In recent decades, Thailand has been running one of the world’s most successful national marketing campaigns. Building on its reputation for hospitality, beautiful beaches and splendid food, the tourism ministry has created an image of Thailand as an exotic paradise where travellers are ushered from spa to floating market to Buddhist ruin, all beneath a never dimming tropical sun. In 2008, the country had more than 14 million visitors – neighbouring Cambodia had two million – and tourism was the country’s biggest source of foreign exchange. Sleepy islands like Koh Samui and Koh Chang are fishing for tourists where once they fished for sea bass; even the smallest Thai towns seem to have boutique hotels offering wi-fi and fancy coffee.

Now, however, the number of tourists visiting Thailand is beginning to level out and even to drop, perhaps because they have noticed what many Western governments, focused on the situations in Pakistan, Iraq and North Korea, have ignored: Thailand, once known as one of the most stable democracies in Asia, is in political and economic crisis. The scale and speed of the meltdown have been staggering. In 2001, I travelled in southern Thailand, through the three provinces near the Malaysian border. Most of the inhabitants there are Muslims, ethnically Malay people who speak their own dialect, and the region feels more like Malaysia than Buddhist central Thailand. At that time, the south seemed quiet. Women sold crispy fried chicken from handcarts at the side of the road, and Buddhist monks and Muslim prayer leaders walked down village streets. In Pattani, one of the larger towns, Western backpackers wandered through the market, where they stared at plates of biryani and mounds of jackfruit.

When I returned to the region five years later, it resembled a war zone. Militants opposed to the control of the Buddhist-dominated government in Bangkok had bombed markets, schools, monasteries, police stations and other public buildings; they kidnapped soldiers and local citizens and beheaded innocent people; they even attacked mosques, killing imams and worshippers. Many southerners now instinctively kept away from packages or baskets set down on the street, fearing they might contain improvised explosive devices. In response to the militants’ campaign, Thai security forces had set up checkpoints, machine-gun nests and roadblocks. Nearly every shop closed at dusk; many had closed for good for lack of customers. For the five days I was in the south, I didn’t see another foreigner.

The rest of Thailand has since followed a similar pattern. In September 2006, following months of street protests, the military launched a coup against the elected government, the first such coup in 15 years. Since then, violent demonstrations – some of them against the military regime and the government it installed, some in support of it, some interested only in causing chaos – have come to dominate life in Bangkok. In spring last year, demonstrators armed with Molotov cocktails and guns clashed with police across the capital, setting fire to buildings and causing at least six deaths and hundreds of injuries. At roughly the same time in the resort town of Pattaya, two hours south-east of Bangkok, demonstrators attacked the prime minister’s car, then smashed their way into the fancy hotels hosting a major regional summit, embarrassing the government by forcing the participating leaders to flee and the proceedings to be abandoned. Meanwhile, Thailand has junked the progressive constitution written in the 1990s, when, after the demise of the previous military regime, the country seemed to have built a reasonably stable democracy. Worse still is the return of the armed forces as a powerful force in politics. ‘I don’t know how we get out of this situation,’ a senior Thai diplomat conceded. ‘It seems like a spiral.’

From the perspective of the elites in Bangkok, the breakdown began early in 2001, with the election as prime minister of Thaksin Shinawatra, a tycoon and a politician unlike any who had come to power before in Thailand. With promises of huge amounts of aid to the poor and a sophisticated advertising campaign that presented him as a Michael Bloomberg figure, a billionaire businessman who knew how to get things done, Thaksin’s party won the election by one of the largest margins in the country’s history. In office, he fulfilled some of his promises to the rural poor, who are concentrated in the north and north-east, comprise a majority of the population, and voted overwhelmingly for his Thai Rak Thai (Thais Love Thais) party. He delivered inexpensive healthcare and oversaw a programme to distribute micro-loans to every village, designed to help the poor start up small businesses. These policies were significant: the rural poor had barely benefited from the economic boom of the 1980s and early 1990s, which had transformed Bangkok from a city of canals and floating markets into a high-rise capital of megamalls, office towers and latte bars. According to Michael Montesano, one of the most astute observers of Thailand, by 2007 household income in Bangkok was roughly three times that of households in the rural north-east. Indeed, while the urban middle classes have benefited from trade and globalisation, the rural poor have seen the agricultural sector collapse in the face of competition from China and giant Western agribusinesses.

