Government Failure: Thailand’s Rice Subsidies

File this under another grand moment of government failure: Thailand’s rice subsidies

From the Wall Street Journal Real Times Economic Blog (bold mine)

Under the program, the government offered to buy rice from local farmers for up to 50% above the market rate in a bid to boost incomes and spending among a key constituency. The premise was that by hoarding rice Thailand would be able to force up rice prices globally, reaping a larger profit when the stocks were eventually sold.

But the program backfired as India and Vietnam ramped up their own rice exports, knocking Thailand from its spot as the world’s top producer and forcing prices down.

State warehouses were flooded with an estimated 10-15 million tons of rice that Ms. Yingluck’s administration was forced to sell in order to pay farmers after the plan’s financing became unsustainable, driving down prices further. Still, many farmers went unpaid for months, and a few committed suicide after finding themselves unable to pay off debts.

This seems like a wonderful depiction of central planning failure and of the political economic lesson called “There is no such as a free lunch”

The former populist governments of Thailand bought the farmers votes by providing rice subsidies. That’s because about 2/3 of Thai’s population have reportedly been rice farmers. The government eventually came to realize that their grand scheme of influencing world markets backfired which is classic example of the fatal conceit from central planning. 

And most importantly, the government eventually awakened to the reality that taxpayer resources has LIMITS!!!

So the parasitical dependency relationship which had been nurtured from Thai’s rice politics caused financial havoc to many farmers where many were left unpaid which prompted a few to commit suicide.

Thai’s rice politics seem to ring a bell with the Philippine setting whose very costly counterpart carries a slogan “rice self-sufficiency” program. Like in Thailand, spending by the government continues to bulge, part of which has been financed by ballooning debt.

The article’s intent has been to report that the junta government has “officially confirmed” the end of the controversial subsidy program under its regime. This should be a welcome development. But the military government said that the decision for its continuance “could be left to the new interim government”. This means for now Thai's rice subsidy has conditionally been placed in the backburner subject to future political exigencies. Politics has always been about smoke and mirrors.