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Yet Thaksin has endured such controversies with only minimal political damage. His approval ratings have rarely dropped below 50%, and are currently approaching a remarkable 80%. Panitan Watanayagorn, a political analyst at the Institute of Security and International Studies at Chulalongkorn University, sees similarities between Thaksin and U.S. President George W. Bush, another polarizing leader who was re-elected despite furious opposition. Like Bush, Thaksin "is very good at making politics simple so that the people can understand," says Panitan. "He has the ability to appear ordinary. He is the people's politician. The perception is that he can fix whatever goes wrong"—an impression that was reinforced recently by Thaksin's quick, assertive reaction to the tsunami disaster.
When Thaksin took office, Thailand was still suffering from the effects of the Asian economic crisis of 1997-98. Growth was solid but hardly electrifying, and business confidence was fragile. At the same time, Thailand was being buffeted by global economic shifts. For decades, growth had depended on exports of low-cost goods like sneakers to the U.S. and Japan, but Thailand was losing its competitive edge to China's manufacturing juggernaut. Thaksinomics offered a solution: strengthen the rural sector and uplift the poor to develop a strong domestic economy, so that the country would be less dependent upon exports and less vulnerable to external economic forces such as the buying power of the overstretched American consumer. "The old strategy simply won't work," explains Uttama Savanayana, a vice minister of finance. "We had to come up with something new. We had to start on the inside."
Among other programs, Thaksin built a marketing network to help small craftsmen export their wares, established a People's Bank that offered microloans to budding entrepreneurs, and introduced low-cost health care. Morgan Stanley economist Daniel Lian, who recently wrote a report in which he praised Thaksin for his "comprehensive road map charting the future of Thailand," says: "I don't find a single person who has offered a policy alternative to Thaksin's." The economy has also performed well beyond the policies of Thaksinomics, benefiting from robust global growth, high commodity prices and increasing trade with China. Thai factories have been running at 75% of capacity in recent months, a seven-year high, and unemployment fell to 1.6% last year from 5.7% in 2000. Says Goldman Sachs economist Adam Le Mesurier: "I don't think the economic recovery in Thailand is a mirage."
But efforts to stimulate domestic demand by encouraging the masses to borrow money have backfired elsewhere. Several years ago, South Korea boosted consumer spending by offering incentives such as tax credits for credit-card use. It worked for a while. But borrowing resulted in tens of thousands of South Koreans' sinking heavily into debt, and today Seoul is wrestling with depressed domestic spending and slowed economic growth. Thaksin, similarly, has pressed state banks to boost lending to consumers, especially for housing, and Thailand has seen a worrying increase in household debt—which on average has surged 62% since 2000. Thailand's debt problem hasn't reached nearly the excessive levels seen in South Korea, and the Bank of Thailand recently released a report asserting that the risks are "manageable." But the same report went on to warn that "this may not hold true in the future as debt will continue to grow." Says Bank of Thailand governor Pridiyathorn Devakula: "We cannot be complacent. We are very serious about it."
No program is as emblematic of Thaksinomics as the Village Fund, which has provided the rural poor with the money to invest in everything from workshops to rice paddies. As a businessman, Thaksin understood better than other politicians the significance of providing cheap capital to those who usually cannot get it. Yet it's still unclear how much lasting impact the program will have on the lives of the poor. Wichai Turongpun, a director at the National Institute of Development Administration in Bangkok, spent a year studying the program in 19 provinces in the country's northeast and concluded that the results are mixed. Much of the money borrowed, he says, was used to pay off other, high-interest debt or to cover school fees. In a small number of cases, Wichai says, loans were wasted on mobile phones and motorbikes. Though officially the repayment rate on these microloans is nearly 100%, in some cases, Wichai says, borrowers are turning to predatory loan sharks to raise money to pay back the government. Though the fund has helped the poor to a degree, Winai says, "it doesn't serve the main purpose—that people can use this money to generate income and have a better living." The Finance Ministry's Uttama responds: "In a program like this, there will be different results. The thrust of it is very much on track."