Thaksin’s populist policies made much of this urban/rural, rich/poor divide. He has a demotic charm that enables him to communicate effectively with the poor and on the campaign trail farmers treated him like a god. In contrast to traditional Thai politicians, who expect people to grovel to them, Thaksin, despite his massive ego and equally massive fortune (Forbes estimated him to be worth $2.2 billion in 2006), managed to pretend to be the people’s servant. Arriving in villages in the north, his home region, he would make a humble wai, the Thai version of a bow, then listen to the most trivial complaints. It worked. In 2005, voters gave his party an even larger majority than in 2001; he and his allies now controlled 374 of the 500 seats in parliament.

By his second year in office, Thaksin had more than tripled government expenditure on anti-poverty programmes, and over his time in office the percentage of the population living in poverty fell by nearly half. But his policies also had a darker side. As Montesano notes, in many ways Thaksin resembled a Latin American caudillo more than a bland and consensus-building Thai leader. Not long after his election in 2001, he began dismantling the country’s democratic institutions. His allies bought stakes in many of the largest publishing groups and television stations. Many newspapers became slavishly pro-Thaksin, and the few journalists willing to pursue stories that didn’t reflect so well on him often found themselves frozen out. When, in 2004 and 2005, I visited the Bangkok Post, a leading English-language daily, I found that many investigative reporters had been assigned to interview local celebrities or encouraged to write stories that did not impugn the prime minister and his allies. Thaksin’s administration forced long-serving civil servants to retire, replacing them with cronies, and some of his relatives were appointed to key positions in the armed forces – his cousin became supreme commander of the military. Facing charges of illegally concealing his assets, Thaksin was narrowly acquitted by the constitutional court; afterwards several judges alleged that intense political pressure had swung the decision. With his encouragement, a cult of personality was built up around him: billboards of his grinning face adorned highways and buildings across the country, angering the monarchists by taking up space usually reserved for portraits of the beloved monarch, Bhumibol Adulyadej.

Worst of all were Thaksin’s policies in the south of the country. In Tearing Apart the Land, Duncan McCargo gives a thorough explanation of why unrest began in the region, and why it has spread. The southern provinces essentially formed an independent state until the turn of the 20th century, and have chafed at Bangkok’s rule ever since. In the 1960s and 1970s, separatists launched a spate of violent attacks, but by the 1980s and 1990s Bangkok seemed largely to have pacified the region, by directing more state money there and responding better to southerners’ complaints.

Thaksin reversed much of this. He dissolved the longstanding local council charged with dealing with these complaints, and increased the presence of the security forces, while a generation of southerners fell under the sway of militant leaders and took up the separatist cause. In 2001, several policemen were shot dead, apparently by snipers. The insurgency grew rapidly. According to McCargo, ‘the security policies of the Thai state in the south were a lamentable catalogue of criminal blunders, negligence, incompetence, lack of co-ordination and sheer misdirection … The militant movement consistently gained the upper hand in the southern border provinces, placing the Thai security forces firmly on the defensive.’

Initially, there was little to suggest that the insurgency had links to any sort of global Islamist movement, but the subsequent crackdown seems to have helped to transform a local conflict into one with international ties. (This is becoming a familiar pattern: in Somalia, American and Ethiopian incursions helped Islamists turn a local power struggle into a cause célèbre for militants around the world.) The Thai army’s response to the crisis in the south attracted the interest of Arab satellite TV stations, Islamist websites, charities and foreign militant groups, to whom some southerners may have looked for guidance. Yet, as McCargo notes, the conflict has been largely ignored by the Western press, and the Thai government, eager to keep on attracting tourists, has played it down.

