Thailand's military coup to ouster its prime minister has been met with a yawn in the financial markets. Contrary to the gospel spread by some economists, financial markets are very poor forecast instruments of the future course of events, and that is why markets are so erratic and have a habit to swing violently according to the unfolding events, not according to any foresight, and statistically meaningless fluctuations of economic data. With regard to the military coup in Thailand, major financial media can only come up with a superficial view that the tourism in Thailand will be hurt, but everything else will be normal and fine. Political reactions from the global community to the coup are also low key. Self-proclaimed champion of spreading western style democracy around the world, USA, has failed to issue any strong condemnation of the coup; US has only demanded that Thailand to return to democracy quickly, but has not demanded the reverse of the coup and to restore the democratic constitutional condition before the coup. In contrary to the superficial reports that people in Thailand are enthusiastically supporting the coup, there are media reports that the scheduled general election in Thailand in October will be fair due to the cleaning of the election committee, and public opinion surveys suggest that the party of the ousted prime minister, with support mainly from rural areas, is leading in the polls. The coup seems to be designed to prevent the reelection of the party of the ousted prime minister. The consequence of this military coup in Thailand is actually much more far reaching than both financial media and US government have perceived, and deserves a detailed analysis here.
Developing countries can take advantage of the globalization scheme to jump-start their economy by attracting foreign manufacturing capitals. The attractions to multinational manufacturers are the low cost labor and loose environmental controls. Those countries undergoing this path also must provide a stable political environment. Those conditions are usually not compatible with a western style democracy. In a western style democratic society workers have the right to organize and have the freedom to demand higher wages. As foreign capital floods in and factories spring up, wage rises quickly. Also in a democratic society, people have the freedom of speech and will demand cleaner environments; thus production costs will be pushed up rapidly. When China, an authoritarian communist society, has opened the door to foreign capitals, western-manufacturing capitals have started a China gold rush, with newly democratized Southeast Asian countries left in the cold. The economic growth rates of those newly democratized countries have trailed far behind the growth rate of China. The discontents of general public in those countries are rising along with sharpened political confrontations. The oppositions will take every chance to stage mass demonstrations to force the reining political figures to resign, instead of waiting for the next election or using the method of removal provided by their constitutions. The situation before the coup in Thailand is not unique to that country alone. Similar situation has existed in Philippine, and mass demonstrations and sit-ins are currently underway in Taiwan in order to force scandal tinted President Chen to step down. Common sense tells us that once a military coup is allowed to stand, any elected leaders under the sanction of military after the coup must always look over their shoulders to please military, and only a phony democracy can emerge after the coup. A weak response from US government can be taken as a signal that USA is willing to tolerate such a fake democracy and military coup as an acceptable mean to destroy a democracy. This kind of timid reaction from US government may well encourage militaries in Philippine and Taiwan to follow the path of Thailand.
Some analysts are hailing the military coup in Thailand and claim that economic condition in Thailand will improve. Probably those analysts are fantasizing that the military junta will lower wages of Thailand's workers and allow more pollution to take place so that foreign manufacturers will move back to Thailand. However, any military backed governments have very poor track records in dealing with the economy, not like the authoritative communist system in China and the authoritative regime of late Chang Chin-Kuo in Taiwan that created Taiwan's economic miracle. If military coups spread to Philippine and Taiwan, hedge-funds that are investing in Southeast Asia will panic and run to the exit at once, and another financial crisis will befall to that part of the world.
The situation of Taiwan is especially critical for the whole globalization process. Taiwan is a geopolitical flash point with China at one side and US and Japan at the other side so that a military coup in Taiwan, whether bloodless or bloody, will trigger a US-China confrontation. Besides the geopolitical concerns, a coup in Taiwan will destroy any legitimacy of the globalization process itself. The globalization process is sold to the general public as the way to help developing countries to climb toward prosperity and democracy. The proponents of this process always quote Taiwan as the role model of globalization, though the fact is that Taiwan achieved its economic miracle during its era of authoritative political system, and most of its first generation manufacturing industries moved to China once it has become a democracy. If a military coup should occur in Taiwan, the political cover of globalization will be blown to pieces, and the naked truth that US is using globalization to run up huge trade deficits so that its consumers can spend beyond their means by borrowing from foreigners in the form of trade deficits will be exposed. Thus the globalization process will be subject to intensified attacks from its opponents who are worried that the run away trade deficit eventually will reduce USA into a banana republic. Clearly we must observe closely whether US government is capable to prevent the virus of military coup to spread to other Southeast Asia countries, especially to Philippine and Taiwan, after its weak response to the destruction of democracy in Thailand.