Bhutans Gross National Happiness

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COMMENTARY

DECEMBER 12, 2015 vol l no 50 EPW Economic & Political Weekly30

Michael Givel ([email protected]

) teaches at theDepartment of Political Science, University of

Oklahoma, the United States.

Bhutan’s Gross NationalHappiness

An Interrogation

Michael Givel

Despite Bhutan’s deliberate

policy direction of promoting

non-economic goals embodied

in gross national happiness over

gross domestic product, does GNH

still incorporate the promotion

of material well-being through

adequate living standards based

on economic progress? This

article examines whether GDP is

an incompatible policy objective

or outcome when balanced with

GNH’s equitable and sustainable

economic progress, good

governance, ecological

protection and culturalpreservation policy objectives.

In 1972, the fourth king of Bhutan,

Jigme Singye Wangchuck, declared

that gross national happiness (GNH)

was more important than gross domestic

product (GDP). GDP is the primary indi-

cator to measure well-being in the world

(Costanza et al 2009; Marcus and Kane

2007; Choden and Kusago 2007). Wang-chuck called for Bhutan to pursue devel-

opment that balanced material economic

growth as measured by GDP to preserve

Bhutan’s traditional culture and society,

while channelling modernisation and

economic growth reflected by GDP.

Simon Kuznets, a Nobel Prize winning

American economist, first conceived of

GDP in 1934 when he assisted the United

States (US) Department of Commerce in

developing a standardised measure-

ment of economic productivity (Kuznets

1934; Wolverson 2010). The GDP indica-

tor was developed to aid President

Franklin D Roosevelt in measuring New

Deal policies used to counter the impact

of the great depression (Wolverson 2010).

Subsequent to the New Deal, economists

and policy analysts have used GDP to as-

certain the impact of monetary, spend-

ing, and tax policies on economic pro-

ductivity (Wolverson 2010). However,

Kuznets cautioned that GDP should notbe used as a broad indicator of general

welfare, including overall economic or

social well-being (Wolverson 2010; Gert-

ner 2010). Kuznets wrote, “…the welfare

of a nation can scarcely be inferred from

a measure of national income” (1934;

Costanza et al 2009; Marcus and Kane

2007). Rather, Kuznets argued that GDP

should address narrower issues such as

economic growth, or what is spent on

particular goods and services (Costanza

et al 2009; Kuznets 1934).

GDP measures the market value of all

goods and services produced within a

country in a particular time period

(Kuznets 1934). Economists calculate

GDP by totalling national private con-

sumption plus gross investment plus

government spending plus (exports mi-

nus imports) (Kuznets 1934). When cal-culating GDP, the measurement of pro-

duction includes everything within na-

tional boundaries, regardless of what is

produced (Kuznets 1934). The use of the

exports-minus-imports factor removes ex-

penditures on imports not produced in

the nation, and adds expenditures of

goods and services produced which are

exported, but not sold in a nation

(Kuznets 1934).

In 1944, at the Bretton Woods Confer-

ence a strong orthodoxy emerged among

the 44 nations in attendance that a pri-

mary measure of human well-being

would be economic progress based on

GDP. Subsequently, this was adopted by

international financial institutions like

the World Bank and International Mon-

etary Fund (Easterlin 2000; Costanza

et al 2009; Thinley 2002). In recent

years, GDP has been the standard indi-

cator of well-being among a number

of financial institutions, governments,politicians, policy analysts and economists

(Costanza et al 2009; Thinley 2002).



COMMENTARY

Economic & Political Weekly EPW DECEMBER 12, 2015 vol l no 50 31

Other Criticisms of GDP

About the same time Bhutanese king

announced in 1972 that GNH was a more

relevant measure of well-being than GDP

in terms of preserving traditional Bhuta-

nese culture and values. In the West, a

new field of economic scholarly research

emerged that similarly concluded from a

secular perspective that happiness can-

not only be determined by economic

factors (Graham 2009; Thinley 2002;

Easterlin 2000, 2003, 2004, 2005). In

1974, economist Richard Easterlin deve-

loped his groundbreaking Easterlin

Paradox (1974). The dominant econo-

mic theory posits happiness is linkedto a growth in income (Easterlin 2003).

