Thailand’s Silent Coup

Project Syndicate  |  Dec 26, 2013

By Sin-ming Shaw

BANGKOK – Thailand is once again being convulsed by extreme partisan politics, with the country’s polarization playing out on Bangkok’s streets. Several people have been killed, and many more have been injured. The sense that Thailand has been through all of this before would be mildly reassuring were it not for a nagging fear that this decent and prosperous society may be set to destroy its democracy.

Much of the violence has been led by Suthep Thaugsuban, a former deputy prime minister. He has inspired thousands of demonstrators, many from his power base in the country’s south, to storm and occupy government buildings with the aim of unseating Prime Minister Yingluck Shinawatra, the sister of exiled former Prime Minister Thaksin Shinawatra. Suthep says that this is the first step in rooting out “Thaksinism” from the country’s political life.

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On December 1, Suthep demanded – and received – a meeting with Yingluck in the presence of Thailand’s military chiefs, whom he had asked to “guarantee” his safety. During the meeting, Suthep gave Yingluck a two-day deadline to resign. With the police failing to control the mobs in the streets without the help of the military, Yingluck decided to resign and dissolve parliament, declaring that she would lead a caretaker government until a new election is held on February 2.

The date was endorsed by a “reform forum,” established to resolve the crisis and comprising Bangkok’s elite (including the military). Suthep and his followers were dissatisfied, and left the forum in protest, rejecting Yingluck even as an interim prime minister and demanding that the election be held after political reforms – the sort he would agree with – are implemented to eliminate all vestiges of the Thaksin clan from government.

In fact, Suthep has called for a “people’s council,” comprised of 400 unbiased representatives. The council would replace the Senate after the upper house nominates a new leader to be appointed by the King, thus obviating the need for elections in the near future. Wassana Nanuam, the military-affairs correspondent of the English-language daily Bangkok Post, has described the move as a “silent” coup d’état: no tanks in the streets.

The Democrat Party, led by the former court-appointed Prime Minister Abhisit Vejjajiva, has separately announced a boycott of the February 2 election on the grounds that the party could not reform the country even if it participated. The Democrat Party last won a parliamentary majority in 1992.

While the military chiefs’ inclinations have been with Bangkok’s elites, they are being careful to keep their options open. Their unsuccessful stint in power following the military coup in 2010 appears to have taught them that they should wait to see if their political allies can break Thaksin’s electoral stranglehold, which has lasted 12 years and five general elections, before deciding what to do next.

Bangkok’s elites maintain that the billionaire Thaksin and his allies have bought their electoral victories. But Freedom House, which tracks democracy and civil rights around the world, declared Yingluck’s landslide electoral victory in 2011 free and fair, a position supported by most Thailand experts.

Despite Thaksin’s corrupt image, a majority of mainly poorer Thais see him as their only alternative to the country’s out-of-touch urban elites. Indeed, Suthep’s insistence on delaying the election is an open admission that he and his allies cannot win a fair contest, and he has even gone so far as to suggest that, with the “right” leader, Thailand may not need elections at all in the future. Nor is it clear that any reforms would satisfy the anti-Thaksin camp, except for those designed to deny Thaksin’s followers a parliamentary majority.

That said, Thaksin and his sister bear some responsibility for their recent misfortunes. Guilty of excessive hubris, their ability to empathize with the peasants and the urban poor is matched only by their disregard for the urban middle class and its members’ demand for clean government and rule of law rather than populism.

Yingluck must also take some blame for her clumsy handling of the current crisis. What ignited the protests was her attempt to amend an amnesty bill, originally intended as a grudging act of reconciliation between the country’s opposing ��red” and “yellow” political camps. But, while the amnesty was to apply to lesser crimes committed from 2006 to 2011, Yingluck tried to extend it two years earlier and include capital crimes – a move rightly seen as a blatant attempt to absolve her brother and pave the way for his return to Thailand.

Thaksin’s supporters miscalculated in assuming that they could so easily abuse their parliamentary majority. Their effort to manipulate the amnesty, though not unconstitutional, was nonetheless arrogant and provocative. Anger erupted among Bangkok’s middle classes, prompting Suthep to unleash his mobs.
The story is far from over. If recent history is any guide, the February election (assuming it is held) will sweep Thaksin’s allies back to power. What follows will be fraught with risks of further instability, as poor rural Thais face off against wealthy urban elites, and polarization intensifies between the north, where most people live, and the southern power base of the Democrat Party and Suthep, the street mobs’ leader.

