COMMENTARY

Bhutans Gross National

Happiness
An Interrogation
Michael Givel

Despite Bhutans 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
GNHs equitable and sustainable
economic progress, good
governance, ecological
protection and cultural
preservation policy objectives.

Michael Givel (mgivel@ou.edu) teaches at the

Department of Political Science, University of
Oklahoma, the United States.

30

n 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 indicator to measure well-being in the world
(Costanza et al 2009; Marcus and Kane
2007; Choden and Kusago 2007). Wangchuck called for Bhutan to pursue development that balanced material economic
growth as measured by GDP to preserve
Bhutans 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 measurement of economic productivity (Kuznets
1934; Wolverson 2010). The GDP indicator 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 ascertain the impact of monetary, spending, and tax policies on economic productivity (Wolverson 2010). However,
Kuznets cautioned that GDP should not
be used as a broad indicator of general
welfare, including overall economic or

social well-being (Wolverson 2010; Gertner 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 consumption plus gross investment plus
government spending plus (exports minus imports) (Kuznets 1934). When calculating GDP, the measurement of production includes everything within national boundaries, regardless of what is
produced (Kuznets 1934). The use of the
exports-minus-imports factor removes expenditures 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 Conference a strong orthodoxy emerged among
the 44 nations in attendance that a primary 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 Monetary Fund (Easterlin 2000; Costanza
et al 2009; Thinley 2002). In recent
years, GDP has been the standard indicator of well-being among a number
of financial institutions, governments,
politicians, policy analysts and economists
(Costanza et al 2009; Thinley 2002).

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COMMENTARY
Figure 1: Bhutanese Annual Total GDP
1,600

In dollars, not adjusted for inflation

1,400

1,200

1,000

800

600

400

200

2000

2002

2004

2006

2008

2010

2000

2002

2004

2006

2008

2010

1998

1996

1994

1992

1990

1988

1986

1984

1982

Source: World Bank, 2011, World Development Indicators.

Figure 2: Annual Percentage of GDP Growth in Bhutan

25

20

(in %)

15

10

1998

1996

1994

1992

1990

1988

1986

1984

1982

0
Source: World Bank, 2011, World Development Indicators.

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 Bhutanese culture and values. In the West, a
new field of economic scholarly research
emerged that similarly concluded from a
secular perspective that happiness cannot only be determined by economic
factors (Graham 2009; Thinley 2002;
Easterlin 2000, 2003, 2004, 2005). In
1974, economist Richard Easterlin developed his groundbreaking Easterlin
Paradox (1974). The dominant economic theory posits happiness is linked
to a growth in income (Easterlin 2003).
The paradox arises because greater
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DECEMBER 12, 2015

happiness can be linked to short-term increases 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 consumed has more utility than subsequently
consumed goods and services (Easterlin
2005). In essence, the paradox reflects
that the more you have and want, presumably the less satisfied you will be.
The key variable measuring changes
in happiness is a complex change in
peoples aspiration over time, and not
simply a hedonistic sensory pleasure, such
as seeking of greater income and material wealth (Easterlin 2003). The reason
that many economists have concluded
vol l no 50

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 happiness is not just based on rati- onalistic
and objective economic income or
consumption-based measures (Graham
2009; Easterlin 2003). In conjunction
with income-based measures, he noted
that subjective measures of well-being
such as family matters, employment situations, healthcare, political democracy,
and domestic and international events,
also are important in determining individual happiness (Graham 2009; Easterlin 2000, 2004). The definition of happiness continues to expand to include
what citizens of a nation conclude themselves is their level of well-being (Easterlin
2000). Central to the examination of
subjective indicators linked with objective 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 argued
that social progress based solely on economics was suboptimal. The difference
though, from the Bhutanese perspective, 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
Bhutans king announced, Gross National Happiness is more important than
Gross Domestic Product (Dorji 2008).
The modern purpose of GNH as noted by
Royal Government of Bhutan is maintaining balance among economic productivity, ecological balance, cultural and
Mahayana Buddhist spiritual values,
and good governance (Royal Government of Bhutan 2000).
The development of quantitative indicators for GNH did not happen until
1998, after Jigmi Thinley, Bhutans prime
31

COMMENTARY
Figure 3: Recent Bhutan Government Debt as Percentage of Total GDP
90
80
70

(in %)