The paradox arises because greater

happiness can be linked to short-term in-

creases in income, but long-term rises in

income are not met with a congruent

increase in happiness (Easterlin 2003).

This is due to a declining marginal utility

in which the first good or service con-

sumed has more utility than subsequently

consumed goods and services (Easterlin

2005). In essence, the paradox reflects

that the more you have and want, pre-

sumably the less satisfied you will be.

The key variable measuring changes

in happiness is a complex change in

people’s aspiration over time, and not

simply a hedonistic sensory pleasure, such

as seeking of greater income and mate-rial wealth (Easterlin 2003). The reason

that many economists have concluded

that greater income leads to greater

happiness is that they have measured

happiness at a “point in time” and not

over a “life cycle” (Easterlin 2004, 2005).

Easterlin also pointed out that happi-

ness is not just based on rati- onalistic

and objective economic income or

consumption-based measures (Graham2009; Easterlin 2003). In conjunction

with income-based measures, he noted

that subjective measures of well-being

such as family matters, employment sit-

uations, healthcare, political democracy,

and domestic and international events,

also are important in determining indi-

vidual happiness (Graham 2009; Easter-

lin 2000, 2004). The definition of happi-

ness continues to expand to include

what citizens of a nation conclude them-

selves is their level of well-being (Easterlin

2000). Central to the examination of

subjective indicators linked with objec-

tive indicators are differing impressions

in various societies of how aspirations

are linked to greater happiness and

well-being. Other scholars have reached

similar conclusions (Coleman 2010;

Cummings 2000; Kahneman and Krueger

2006; Wiseman and Brasher 2008). In

an interesting convergence, some Western

and Bhutanese critics of GDP both arguedthat social progress based solely on eco-

nomics was suboptimal. The difference

though, from the Bhutanese perspec-

tive, is that the criticism of GDP was in

reaction to modernisation and capitalism

irreparably changing the nature of a

traditional Mahayana Buddhist society.

History of GNH Policy

As indicated earlier, the policy effort

to encourage GNH as a development

approach commenced in 1972, when

Bhutan’s king announced, “Gross Na-

tional Happiness is more important than

Gross Domestic Product” (Dorji 2008).

The modern purpose of GNH as noted by

Royal Government of Bhutan is main-

taining balance among economic pro-

ductivity, ecological balance, cultural and

Mahayana Buddhist spiritual values,

and good governance (Royal Govern-

ment of Bhutan 2000).

The development of quantitative indi-cators for GNH did not happen until

1998, after Jigmi Thinley, Bhutan’s prime

Source: World Bank, 2011, World Development Indicators.

Figure 1: Bhutanese Annual Total GDP

1,600

1,400

1,200

1,000

800

600

400

200

0

I n d o l l a r s , n o t a d j u s t e d f o r i n f l a t i o n

1 9 8 2

1 9 8 4

1 9 8 6

1 9 8 8

1 9 9 0

1 9 9 2

1 9 9 4

1 9 9 6

1 9 9 8

2 0 0 0

2 0 0 2

2 0 0 4

2 0 0 6

2 0 0 8

2 0 1 0

Figure 2: Annual Percentage of GDP Growth in Bhutan

25

20

15

10

5

0

1 9 8 2

1 9 8 4

1 9 8 6

1 9 8 8

1 9 9 0

1 9 9 2

1 9 9 4

1 9 9 6

1 9 9 8

2 0 0 0

2 0 0 2

2 0 0 4

2 0 0 6

2 0 0 8

2 0 1 0

Source: World Bank, 2011, World Development Indicators.

( i n % )



COMMENTARY

DECEMBER 12, 2015 vol l no 50 EPW Economic & Political Weekly32

minister, spoke to an international audi-

ence at the Asian-Pacific Millennium

meeting in Seoul, South Korea (2009).

The development of measuring happi-

ness and well-being in GNH based on

quantitative factors began by identifying

four pillars of societal progress includ-

ing: cultural preservation, ecological

protection, and good governance with

no corruption (Centre for Bhutan Stu-

dies 2011a, 2011c). For the purposes of

further analysis of GNH on Bhutanese

society the four pillars have been

expanded into nine domains including:

standard of living, good governance, time

use and balance, vitality and diversity of

community/cultural/ecosystem, health

of the population, education, and

psychological well-being (Centre for

Bhutan Studies 2011a, 2011c; Thinley

2009). The Thimphu, Bhutan-based

think tank—Centre for Bhutan Studies

has also recently developed 33 measures

based on national public opinion surveysto assess national well-being as reflected

in the nine domains (Centre for Bhutan

Studies 2011a, c; Thinley 2009).

