by the extent of the market,” is that DSPPs must aim at boosting productivity. Thus, DSPPs can increase demand, extend the markets, and deepen a division of labour. In a Kaldorian tradition, DSPPs should focus more on the industrial sector because their production processes manifest increasing returns, and their products are primarily exportable. However, economic activities in the agricultural or service sectors could benefit from increasing returns and export opportunities for the current economy. Therefore, we propose that DSPP spending goes to economic activities in a transformation process with increasing returns and exportation.

Since 2015, the Thai government has set targets to promote the First S-Curve Industries under the Thailand 4.0 strategy with the confidence that these industries can push the Thai economy forward (Jones and Pimdee Reference Jones and Pimdee2017).Footnote ⁴ Our concern is that government policies need to address supply and demand constraints to diversify production capabilities. The export orientation of the plan may divert people away from the importance of domestic demand. The fact is that the country would not be able to attract sufficient foreign demand if these activities had not reached a certain level of productivity. On the other side of the same coin, they would not reach that level of productivity if they were not sufficiently in demand. DSPPs can be part of a solution to this chicken–egg conundrum. For instance, since the proportion of the aging population in a developed country tends to increase, Veerayooth Kanchoochat (Reference Kanchoochat2019) proposed that the Thai government should encourage services for upper-class elderly care to serve the rising demand from foreigners. Simultaneously, ADB (2020) estimated that 16.7% of the Thai population was over 60 in 2017, and the number is predicted to increase to 32% by 2040. Therefore, the government should subsidise Thai seniors who would like to receive the services, supplementing its demand. The enlarging market due to higher demand will attract new competitive workers and encourage entrepreneurs to invest in high-technology capital for enhancing competitiveness. In other words, this market expansion will play an essential role in creating network externalities. Injection in the form of DSPPs can galvanise sufficient domestic demand as their first step.

The second principle is that DSPPs must aim at promoting innovations. A firm does not voluntarily innovate or increase the capital–labour ratio during its production process. Innovation, in our view, comes out haphazardly because of pressures and conflicts in an economy. It does not have to be a novel technology or a means of production that could impact the whole economy, nor is it necessarily something created by a giant corporation, a high-tech company, or advanced technology. Adam Smith's story on how “one of those boys who loved to play with his companions” invents an automatic valve in a steam engine is fascinating to show that anyone could come up with some innovative ideas (Smith Reference Smith2003 [1776]: 17). DSPPs could be a funding source for the trials and errors of those who would like to turn those ideas into reality in the form of marketable goods and services.

Thaksin's era DSPPs differed from those in the present as their focus moved from investment-oriented to consumption-oriented. Although the post-Thaksin DSPPs were helpful in several ways, their opportunity cost was that the subsidy did not directly go to those who needed money for their businesses. In our view, it would be more beneficial if future DSPPs return to focus more on incentivising individuals or groups to innovate and invest. YouWin! Competition, a business plan competition launched in Nigeria in 2011, could be an excellent example for a DSPP with this purpose. The competition accepted business plans from entrepreneurs with fewer than ten workers who were short on funds to run their businesses. It attracted business plans from 24,000 applicants, but instead of awarding a few winners with a large sum of money, the committees selected the top 6000 applicants for a business training course. In the end, 1200 applicants won the prize. They used this award money to set up their businesses and enter the markets. The three-year follow-up study found that the program was successful since most businesses grew sales and profits and employed more workers. Furthermore, innovative activities increased by 22 percentage points for new firms and 14 percentage points for existing firms (McKenzie Reference McKenzie2017). In our view, this kind of program, where anyone could turn an idea into practice, is necessary to boost innovations.

The third principle is that DSPPs need to address the inequality problem. The question might arise: If DSPPs have been used for decades and can do so, why has the inequality problem in the Thai economy not been addressed? In our opinion, inequality is chronic, structural, and mainly shaped by economic structure and policies.Footnote ⁵ The latest Thailand 4.0 strategy, while claiming to target the problems of inequality and unequal development, tends to exacerbate the gap between regions and between the rich and poor (Prapimphan Chiengkul Reference Chiengkul2019). As only a few big companies have monopolised the production and sale of most grocery products in the country, people's purchases subsidised by DSPPs in the past would go straight to the hands of those companies. As a result, those who benefited the most from DSPPs always have been the big businesses. The well-designed recent DSPPs, such as the co-payment stimulus program (Khon La Khrueng) and the financial aid scheme (Rao Chana), considered this problem because they encouraged the money to pass through many more hands before reaching the big firms’ pockets (MGROnline 2020). The government could enhance benefits from these DSPPs by restricting the purchases to products from community-based enterprises.

A measure such as a tax break for a local entrepreneurship stimulus program's (One Tumbon One Product, or OTOP) purchases in 2019 was a reasonable attempt by the Prayuth administration. However, several actions by the government allowed big firms to share the benefits with community-based companies and could worsen the inequality situation. One example is the Pracharath model, which “reflects the collective endeavours of Sino-Thai business tycoons to buttress hierarchical capitalism” (Prajak Kongkirati and Veerayooth Kanchoochat Reference Kongkirati and Kanchoochat2018: 299). Big companies allied with the government have become a part of projects such as Pracharath Rak Samakkee or Big Brothers by joint-venturing, sharing know-how, or offering other kinds of support for local enterprises. However, these alliances lead to “a hierarchical mode of economic participation and reinforcement of power asymmetries in the economy, in the circumvention of a ‘level playing field’ competition” (Prajak Kongkirati and Veerayooth Kanchoochat Reference Kongkirati and Kanchoochat2018: 300).

The three principles we propose could be at odds with one another. For instance, our first principle to support businesses to reach a higher level of increasing returns to scale might mean that the policies might exacerbate inequality because those owners might reap more profits from upcoming DSPPs. A particular community might take advantage of its products and innovation, possibly worsening regional inequality, which is normal since some benefit more than others from a single policy. Kaldor is aware that favourable treatment of an industrial sector requires rebalancing policies for other sectors (Chandra and Sandilands Reference Chandra and Sandilands2021). The government's role will be to balance the benefits and costs for all people in an economy. Therefore, we do not consider a single DSPP a panacea. Instead, there should be a set of DSPPs interacting with one another. For instance, if a small group of elderly care centres benefits from future DSPPs, they must be appropriately taxed. If some businesses do not embrace innovation, the government must pressure them to explore their potential.