Thai prime minister Thaksin Shinawatra rang in the new year with his trademark: sensational promises. Addressing supporters at an open-air stadium in Bangkok, the tycoon turned populist foretold a nation transformed in "a golden year for Thais all over the country." In a country where nearly 2 million people are unemployed and one in three people never makes it past primary school, Thaksin vowed: "All children of school age will get a chance to study! All people of working age will be employed!"

Decked out in the blue, white and red of the national flag, the crowd rained cheers on Thaksin, who has emerged as the most outspoken and controversial Asian leader of the new millennium. In a region where most parties are built around personalities, not policies, Thaksin uniquely delivers both. With Thais still angry over the flight of foreign funds during the Asian crisis of 1997, he vowed to build an economy less dependent on foreign creditors and exports, more reliant on Thai consumers and entrepreneurs. His results in 2003: the stock market shot up 87 percent and the economy grew 6.3 percent, second fastest in the world after China.

Now, with Thaksin promising even faster growth this year, his firebrand nationalism is winning approval ratings of more than 80 percent, while critics worry that Thaksin is openly transforming Thailand from a fledgling free-market democracy into something more akin to China, where the ruling party sees freedom primarily as a financial concept. "Democracy is a good and beautiful thing, but it is not the ultimate goal," Thaksin said last month on Thai Constitution Day. "Democracy is just a tool... The goal is to give people a good lifestyle, happiness and national progress."

Thaksin is consolidating the levers of state control in ways that borrow from virtually every known model of command economics. He was the nation's leading tycoon before taking office and has since stocked his administration with businessmen and relatives. He has slapped price controls on doctors' services and (temporarily) on fuel, and topped China's river-moving schemes with a proposal to cut a $35 billion canal across the Isthmus of Kra that would shorten shipping between East Asia and Europe. In November he prepped Bangkok for a summit of Pacific nations with the kind of measures often seen in Beijing: sweeping the streets clean of migrants, covering over slums with huge billboards.

On the global level, Thaksin has led incipient efforts to create new cartels for sugar-, rubber- and rice-producing nations devastated by the global slump in commodity prices. He is creating a state investment fund designed, in part, analysts say, to enable Bangkok to combat foreign speculation in its markets, as Tokyo and Hong Kong have done in the past. And while Italians fret that their own tycoon turned prime minister controls most of Italy's TV stations, Thaksin or his relatives control all Thai TV stations.

Thaksin's strategy--known as Thaksinomics--is a deliberate departure from free-market norms, and establishes him as a cutting-edge practitioner of state control. His main focus is on heavy public spending and easy money for local corporations and individuals as well. Thaksin's use of tax and lending authority to funnel money directly to consumers is another novelty for Asia, where leaders traditionally urged individuals to work hard and save to create pools of capital for industrial development, not personal consumption. Thaksinomics "is not a miracle," says a Western banker in Bangkok. "It's certainly something different than what we've had in Thailand in the past few years. And it's very political because Thaksin is so strong."

Thaksin's policies are a response to what he calls the "time of darkness." Like neighboring Asian tigers, Thailand's export-driven economy overheated, driving up prices, weakening competitiveness and ultimately collapsing the local currency in 1997. The falling baht made it impossible for Thai companies to repay billions in short-term foreign loans, precipitating a crash in the stock and real-estate markets. The economy shrank 10 percent in 1998, and it took a $3.4 billion International Monetary Fund bailout to end the nose dive.

In the three years that followed, Thailand imposed austerity measures and began to break incestuous links between politicians, big business and the banks. These reforms, pursued under IMF pressure, proved deeply unpopular, and Thaksin's Thai Rak Thai (Thais Love Thais) party exploited the backlash. Thaksinomics began as a campaign vow to free local industry from the whims of global markets, and led to a watershed victory in January 2001 elections.

To spur grass-roots entrepreneurship, Thaksin began creating low-interest loans and other supports for the rural poor. His government froze $1.6 billion in farm debts and offered every citizen health care for 75 cents per trip to the doctor. Banks were mobilized to supply easy credit to small and medium enterprises, and the government handed $23,000 to each of Thailand's 70,000 hamlets to bankroll a "one village, one product" manufacturing revolution.

As the economy grew in 2003, so did tax collections, allowing Thaksin to repay the IMF ahead of schedule and to boast that Thailand would "never again fall prey to world capitalism." He bridled at those who overlooked this landmark to criticize him for gutting official commissions that monitor human rights and elections, and winking at the deaths of more than 2,000 suspects in his war on drugs this year. (Thaksin insists the drug dealers died in their own cross-fire.) "Had we made any mistakes in our economic policies," Thaksin declared triumphantly during a recent speech in Manila, "we would have been severely punished by our 'well-wishers' in the international media as well as those still stuck with the old paradigm of economic analysis."

