The Common Touch

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Udol Kamta can attest to some of the program's drawbacks personally. Before Thaksin's Village Fund was launched, Udol had almost no debt. Today, the 50-year-old farmer and his family owe the fund $2,250, but the income he ekes out by tilling rice and red chilies is too meager for him to pay it off. "I've never had such extreme problems in my life," says Udol. His troubles began three years ago when the 1 million baht hit his hamlet of Nhonghoi in Thailand's northeast like a winning lottery ticket. A committee of local villagers parceled out the loans liberally. Udol borrowed $500, invested it in a new chili field, and waited for his fortune to roll in. But like many of his fellow farmers, he lacked business experience. Though his chilies earned a little extra cash, it wasn't nearly enough to cover his $500 loan plus 6% annual interest. So when the debt came due after one year, his wife borrowed $500 from the fund for him to use to pay back his own loan. Then the family dug itself in deeper. Udol borrowed another $500 to help with the costs of his new chili field, his son borrowed $500 to pay school fees, and his mother-in-law took a $750 loan to invest in new cows. He hasn't been able to pay any of it back. Each time the loans come due, says Udol, he temporarily borrows from emergency savings held by Nhonghoi's elders to repay the Village Fund, then borrows more from the fund to erase his debt to the chiefs. "I didn't know how to manage the money," Udol says. "If I had known what would happen, I wouldn't have taken the money in the first place."

Udol's tale of woe is far from unique. According to Nhonghoi's head chief, about half of the residents who borrowed from the fund have become snagged in a similar debt trap. In nearby Baan Nhong Ku, locals spent the first two years of the program borrowing from one another to pay back the fund in full, but this year a poor rice harvest starved the town of extra cash. The inhabitants have taken on extra work on construction sites to make up the difference and have begged the local government office to extend their payment deadline.

Meanwhile, in the hamlet of Baan Dongsaensuk, residents are becoming less inclined to repay at all. Somboon Nonta, who sits on the village's loan committee, says he considers the fund "a donation" from the government—so he has allowed residents considerable leeway to pay back loans whenever they can afford it. "I don't know when this money will be repaid," says Somboon. "If we force people to pay the loans back, it could force them to commit crimes or borrow the money from elsewhere." Alican Tayukhen, the leader of a small Muslim community in the area, calls the Village Fund "a lot of trouble. Thaksin played a game to please the villagers, but didn't realize the damage that would be done."

Still, wealth transfers from the government—whether in the form of loans to the poor or tax breaks for the rich—rarely end political careers, as long as the majority of voters perceive that they are reaping benefits. Thaksin is already planning new initiatives for his second term, including a spending spree on road construction, mass-transit systems and other megaprojects with a price tag that the Finance Ministry says could reach a total of $38 billion over the next six years. "Thaksin understood, before anyone else, that in today's Thailand, popularity is the name of the game," says Panitan, the political analyst. "It's not about fighting for democratic rights. It's about policies and what you can deliver to the masses." Whatever happens in the February election, Thaksinomics must prove it can truly deliver for Thaksin's legacy to be assured.