Hong Kong’s Hollow Leadership

Project Syndicate  |  Mar 8, 2013

By Sin-ming Shaw

HONG KONG – Hong Kong Chief Executive Leung Chun-ying has been dogged by scandal from his first days in office, and his personal integrity is routinely impugned by much of the public. So it is no surprise that his popularity is plummeting.
Leung has only himself to blame. He seems incapable of connecting with ordinary Hong Kong citizens, instead coming across as a shifty politician who often dodges direct questions, offers vague answers, and evades responsibility for major failings by apologizing for minor shortcomings.
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Leung staked his reputation on being able to tame Hong Kong’s absurdly inflated property market, and has failed miserably. Indeed, Hong Kong is now the most expensive city on the planet. It takes at least 13.5 years of mean household income to buy an average flat, according to one recent international survey. The comparable figure for London and New York is 7.8 years and 6.2 years, respectively.
Rising property prices are making middle-class flat owners multimillionaires, while their children – even with a good university degree – can hardly afford private housing without parental help. Leung has advocated that young people leave Hong Kong to work in less expensive countries.
Leung came into his job with a self-destructive attitude. Like his mentor, Tung Chee-hwa, Hong Kong’s first chief executive after its return to China, Leung harbors a deep antipathy toward the British and the professional civil service, a legacy of colonialism. He adheres to the Maoist idea that a country consists of “the people” and “enemies” (never mind that he was the youngest and first Chinese partner in a British property-surveyor firm in Hong Kong, and that Tung studied nautical engineering in the United Kingdom).
But treating the civil service as a potential enemy was clearly stupid, as only the civil servants know how the government actually works. Neither Tung nor Leung had any operational government experience, which was most clearly demonstrated in their indifferent attitude toward public appointments. The anti-corruption police arrested Mak Chai-kwong, Leung’s first Secretary of Development, only 12 days after he was appointed. His successor, Paul Chan Mo-po, was soon exposed as a one-time owner of slum housing.
The information that undermined both officials had been buried deep in official documents, and could have surfaced only because someone, or some group, in the civil service with access decided that it would be best to leak it. In Tung’s administration, two cabinet secretaries also had to quit following damaging disclosures. With a couple of notable exceptions, the mediocrity of most of Leung’s appointees elicited sighs even from his political allies.
The same incompetence is at the root of his failure to deflate the property bubble. While he has announced grandiose plans to increase the future supply of land for development, and has hiked the stamp duty twice, the market has figured out that he does not understand that he needs to manage expectations by removing obstacles in the current development pipeline. His measures have increased prices while shrinking the number of transactions – precisely the opposite of what is needed.
One major roadblock that Leung fails to appreciate is caused by an obscure 1981 UK Privy Council ruling, Hang Wah Chong Investment Co. Ltd v. Attorney General of Hong Kong, which gave the government unlimited authority to behave as a revenue-maximizing private monopolist. Thus empowered, the civil service has been behaving without regard to the public interest, as delays shrink supply while boosting prices. A substantial amount of floor space would have been available already if government authority were exercised responsibly.
Yet the same law could allow the Chief Executive to instruct the civil service to act to minimize social damage. Maximizing public revenue is not always consistent with the goal of social and economic stability. After all, Hong Kong is facing a clear and present danger that the property bubble will end in tears for many.
Dissatisfaction with this state of affairs is not confined to the powerless. Victor Li Tzar-kuoi, the son of Hong Kong’s most powerful property baron, Li Ka-shing, astonished the public recently, saying in court testimony that it was a “painful experience” to deal with the government’s imperious Urban Renewal Authority.
Another roadblock is the Hong Kong dollar’s exchange-rate peg to the US dollar under the antiquated currency-board arrangement, a colonial relic still used by Gibraltar, the Falklands Islands, and St. Helena (territories with a combined population of roughly 40,000). Under this system, the Federal Reserve in Washington, DC, sets Hong Kong’s interest rates and money supply.
The mantra since the handover to China in 1997 has been that this system has served Hong Kong well. But the high rate of asset inflation in Hong Kong is due partly to an undervalued currency, set at HKD7.8:$1 since 1983 (though allowed to trade within a narrow band between 7.75 and 7.85 since 2005). Market forces have set the real effective exchange rate by jacking up asset prices.
Hong Kong, a trading economy par excellence, thrives on market forces. Yet its policymakers remain frozen on the issue of the exchange rate. The betting in Hong Kong today is that, unless Leung can somehow reboot his administration, he is likely to follow Tung in leaving office before his term expires.

Last Tango in Argentina?