The crisis soon escalated, with each move by the militants provoking a harsh and often counterproductive response. In April 2004, more than 30 suspected militants holed up in Krue Se Mosque, one of the best-known religious centres in the region. Although the minister of defence ordered the security forces to negotiate a peaceful resolution, they tossed grenades into the mosque and then stormed it, killing more than a hundred people and destroying much of the building. ‘Many of the dead,’ McCargo reports, ‘had apparently been beaten and shot repeatedly.’ Later that year, the army blundered again. After a demonstration in the village of Tak Bai, hundreds of local men were rounded up. They were tossed, hands bound, into crowded trucks, and driven away; at least 85 men suffocated inside the sweltering vehicles.

After these massacres, insurgents began targeting local officials, soldiers, policemen, monks and even primary school teachers. They burned down schools, and kidnapped and beheaded labourers walking to work. The Rand Corporation estimates that between January 2004 and August 2007, militants in the south detonated no fewer than 1189 bombs and took part in 3253 drive-by shootings and assassinations. Southern Buddhists, now a terrified minority, set up paramilitary groups themselves, making the atmosphere even more tense. Bangkok had imposed martial law in the region in 2004 and when I visited in 2006, my contacts complained incessantly about men being taken from their homes at night by members of the security forces, never to return. McCargo claims that, in one village, a Muslim family of nine was shot dead at point-blank range, probably by the security forces. Human rights groups claim that the security forces have tortured suspects and beaten imams to death: a well-known local human rights lawyer called Somchai Neelapaichit vanished. I saw secondary school students walking home in large groups, the better to guard against being seized by insurgents or the army.

Thaksin sparked an almost irrational level of anger among Thailand’s traditional elites – monarchists, Bangkok professionals, big businessmen – but not because of his actions in the south. Some of these people, who had fought for decades to modernise and democratise the country, abhorred his autocratic style. Others couldn’t stand his confrontational methods: he didn’t solve problems in the traditional Thai way, through backroom deals that allowed everyone to save face. Many feared too – correctly, as it turned out – that once the rural poor had seen the real power of their vote, they would never again tolerate the old oligarchic order.

Yet the traditionalists did not respond by trying to strengthen the institutions Thaksin had subverted – the media, for example, or the courts – or by rebuilding the Democrat Party. Instead, they chose to tear Thai democracy apart in order to bring Thaksin down. In 2006, Bangkok’s upper classes launched noisy street protests under the banner of the People’s Alliance for Democracy. Just like the old German Democratic Republic, the PAD called itself democratic precisely because it wasn’t. Its protests didn’t attract many followers from outside Bangkok; one of its proposals was that a number of elected members of parliament should be replaced by appointees, presumably because the rural poor could not be trusted at the ballot box. Dressed in yellow, the colour of Thailand’s monarchy, PAD demonstrators occupied parliament and, later, Bangkok’s main airport. During the siege of parliament, someone set off a car bomb, and in the subsequent clashes two people were killed and at least 400 injured. The security forces often stood by as the PAD ran roughshod; some police officers even exuberantly put their arms round PAD protesters holed up in the airport.

After the September 2006 coup, young women put garlands on soldiers patrolling the streets of Bangkok, unconcerned that the PAD had invited back into politics a force that has launched 18 coup attempts since 1932. (The US and most other Western nations took a benign view of the coup; although Washington formally condemned the takeover it did not cancel joint military exercises with Thailand, and privately made it clear that the bilateral relationship would be unaffected.) ‘The military was the best option,’ one long-time Thai diplomat told me. ‘We had to stop democracy to save democracy.’

Street demonstrations seem to have become a permanent fixture in Bangkok. After the coup, and the subsequent questionable judicial decisions which disqualified pro-Thaksin candidates from standing as prime minister, the elites were able to instal Abhisit Vejjajiva, a suave young British-educated technocrat who was about as comfortable dealing with the working class as Prince Philip. (Following the coup, Thaksin went into exile, and now spends much of his time in Dubai, from where he regularly broadcasts messages back to Thailand.) Convinced, with some reason, that they had been disenfranchised, the rural poor dressed themselves in red, Thaksin’s colour, and marched on Bangkok. Like the yellow shirts, the red shirts were prepared to use violence. Last April, gunmen pulled alongside the car of Sondhi Limthongkul, the head of the PAD, and fired at it. He survived, though doctors had to remove bullet fragments from his skull. That same week, red shirt protesters in Bangkok clashed with the police and army, torching cars, firing rifles and lobbing small bombs. (In a twist typical of Thailand, famous for its sexual tolerance, transvestites in red shirts reportedly taunted the military with impromptu stripteases.)

