Exporting Shangri-La - The Great Invention: The Story of GDP and the Making and Unmaking of the Modern World - Ehsan Masood

The Great Invention: The Story of GDP and the Making and Unmaking of the Modern World - Ehsan Masood (2016)

Chapter 7. Exporting Shangri-La

By now, I’ve learned that the ingredients for happiness are simple: giving, loving, and contentment for who you are.

—Lisa Napoli, Radio Shangri-La: What I
Discovered on My Accidental Journey to the
Happiest Kingdom on Earth

In 1971, Bhutan’s crown prince Jigme Singye Wangchuck ascended the throne following the sudden and untimely death of his father from a heart attack. The new king was just sixteen. In a larger nation, or in a more mature monarchy, the idea that a young person, not yet out of high school, could take on the responsibilities of head of state would be unthinkable. But Bhutan’s new king was wise beyond his years. Already experienced in aspects of statecraft, he was more than ready to take this small, landlocked picture-postcard nation out of the 19th century and into the 21st.

Whereas Mahbub ul Haq needed a decade’s worth of experience as an economic planner to see the problems inherent in GDP-centric development, the fourth king Wangchuck would not need nearly as much time. He would, moreover, have the vision to connect Haq’s concerns with Maurice Strong’s environmentalism—something neither man had managed to do. The teenage king would be the first head of state to attempt a synthesis between greenery and growth, and between growth and well-being. The idea that he would champion has come to be called Gross National Happiness.

“Our country’s policy,” he said shortly after being crowned king, “is to consolidate our sovereignty, to achieve economic self-reliance, prosperity and happiness for our people.” In a speech to mark Bhutan’s membership in the United Nations, the king uttered the now-famous words: “Gross National Happiness is more important than Gross National Product.”1

In the intervening four decades, Bhutan has tried to show the world that it should be possible for a relatively poor nation to become prosperous without sacrificing important elements of its culture and lifestyle; that it should be possible for a nation to grow while remaining green; but that doing so means steering a course that is not only about maximizing GDP.

The king’s speech, the subsequent policies of his government, and the work of Bhutanese intellectuals in framing and shaping Gross National Happiness have influenced many heads of government and also major international organizations such as the World Bank and the OECD.2 At the same time, it has attracted legions of visitors to the nation. Tourists, researchers, seekers of spiritual nourishment, and policy makers have all flocked to Bhutan. They have combed towns and villages and conducted thousands of interviews in search of the elixir, which they hope to bottle and take back home. Search on the Internet or on online book-selling websites and you will see the fruits of their efforts in titles such as A Splendid Isolation: Lessons on Happiness from the Kingdom of Bhutan (Madeline Drexler); and Radio Shangri-La: What I Discovered on My Accidental Journey to the Happiest Kingdom on Earth (Lisa Napoli). Thanks largely to one king’s speech, one of the world’s poorest countries has also become the world’s laboratory for how to be happy.

This chapter tells the story of Gross National Happiness as perhaps the second-closest alternative to GDP after the Human Development Index. It is at heart the story of a small nation’s desire to be able to develop according to its own pace and priorities and to create its own metric, its own measurement, so that it can run its economy and society according to its own values and priorities.


Bhutan is without a sliver of doubt a country whose natural beauty has an arresting, stunning quality. Surrounded by mountains, lakes, rivers, and waterfalls, the country has some of the world’s strictest planning rules, designed to protect plant and animal life from being built over. Some 70 percent of Bhutan is covered by forest, and some 50 percent of its land area is not allowed to be developed. There are 677 glaciers and 2,674 glacial lakes.3 At the end of 2012, the ecological economist Robert Costanza (whom we will meet properly in Chapter 8) was asked by the government to estimate the dollar value of Bhutan’s biodiversity and ecosystem services. His estimate came to more than $15 billion, or five times the nation’s GDP.4

Bhutan, one of the world’s smallest nations, with a population of some 750,000, is sandwiched between two giants, India and China. Geopolitics being what they are, Bhutan’s leaders have opted for a close relationship with India. India is Bhutan’s largest trading partner by a wide margin, and Bhutanese citizens can use the Indian rupee, alongside their own ngultrum, as currency in their shops.

Bhutan until the end of the 20th century was a very poor and largely agricultural society. Most of its people lived on small farms. They grew just enough to feed themselves, with perhaps a little more left to sell at the local markets. Most families did not have electricity, and that meant the working day began shortly before dawn and ended at sunset. No electricity meant no TV, certainly no Internet, and no laptops. Indeed, there were few paved roads and no traffic lights.