60
50
40
30
20
10

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

Source: Federal Reserve Bank of St Louis, Economic Research Division, FRED Graph Observations, Federal Reserve Economic
data, http://research.stlouisfed.org/fred2

minister, spoke to an international audience at the Asian-Pacific Millennium

meeting in Seoul, South Korea (2009).
The development of measuring happiness and well-being in GNH based on
quantitative factors began by identifying
four pillars of societal progress including: cultural preservation, ecological

protection, and good governance with

no corruption (Centre for Bhutan Studies 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 tankCentre for Bhutan Studies
has also recently developed 33 measures
based on national public opinion surveys
to 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 vitality
(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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DECEMBER 12, 2015

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COMMENTARY

2010 for all domains was 74.3% based

on a scale of 0% to 100% (Centre for
Bhutan Studies 2011c).

which calls for the balancing of material

needs with Mahayana Buddhist cultural
values is to remain viable the task of balancing the powerful forces and trends of
GDP Trends
economic modernisation and large inIn tandem with GNH, what has been the creases in GDP will need to be directly
impact of annual GDP growth in Bhutan addressed by the Bhutanese government
since the 1960s? According to the World in the years to come. Officially, GNH is
Bank and Bhutan Monetary Authority, more important than GDP in Bhutan; but
the growth or not of GDP
Table 1: Bhutanese Real GDP by Economic Subsectors
(%)
and
the diversification
Category
1980
1990
2000
2008
and
modernisation
of the
Agriculture, livestock and forestry
52.8 35.62 27.7 20.1
Bhutanese
economy
can
Wholesale and retail trade
15.5
4.66
4.5
4.4
Transport, storage and communications
4.3
6.62
9.1
5.0 be a powerful influence
Social services
10.8
16.8 14.3 11.0 on whether the effort to
Finance, insurance and real estate
6.3
8.73
7.1
9.3 maintain GNH in a viable
Mining and quarrying
0.6
.86
1.6
2.3
form is successful in
Manufacturing
3.2
7.71
8.2
8.5
maintaining traditional
Electricity, water and gas
0.2
8.66 11.4
19.1
cultural values. UltimateConstruction
7.9
8.42 14.0 11.5
ly, what is happening in
Hotels and restaurants
*
.18
.45
5.0
Bhutan is a lesson for all
* Included in wholesale, retail, and trade.
Source: Economic Development Policy of the Kingdom of Bhutan, 2010,
Asian nations throughout
Royal Government of Bhutan (Bhutan Ministry of Economic Affairs 2010).
the region. Traditional
cultural
values,
if they are preserved in
the annual percentage growth rate of GDP
per capita in Bhutan, measured in US dol- whole or part, will need to contend with
lars and not adjusted for inflation, has the values of global capitalism and modgrown exponentially from 1982 to 20101 ernisation with GDP trends being an im(Figure 1, p 31). Measured a different way portant benchmark of how this clash of
and tracking closely with this trend has economic and other policy goals is faring.
been the annual percentage of GDP
growth based on constant $2,0002 Notes
1 World Development Indicators 2011 by the
(Figure 2, p 31).
World Bank, available at: http://data.worldDue to the major commitment in Bhutan
bank.org/data-catalog/world-development-into transition into a modern economy and
dicators/wdi-2011; Trading Economics, 2015:
Bhutan GDP Annual Growth Rate, http://
state, public spending and debt, as a perwww.tradingeconomics.com/bhutan/gdpcentage of annual GDP, has been high3
growth-annual, accessed on 15 April 2015.
2 World Development Indicators 2011 by the
(Figure 3, p 32).
World Bank, available at: http://data.worldAs indicated in Table 1, from 1961 to
bank.org/data-catalog/world-development-in2010, Bhutan has continued to transition
dicators/wdi-2011.
from an economy based on subsistence 3 Federal Reserve Bank of St Louis 2011; FRED
Graph Observations, Federall Reserve Ecoagriculture to a diversified economy
nomic Data.
based on several important sectors,
including: social services, finance, in- References
surance, real estate, manufacturing, enCentre for Bhutan Studies (2011a): Bhutan GNH
ergy, construction (Royal Government
Index, Thimphu, Bhutan; available at: http://
www.grossnationalhappiness.com/articles/.
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 international economic policies, has remained
robust since GNH was introduced. If GNH,
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DECEMBER 12, 2015

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