Thaksin's new paradigm is actually an old formula of Keynesian public spending and loose credit to boost consumption. This can be healthy, if the credit goes to productive uses and stays under control. The state-run banks have doled out $3.4 billion to small and medium enterprises. That's a significant sum in a $130 billion economy, yet entrepreneurial production appears to be playing a small part in the boom. Many borrowers are using state credit to buy mobile phones or motorcycles or repay old debts, even though the fund is intended solely for new businesses.

The government claims a 97 percent repayment rate, but that's misleading. According to the opposition Democratic Party, half of the borrowers can't generate enough income to repay. Some borrow from loan sharks to repay the fund, then borrow anew from the fund to settle with the loan sharks and walk away with money to burn. "You'll find that these people, over the next few years, won't be able to pay it back," says Pat Piek, a clothing-store owner in Bangkok, who opted not to take out a micro credit loan two years ago.

In the meantime, however, sales of everything from cell phones to cement have mushroomed as poor Thais find easy money. Low-interest home loans underpin a sharp recovery in real estate, and other industries are likewise expanding on credit. "As people buy things like cars and motorbikes, that pushes the numbers up," says one Western banker. "It's consumer-credit driven."

Once again runaway debt is the key threat, and it is not confined to consumers. Since the '97 crisis, Thailand has made far less headway than neighbors like South Korea in cleaning up bad corporate loans. Six years on, International Monetary Fund economists Vikram Haksar and Piyabha Kongsamut recently pointed out, Thai companies remain "among the most highly leveraged in the region," with "a full 25 percent" of public companies facing debt-servicing difficulties. Thaksin has defended the right of debtors to hold on to bankrupt properties, rather than face the cleansing fire of a forced sale at rock-bottom prices.

The question, says economist Pasuk Pongpaijit, is whether Thaksin's generosity to debtors can inspire the confidence and investment necessary to sustain the growth spurt. Several key indicators point to trouble, including foreign direct investment, which has fallen from $2.5 billion in 1996 to $1.5 billion last year. One Western "vulture capitalist" says he quit looking for distressed real estate in Thailand because Thaksin's "nationalistic campaign against foreign fund invaders" encouraged debtors to hold out for higher prices. "Thaksin's thinking was that the Thai economy would grow, and that if debt were pushed off it would go away or become manageable later," says the investor. "It's the Japanese model."

As in Japan, where the state put off reforms for a "lost decade," debts will mount if left unresolved. Only rapid growth and asset inflation can keep debtors ahead of the game, which may explain why Thaksin last year fought off a proposal to prick the looming stock-market bubble by restraining debt financing of share purchases. Unlike 1997, when the crash centered in Bangkok, the next downturn could hit poor villages across the country, trapping millions of poor people in debt.

Observers also worry that Thailand is steadily reverting to the crony capitalism endemic prior to 1997. Thaksin is the son of a silk-trading family, who became a police lieutenant general and later used his contacts to build a business selling computers to the government. His Shin Corp. evolved into Thailand's largest company, built mainly on telecommunications. Thaksin passed control of Shin to his son before taking office, and insists he has done nothing to help the business since. Yet accusations persist. The Shin Corp. recently sued a civic group called Campaign for Popular Media Reform along with editors of the Thai Post for asserting that the company used Thaksin to win business concessions. Market analysts say shares in companies with ties to Shin trade at a "Thaksin premium" of roughly 10 percent, based on the assumption that Shin has friends in high places.

Even before Thaksin took office, the Thai state owned most radio and television broadcasters, as a legacy of decades of military rule. As Thaksin was preparing to run for prime minister, Shin bought a controlling stake in the nation's sole independent TV broadcaster, iTV. Media watchers say Thaksinomics tends to get glowing coverage in outlets under his government's or family's influence. Last week a report by the Thai Journalists Association said advertisers now shun "newspapers which presented negative reports about the government," creating "a climate of fear and self-censorship." Economist Juanjai Ajanant says Thaksin can conduct "a damn good PR campaign, because he controls most of the media."

Thaksin's growth machine is likely to keep rolling long enough to carry his party to victory in parliamentary elections set for 2005, thus tightening its grip on power. Thaksin is now forecasting 8 percent growth in 2004, rising to 10 percent in 2005, spurred on by his plan to invest $25 billion over the next five years on new roads, railways and bridges. Lately, Thaksin's ambitions appear to be spreading regionwide, with plans to extend these new transport lines into poorer neighboring countries, including Cambodia and Laos.

The legacy of Thaksinomics depends on what happens after the current orgy of consumption. If a new class of grass-roots entrepreneurs emerges to sustain growth, then Thaksin may fulfill the expectations of analysts who see him as the leader of a newly effective breed of popular reformer (following story). Thailand will emerge as the leading model of successful resistance to unbridled globalization, taking over the role played by longtime Malaysian leader Mahathir Mohamad. "He aspires to be Mahathir's successor," warns Abhisit Vejjajiva, deputy leader of the opposition Democratic Party, who sees this as "a recipe for disaster." It's worth recalling, however, that Mahathir retired only last October, after 22 years of exercising tight state control over an economic miracle. Thaksin could do worse.