But in many other respects, Bhutan belies the stereotype of a nation wedded to tradition. In her memoir, Treasures of the Thunder Dragon, the present queen mother, Ashi Dorji Wangchuck, describes her “tomboy” childhood spent gathering wood, fetching water, and harvesting plants. Her father, along with most men, would stitch clothes and shoes for the family, “and of course he was skilled at delivering babies,” a practice she says continues in some more remote villages.5

Bhutan today is at the center of cyclonic change. It is a parliamentary democracy. It has a noisy and argumentative media. Centuries-old traditions, the strong families, and confident belief systems are being questioned. But in 1972, when King Wangchuck set out to realize his vision, Bhutan was different. One thing we now know (or at least it is claimed) is that Bhutan’s people were among the most contented. Certainly they were among the most communitarian. There was deep respect for parents and the elderly. In terms of rights, faith, family, community, and society counted for more than what individuals might or might not have desired.

Herein lay the dilemma for the young king. Life expectancy was less than forty, and average income was around $50 per year. He had decided his nation needed economic development, education, and better health care. More than that, he pledged to modernize governance, including introducing democracy. But he couldn’t countenance development at any cost. The king did not want his nation to prosper at the cost of its surroundings, or at the cost of the values its people live by. The king wanted his nation to modernize, but he didn’t want modernization at any price.


As a teenager King Wangchuck had been given some responsibilities by his father. He knew that part of the solution to Bhutan’s problems lay in better government. By better government we are not talking here about Big Government, of the kind that makes headlines in Washington, DC, or London. Better government for Bhutan meant creating parliamentary democracy in the first instance, followed by a commitment to the most basic functions so that the state can reasonably protect its most vulnerable citizens, especially children and the elderly. As late as 1960 the Bhutanese state did not even have a functioning capital—Thimphu was just an amalgam of villages. And so in 1998, King Wangchuck voluntarily gave up his powers to a council of ministers. A new constitution followed three years later, in 2001. In 2006 the king abdicated in favor of his son, and two years after that, in 2008, Bhutan saw its first ever elections.

Better government for King Wangchuck also meant that health care would be free for all citizens. In the year 2012-2013, a little over 7 percent of the nation’s public spending went to health care,6 which is closer to the average for developed countries than to that for developing nations. Even today, Bhutan is basically a Big Pharma-free zone. There are no multinational pharmaceutical companies: the state picks up the bill if anyone has the misfortune to fall ill.

The results of this policy do look pretty impressive, even if Bhutan was starting from a low base. Bhutan’s men and women now live to around seventy years, as incidences of preventable deaths keep falling. The number of women who die during or after childbirth has dropped from 380 per 100,000 births in the 1980s to around 250. Infant mortality has also fallen, from 120 per 1,000 live births in the 1980s to 40 in 2005. These are the kinds of figures you’ll more likely see in middle-income countries such as Brazil or Russia. Bhutan, moreover, has all but eliminated leprosy, as well as iodine-deficiency disorder. The vast majority of children are immunized (including in hard-to-reach rural areas), and cases of malaria have fallen drastically, from 12,000 in 1999 to around 1,000 today.7

Overall, the health of Bhutan’s citizens is in better shape than that of the citizens in countries at a similar level of development when measured according to GDP. Just as nearby Pakistan chose to adopt a development model of private sector-led growth first, with spending on health and education later, Bhutan seems to have fallen for Sweden under Olof Palme.

The king’s other big idea was to encourage the nation’s intellectuals to think of creative ways to create economic growth, but with Bhutanese characteristics. In particular he was of course looking for ideas that would give practical form and shape to Gross National Happiness. Fortunately for the king, an intellectual with such creative ideas did emerge, though, like so many of the characters in our story, he was not entirely homegrown.


In the late 1980s, Dasho Karma Ura was returning to Bhutan after a period away studying in the UK at the universities of Oxford and Edinburgh, where he read philosophy of economics. On his return, Dasho (a civilian honor the king bestows) Karma Ura established the Centre for Bhutan Studies, a think tank based in Thimphu. A short while later he gathered a small team of researchers from around the world, and together they attempted to give precision to the king’s vision for Gross National Happiness.

