Zen Economics: Gross National Happiness

If I mention the country of Bhutan most people will look glazed and struggle to think where this place is in the world. Well, it's a landlocked nation in the Himalayas, sandwiched between India and China. Until earlier today it was famous as a kingdom with absolute monarchic rule for the past 100 years. It's just over 18,000 square miles with a population of some 675,000. Its official languages are Dzongkha (pronounced Jong-ka) and English. Its main releigion is Buddhism.

It made a major move toward modern democracy in 1998 when King Jigme Singye Wangchuck transferred most of his administrative powers to the Council of Cabinet Ministers and allowed for impeachment of the King by a two-thirds majority of the National Assembly. In 1999, the government lifted a ban on television and the Internet, to become one of the last countries to introduce television. The King said that "television was a critical step to the modernisation of Bhutan as well as a major contributor to the country's Gross National Happiness"; Bhutan is the only country to measure happiness.

The King announced in December 2005 that he would abdicate the throne in his son's favour in 2008, but shocked the country by abdicating in December 2006. Bhutan entered a new era of democracy. Elections for the upper house (National Council) were held on December 31, 2007, while elections for the lower house, the 47-seat National Assembly, were held on March 24, 2008. Yesterday, the Druk Phuensum Tshogpa (DPT, also known as the Bhutan Prosperity Party) won 44 of 47 seats in the National Assembly Candidates. DPT President Jigmi Thinley is expected to be the country's next prime minister, a post he has held twice before. But this time, he will lead the country as Bhutan's king ends a century of dynastic rule that has been largely peaceful.

Gross National Happiness (GNH) is an attempt to define "quality of life" in more holistic and psychological terms than Gross National Product (see more explanation). The term was coined by King Wangchuck in 1972 in response to criticism that Bhutan's economy was growing poorly. It signaled his commitment to building an economy that would serve Bhutan's unique culture based on Buddhist spiritual values.

When an analyst on Bloomberg discusses on TV how investors are being attracted to GNH it's time to take it seriously, I guess (see report). That's what happened this morning, in between another bought of selling on Wall Street. Whether it's the yak-butter tea that Bhutan "calculators" serve or it's the zen-like atmosphere in the country something has persuaded some 300 American and European bankers and businessmen to make the grueling journey to Bhutan (which is smaller than Switzerland, with 180 broadband subscribers, and only five elevators). Bhutan's Royal Securities Exchange (with only a handful of traded companies) has a trading bell that only rings on Tuesdays and Fridays at 11 am--not quite like the New York Stock Exchange.

My favourite economic institution, the IMF, reported on this in concept an August 2005 IMF Survey (see reference). But the term still gets little or no mention official public documents (see latest Public Information Notice). However, the IMF reports that its "sister institution", the World Bank (regarded as more "touchy feely" and "people friendly") "aligned its 2005 Country Assistance Strategy (CAS) for the FY06/09 period aligns with Bhutan’s distinctive vision of Gross National Happiness and the priorities and goals of the 9th Five-Year Plan (9FYP)/PRSP. The 10th Plan will be cast in the same GNH framework (see IMF report).

This discovery of GNH is a refreshing revelation for an economist especially when you hear of Wall Street types who subscribe to this idea saying that they sometimes cannot do a deal because they know it's wrong. Where were these people during the subprime mortgage build-up?