Project Syndicate  |  Sep 25, 2012

By Sin-ming Shaw

BUENOS AIRES – Argentina and economic crisis, it can sometimes seem, have been conjoined since the country’s birth, like Siamese twins. In fact, Argentina is the only developed country that has succeeded, in the period from World War II until today, in mismanaging its way out of the First World.
But, for all their failings, Argentina’s ruling elites have never been short on “attitude,” viewing their country as the equal of the world’s strongest, and thus never afraid to stand up to them all.
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It is fighting words in Buenos Aires, for instance, to suggest that Argentine soccer is not the best in the world, though it has managed to win the World Cup only twice, behind Brazil (five), Italy (four), and Germany (three) – and matched by its tiny neighbor, Uruguay. While many experts, players, and fans rank Brazil’s Pelé as the best soccer player of all time, it is wise not to dispute the local insistence that either Maradona or Lionel Messi, two local boys, is better.

Recently, in a taxi in Hong Kong, of all places, a young tango dancer from Buenos Aires was visibly agitated at his host when Brazilian football was put ahead of his country’s game.
Such bravura, or chutzpah, has enabled current President Cristina Fernández de Kirchner to insist that inflation in Argentina – currently rampaging well above 20% – remains in the single digits. In 2007, Fernández replaced professional statisticians at the National Statistics and Censuses Institute with political appointees when the Institute began to publish inflation rates that were accelerating alarmingly. Ever since, official numbers and reality have parted ways.

Moreover, academic and private-sector economists have been warned that publishing different figures could result in criminal prosecution for spreading false rumors. In fact, one academic was fined $125,000 for publishing inflation figures that were substantially higher than official data indicated.
Of course, when you control the official statistics office, you can claim any inflation rate you want; but that does not lower the price of bread. Anyone who buys food in supermarkets or uses a taxi knows that the true rate of annual inflation over the past several years has been 20-30%. Clearly, the market has reached its own verdict, reflected in the gap between the official exchange rate of 4.6 Argentine pesos to the dollar and the black-market rate, which recently reached 6.8, with some economists whispering that an eight-peso dollar is likely before too long.

Not only has Argentina repudiated the $100 billion in foreign debt on which it defaulted a decade ago; it has also shrugged off criticism of its expropriation in April of the Spanish oil company Repsol. Argentina has offered to compensate the company at “fair” market value, to be determined at some future date – presumably when the floor has dropped out of Repsol’s share price, which initially plunged nearly 60% from its previous high, and is still down 40%.

Even as evidence of economic crisis continues to mount – the latest sign being that supermarket shoppers are limited to one bottle of cooking oil per customer – the government gives no indication of concern. The authorities have defied the International Monetary Fund, defaulted on debts, and proudly proclaimed that Argentina has transcended traditional economics. The government is still “negotiating” with the IMF on how best to collect, measure, and report inflation, as if this were not done routinely by trained statisticians throughout the world.

Argentina’s prideful attitude may have led it to become a second-rate economy, but the same attitude has served it well in its one great and unique contribution to world culture: tango, recognized by UNESCO as part of the world’s “intangible cultural heritage.”

Year after year at the annual World Tango Competition, Argentine dancers dominate the top ranks of Stage Tango, more glamorous and difficult than the other category, Salon Tango. This year was no different. The top three pairs were all from Argentina.

Dancing tango well is not just a matter of technical skill, which can be learned by others. The Japanese are unequaled masters of such skills, and have been competing since the beginning of international tango competitions in 2003. In 2009, a Japanese couple, Hiroshi and Kyoko Yamao, made history by winning the championship in Salon Tango, in which a loving connection between the dancers is more important than a haughty attitude. In Stage Tango, where that attitude is paramount, only once has a Japanese woman, Chizuko Kuwamoto, managed to reach the top – and only by dancing with an Argentine partner.
Juan Fabbri, the owner of Tango Porteno and Esquina Carlos Gardel, the two most expensive and important tango clubs in Buenos Aires, believes that what foreigners (including me, a student of tango for years) are missing is the “El Cachafaz” factor. El Cachafaz was the nickname of a legendary early-twentieth-century dancer – José "Benito" Bianquet. The word, from the ghetto dialect of “lunfardo,” evokes “impudence, danger, manliness, mischief, and shamelessness.”

Mario Morales, a top tango choreographer, who has trained a string of tango champions, put it to me slightly differently. “To dance tango well, you need corazon (heart) and passion. Foreigners are more circumspect. We Argentines put our hearts first and maybe think later.”

That insight arguably provides the best explanation of why Argentina excels at tango – and why it is failing to remain in the First World, where it once belonged.