For the purposes of the 2010 GNH

Index, happiness was defined as being

happy in at least six out of nine domains

(Centre for Bhutan Studies 2011b). The

2010 GNH index survey found that 41%

of Bhutanese were happy, while 59% of

Bhutanese were not happy (Centre for

Bhutan Studies 2011c). The Bhutanese

were on the average, happiest in health,

environmental protection, psychological

well-being, and community vital ity

(Centre for Bhutan Studies 2011c). By

subgroups, the happiest people, on the

average, were civil servants, monks

and nuns, single people and young people

(Centre for Bhutan Studies 2011c). The

overall average rating for happiness in

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Figure 3: Recent Bhutan Government Debt as Percentage of Total GDP

Source: Federal Reserve Bank of St Louis, Economic Research Division, FRED Graph Observations, Federal Reserve Economic

data, http://research.stlouisfed.org/fred2

90

80

70

60

50

40

30

20

10

0

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

( i n % )



COMMENTARY

Economic & Political Weekly EPW DECEMBER 12, 2015 vol l no 50 33

2010 for all domains was 74.3% based

on a scale of 0% to 100% (Centre for

Bhutan Studies 2011c).

GDP Trends

In tandem with GNH, what has been the

impact of annual GDP growth in Bhutan

since the 1960s? According to the WorldBank and Bhutan Monetary Authority,

the annual percentage growth rate ofGDP

per capita in Bhutan, measured in US dol-

lars and not adjusted for inflation, has

grown exponentially from 1982 to 20101

(Figure 1, p 31). Measured a different way

and tracking closely with this trend has

been the annual percentage of GDP

growth based on constant $2,0002 (Figure 2, p 31).

Due to the major commitment in Bhutan

to transition into a modern economy and

state, public spending and debt, as a per-

centage of annual GDP, has been high3

(Figure 3, p 32).

As indicated in Table 1, from 1961 to

2010, Bhutan has continued to transition

from an economy based on subsistence

agriculture to a diversified economy

based on several important sectors,

including: social services, finance, in-

surance, real estate, manufacturing, en-

ergy, construction (Royal Government

of Bhutan 2010).

In Conclusion

While a primary policy goal of Bhutan

has been forwarding GNH as a primary

policy objective, GDP has remained a key

feature of evaluating social progress,

including in Bhutan. In this context, GDP,

which is geared to domestic and interna-tional economic policies, has remained

robust since GNH was introduced. If GNH,

which calls for the balancing of material

needs with Mahayana Buddhist cultural

values is to remain viable the task of bal-

ancing the powerful forces and trends of

economic modernisation and large in-

creases in GDP will need to be directly

addressed by the Bhutanese government

in the years to come. Officially, GNH ismore important than GDP in Bhutan; but

the growth or not of GDP

and the diversification

and modernisation of the

Bhutanese economy can

be a powerful influence

on whether the effort to

maintain GNH in a viable

form is successful in

maintaining traditional

cultural values. Ultimate-

ly, what is happening in

Bhutan is a lesson for all

Asian nations throughout

the region. Traditional

cultural values, if they are preserved in

whole or part, will need to contend with

the values of global capitalism and mod-

ernisation with GDP trends being an im-

portant benchmark of how this clash of

economic and other policy goals is faring.

Notes

1 World Development Indicators 2011 by theWorld Bank, available at: http://data.world-bank.org/data-catalog/world-development-in-dicators/wdi-2011; Trading Economics, 2015:“Bhutan GDP Annual Growth Rate,” http://

www.tradingeconomics.com/bhutan/gdp-growth-annual, accessed on 15 April 2015.

2 World Development Indicators 2011 by theWorld Bank, available at: http://data.world-bank.org/data-catalog/world-development-in-dicators/wdi-2011.

3 Federal Reserve Bank of St Louis 2011; FREDGraph Observations, Federall Reserve Eco-nomic Data.

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Documents

Bhutans Gross National Happiness