Dasho Karma is a genial man with a dry sense of humor and a mischievous laugh. In an interview in 2014 he told me that Gross National Happiness is an attempt to quantify what the fourth King Wangchuck had tried to envision all those years ago: “That certain things should not be given up even if they may not make money. We need to preserve those things that are directly counter to making money and therefore to boosting GDP.” In contrast to GDP, Gross National Happiness would measure those things that are important to Bhutan’s people, including self-reliance, a green environment, health, and literacy. It would also be firmly rooted in its country’s cultural story. It would be a way to organize economy and society, just as GDP is.8

Gross National Happiness, in the words of Dasho Karma, amounts to an “offensive” against GDP. How Gross National Happiness offends GDP is in its status as official filter for many (but not all) economic development projects—projects that in many countries would go ahead if they were good for GDP. In Bhutan, however, they have to pass the Gross National Happiness test.

Since the late 1980s, most of Bhutan’s ministries have been measuring their activity according to GNH, alongside GDP. When important policy questions are being decided, government departments have to ask what impact their decisions will have, not only on growth, but also on the components of GNH. The Gross National Happiness test is compiled from answers to nine questions: for example, how will a particular activity affect psychological well-being, work-life balance, and the number and strength of relationships? If a development project is to go ahead, it should not negatively impact on these, nor must it impact negatively on people’s health, education, or physical environment. If it might, then it needs to be rethought.


One of the consequences of applying a GNH filter to economic decisions is that Bhutan has so far decided to stay out of the World Trade Organization.

The WTO is the world’s largest club for free trade. Membership allows businesses in one member country to do business with anyone in another member country without barriers or obstacles. It is popular with 161 countries, all freely trading with one another, and there are a further 23 waiting to join. The roll call of recent entrants includes the likes of China and Saudi Arabia, but there are benefits for smaller countries, too. WTO membership enables large international companies to come calling. This brings new jobs and potentially more in taxation and can be good for a country’s GDP. But it also brings new kinds of problems that need solving, problems that Bhutan has decided it doesn’t need, at least not yet, including fears that WTO membership would reflect badly on Gross National Happiness.

One of the problems inherent in WTO membership is that it isn’t always conducive to very small businesses and those that need some protection to help them grow. Senior officials in Bhutan’s government know that a large influx of foreign investment can be detrimental for tiny family farms as well as those businesses that have ambitions to become the Fords and Microsofts of tomorrow. And that is because big international companies have a tendency to use their size and scale to attempt to defeat any competition. WTO is the perfect venue for that to happen.

WTO is a bit like a giant open-air market, but one where there are no limits on the size of the shops. A town or village market, for example, will have restrictions on the shape of the stalls. It will have rules on the kinds of businesses allowed and what can and cannot be sold. WTO membership for very small countries, on the other hand, would be like the organizers of a weekly village food market allowing Walmart or Tesco to set up in their midst. The WTO does of course have a dispute-resolution process, but imagine a village smallholder challenging a multinational. According to Tashi Wangyal, an economist and member of Bhutan’s national council, although the WTO is meant to level the playing field so that everyone in the market plays by the same rules, “The playing field is not level to begin with.”9

Bhutan’s policy makers also know one other thing that many tend to forget when the corporations come calling: that the majority of the world’s older multinational businesses were created and were given the space to prosper in a pre-WTO world. They could grow, develop new products, and find new markets in their own countries and regions without the risk of being taken over, and without the threat of being undercut. In the words of one Bhutanese blogger: “I would rather be a small fire that warms our home, than a big one that burns our house.”


The primacy of GNH didn’t just stop Bhutan from walking through the doors of the WTO before it was ready to do so; it may even have swept Bhutan’s first elected government from power in the 2013 general elections. This was a government that learned the hard way just how attached its people are to Gross National Happiness, and how relatively less attached they are to more conventional ways of achieving economic growth.

Just as in the 1950s, when Pakistan sent its brightest to Cambridge and turned to Harvard University for ideas on how to achieve industrial-led growth, by 2008, Bhutan’s government seemed to feel that it, too, was missing a trick and needed to find ways to boost industrial development.

The government decided to appoint the global management consultancy McKinsey & Company to advise on what the country needed to do to boost growth. This was not, at least on the face of it, a bad idea. McKinsey’s alumni reads like a Who’s Who of both the public sector and the corporate world. Famous names that once drew a McKinsey paycheck include Louisiana governor Bobby Jindal, former chairman of HSBC Stephen Green, and Facebook’s chief operating officer, Sheryl Sandberg.

Traditionally, global consulting companies would be focused on helping other businesses make money. But lately consulting houses such as McKinsey have been deployed by governments to help them to cut costs and to transfer more of what governments do to private companies.