The Re-Education of Hong Kong

Project Syndicate  |  Sep 18, 2012

By Sin-ming Shaw

HONG KONG – After less than 100 days in office, C.Y. Leung, Hong Kong’s new Chief Executive, is already in political intensive care. In record time, he has managed to lose his veneer of competence, credibility, and steely leadership.
One of his cabinet appointees was arrested for corruption within two weeks of Leung’s assumption of his official duties. Another was found to have been a slumlord who owned illegal cage-like flats that he blamed entirely on his wife, denying any involvement whatsoever. Leung himself was caught with several illegal structures in his house, a violation that he exploited successfully against his rival, Henry Tang, in the election campaign.
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Leung has also distinguished himself by inciting a large swathe of school teachers and students to stage massive street protests against his hasty effort to insert a “national education” program into the school curriculum in order to “reconnect” Hong Kong’s young people with the motherland. For tens of thousands of student protesters, many with their parents in tow, the potential death of an honest education was too much to bear.

The goal of the program, inherited from the previous administration, is a good one: expand knowledge among the young about modern China. But, as Tang correctly pointed out in response to a question about the protests, the “devil is in the details.”

What triggered the uproar was the appearance of a “model” textbook, financed by the government and published by a pro-China think tank. The textbook contains mostly propaganda, including assertions that China’s one-party system is wonderful, whereas multiparty democracy as practiced in the United States has created harmful social turbulence. It offers no discussion of the lethal policies since 1949 that led to the persecution and starvation of tens of millions of Chinese. Nor does it mention the fratricidal political movements from the Great Leap Forward to the Cultural Revolution. The program was clearly meant to indoctrinate, not educate.

Massive protests forced Leung to withdraw a deadline to implement the new curriculum. He has also given the schools flexibility concerning when and perhaps how to introduce it. Since nearly all schools are dependent on government subsidies, the grant of flexibility is widely perceived to be a tactical delay. With the job security of schoolmasters at risk, most are sure to implement the program.

The protesters, led by a 15-year-old student, now a folk hero, have retreated, but that, too, is a tactical decision. The students have promised to continue to fight the program until it is scrapped.
But why does China’s government seek to impose the curriculum in the first place? After all, Hong Kong has one of the world’s most educated populations: the city has, in per capita terms, perhaps more graduates of the world’s top 20 universities than anywhere outside of Manhattan.

Nevertheless, after more than 60 years in power, the Chinese Communist Party (CCP) continues to retain a deep sense of insecurity. The Internet may be ubiquitous in modern China, but YouTube and Facebook, so accepted as a part of normal life around the world, are still banned, and the Public Security Bureau has built a vast Internet monitoring system to filter and censor whatever China’s leaders believe they must fear.
While dissent is the lifeblood of any open society, for China it is a dangerous poison. Moreover, China fears that Hong Kong, with a population of less than eight million, might present a systemic problem as an alternative form of government, even though many Communists and their allies hold key positions in Hong Kong’s private and public sectors.

Instead of accepting that “love” cannot be enforced and must be won, Hong Kong’s over-zealous “patriots” cannot wait to show their loyalty by trying to mandate primitive propaganda. Few in Hong Kong are buying the political elite’s mantra that the national education program is the “right” thing to do. They know that practically all of the ruling elite’s children attend expensive schools in the United States and the United Kingdom, where they would be shielded from the mindless drivel at home.

Leung’s son, for example, is reportedly a student at Winchester College, one of the UK’s most exclusive boarding schools. And most, if not all, of the children of the ruling elite in Beijing are in a similar position. The daughter of Xi Jinping, the presumptive future leader who has now reemerged from an unexplained absence, is attending Harvard under an assumed name. Disgraced ex-Politburo member Bo Xilai’s hard-partying son, Bo Guagua, attended Harrow, Winston Churchill’s alma mater, then Oxford and Harvard. Their parents clearly know that “national education” is not needed for a good education.

Unfortunately, Hong Kong’s younger generation is losing confidence in democracy. Popular elections do not translate into representation in a system designed by China to ensure that its allies win a majority every time. As a result, more and more young people are turning to street demonstrations to make their voices heard. And, while no one in Hong Kong wants independence from China, continued strong-arm tactics to force Hong Kong to “love” China could begin to inspire such sentiments.

Leung’s tone-deafness to popular feeling revives one of the main issues that he managed to dodge during the election campaign. At the time, he denied vehemently that he was a member of the CCP. He claimed that he had only Hong Kong’s interest in mind within the limits of China’s “one country, two systems” formula. So far, however, he seems inclined to make one of those systems resemble the other.

But China’s national interest is to ensure that Hong Kong remains a first-rate city, modern and open. Pulling Hong Kong down, in the name of patriotism, can only impede the advance to modernity that all of China needs to become truly great.

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