Preliminary version

PIA BUNGARTEN
The Crisis of Thailand and the International Monetary Fund

Many Thais believe the IMF's policy prescriptions have turned their country's bad financial crisis into an economic and social disaster of historic proportions. The original policies, embraced by the Thai government included high interest rates and tight fiscal and monetary policy to stabilize the currency, financial sector reforms and moves toward privatization. These seem to have largely rebuilt investor confidence and renewed the foreign investment flow, but the banking sector remains weak and new lending scarce. Export stagnation has dashed hopes of that sector leading the stagnant economy into recovery. Most Thais blame these policies both for the stagnation and for worsening the crisis's terrible social costs. Unemployment and poverty continue to rise, hitting women and children especially hard. Few have been helped by the extremely weak social safety net and family support networks are overwhelmed. Many, including businesspeople, now see the IMF mostly as an incompetent predator with an outdated development model. The Fund mandates policy in secret and without consultation, while blaming the crisis on lack of "transparency" in Thai government and business. It has not admitted any mistakes, despite extensive criticism. In Thailand the IMF has little credibility with which to fight opposition to its proposals. The government's loosening of fiscal and monetary policy since August 1998, with IMF permission, has shown few results. A glacial bureaucracy, demands for kickbacks, and minimal publicity have caused slow and inept implementation of the numerous social support plans it has announced. Some of these programs have been funded by the World Bank, which Thais view more favorably than the IMF for its slightly greater openness and greater concern with social problems. The crisis and IMF/government responses have triggered extensive discussion of Thailand's development model. "Globalizers" continue to support reliance on foreign capital and exports and integration with the global economy. "Localists" say environmental degradation, persistent inequality, and corruption show that economic policy has promoted wealth over social development. They vaguely prescribe moderation and self-sufficiency, key Buddhist values. Advocates of "Limited de-globalization" share the localist critique, but would base growth mainly on domestic savings and the domestic market and would enact new capital controls and trade barriers. A sustainable solution to the economic crisis and its social effects will come only with greater popular participation in policy and decision making.