Not surprisingly, the constant political turmoil has affected Thailand’s economy, already hit hard by the global financial crisis, since the country depends not only on tourism but on manufacturing exports to the West. The boom times of the early 1990s, when chauffeured Mercedes clogged Bangkok’s streets, seem like another age. The economy contracted by more than 3 per cent in 2009, and its long-term future appears little brighter. Major employers like Toyota are slashing jobs, and a weak education system means that the country produces few successful entrepreneurs.

After the coup, the military, led by a Muslim general, initially attempted to soothe tensions in the south. But conciliation proved futile. By the end of 2008, more than 3000 people had been killed in the south since the beginning of the decade. Bangkok still refuses to consider any form of real autonomy for the region, although many southerners agree that this would be the only solution. The violence has begun to spill into Malaysia, and has ruined any hope of economic integration across the Thai-Malay border. McCargo is pessimistic about the future:

The militants are now in the ascendant … In some areas [of the south] movement sympathisers constitute more than half or two-thirds of the population, though some of these are passive sympathisers who are playing along largely as a survival strategy. In many parts of the three provinces, the Thai state has little real authority … Their incompetence and lack of stomach for fighting exposed, the Thai military sought to subcontract and privatise the conflict … There was little evidence that anyone could stop the militant violence.

It is difficult to see a way back to stability. Right now, even a free election would be unlikely to calm things down. As Montesano notes, it would probably return Thaksin or his proxies to power, which would provoke his enemies all over again. The rural poor will never go back to the days when they simply accepted the rule of Bangkok. Yet the elites remain unwilling to give up any of their power. The anti-Thaksin forces are doing nothing to help calm the situation. In recent years, Thailand’s courts have been on the offensive against the former prime minister. Some observers speak of a judiocracy: courts hand down decisions hamstringing opponents of the Democrats, the military and the crown. (The king has given several speeches essentially calling on the judiciary to play precisely this role.) People on the wrong side of court decisions are given little room to appeal. In February the courts seized the majority of Thaksin’s assets; his allies vowed to fight on, calling for a million-person march in Bangkok. With Thaksin gone, his supporters have formed their own self-sustaining networks, which will probably survive even if he is no longer able to fund them. From exile, Thaksin promises: ‘I haven’t received justice and I will not give up.’

Thailand’s globalised economy may lead to even greater inequality between those who benefit from trade and investment and those, in the countryside, who do not. The Thais are also divided by religion: the violence in the south has turned Muslims against Buddhists, generating tensions between the two groups in other parts of the country.

Meanwhile, Bhumibol’s health is declining. At 83, he is the world’s longest reigning monarch, and the only remaining force holding Thai society together. There is good reason to fear that the political system will disintegrate after his death. Though in theory a constitutional monarch, the king actually wields great power. The government is advised, quietly, by his privy council of shadow ministers, a group McCargo calls the ‘network monarchy’. At critical moments, Bhumibol has mediated between opposing political forces; he helped to end previous protests against the military in 1973 and 1992 before too much blood had been spilled. Strict lèse majesté laws protect the king from public criticism and many Thais worship him almost as a god (indeed, the palace and various members of the political elite are essentially campaigning for his deification). In recent months, worn down by frequent fevers, he has rarely ventured out in public; in the autumn, rumours of a turn for the worse in his health sent the stock market tumbling.

Even in this condition, many Thais still hope that the king might bring the yellow and the red shirts together, for who else is there? Not his son and heir apparent, Crown Prince Maha Vajiralongkorn, a hothead who enjoys little respect even among the Thais who idolise his father. Many monarchists, who already despise Thaksin for challenging the power of the king, fear that the crown prince, who is known to be close to Thaksin, will create an opportunity for the exile to return. Few will speculate in public about the king’s future, but everyone tacitly admits that the country, which has muddled through so many crises, might collapse when he dies. According to one Thai legend, the Chakri dynasty, founded in 1782, will perish after its ninth monarch dies. Bhumibol, also known as Rama IX, is the ninth Chakri king.