McKinsey has acres of experience advising governments on how they can boost growth while shrinking the size of the public sector. The company itself is good at making money too—the last time I looked it was worth $7 billion, or twice the size of Bhutan’s GDP. It employs some 17,000 staff, around half of whom are its famously well-paid and well-looked-after consultants—these are the men and women who travel the world, advising companies, governments, and even charities on how we can all do our jobs better.

Arriving in Bhutan in 2009, the McKinsey team spent quite some time getting their own measure of the country and its potential. They correctly recognized that Bhutan is known the world over for happiness. Happiness is, in effect, Bhutan’s “brand.” The consultants also recognized that thanks in part to the work of Dasho Karma, Gross National Happiness has become Bhutan’s most famous export. Not only is it the standard for Bhutan’s own policy decisions, but it is also taught in schools and universities all over the world. It is quoted by heads of state and celebrities and is the topic of numerous conferences, lectures, and seminars. It has inspired copycat measures.

It also didn’t take McKinsey long to figure out that Bhutan’s happiness brand doesn’t make the country that much extra money. Other countries probably make more than Bhutan from an idea that Bhutan gave to the world. That, in the company’s opinion, was what needed to change.

McKinsey’s consultants are also famously data-driven individuals. One of the skills they are taught is to speedily home in on a problem by analyzing a country’s numbers and then putting forward proposals for how those numbers can become bigger, or better. Those numbers might be GDP, for example. Or they could be other indexes.

Bhutan might score high on happiness, but there are a couple of indexes where it is languishing near the bottom, which also caught the consultants’ attention. One of these is the World Bank’s index on ease of doing business. Anyone who wants to start a new business in Bhutan needs to jump through more hoops than a new business owner would in most other countries. Bhutan is also low on the “tourism intensity index,” a measure of tourists per head of population. Bhutan, according to McKinsey, has some catching up to do here as well. Successive governments have been very protective—probably overprotective—about who can and who cannot come into their country. Druk Air, the national airline, has just two aircraft, which at the time of McKinsey’s analysis flew to only one city, Bangkok. Visitors, moreover, had to budget for an extra $200 a day in taxes on top of all other expenses, meaning that anyone thinking of a trip to Shangri-La needed to be rich, or desperate to go—ideally both.

According to McKinsey, if Bhutan wanted to create new jobs, if it wanted its economy to grow further, Bhutan had to slash the amount of time it took would-be entrepreneurs to set up and register their businesses. And the country’s tourism intensity index had to start growing too. Bhutan had to attract more visitors, from 10,000 a year Bhutan needed to attract 100,000 a year, the company said. The target audience: the increasingly stressed-out but moneyed travelers from developed countries. McKinsey’s solution included scrapping the $200-a-day tourist tax and advising the government to hurry up and build more yoga retreats and meditation centers, airports, and hotels. Bhutan was missing a massive opportunity to monetize happiness, and McKinsey would help it to realize this ambition.


McKinsey’s advice to Bhutan went much further than just tourism. Other departments in Bhutan’s government were similarly advised to scale up what they were good at so that new jobs could be created. The education system had to be reformed, McKinsey said. The health care service had to open up to private providers. Farmers would need to grow cash crops, businesses would need quicker and easier access to credit, and red tape would need to be cut. The entire project, dubbed “Accelerating Bhutan’s Socio-Economic Development,” was monitored via a “Performance Facilitation Unit,” and the eventual prize, McKinsey said, would be 10,000 new jobs in tourism, 30,000 in construction, and 10,000 in agriculture. The company even invented a word that I suspect will soon find its way into our leading dictionaries: Bhutan, according to McKinsey, needed “de-bottlenecking.”10

Bhutan’s government did not immediately challenge the suggestions it was getting from McKinsey and instead got on with the task of implementing the plans. It takes a lot of confidence to challenge the world’s leading experts in building nations and growing businesses, but many of Bhutan’s officials remained uneasy, and many, including the Royal Audit Authority, were positively angry. There was anger at the $9.1 million price tag that the company was charging for its advice—though this would have been small by McKinsey standards. There was also anger at the way the government seemed to have disregarded its own decades-old golden rule, which was to measure each and every policy decision, not just for GDP, but for Gross National Happiness, too. Did 10,000 educated young people in such a small country need to be working as tour guides, travel agents, and hotel receptionists? If new airports were to be built, had anyone worked out the increase in carbon emissions and what impact this and the extra flights would have on already threatened Himalayan birdlife? Such basic questions needing elementary economic and environmental analysis were never asked, as the Performance Facilitation Unit prepared to monitor progress toward its targets. The only engagement with environment and quality of life was to find ways to monetize it.

Fortunately, GNH is so completely embedded in Bhutan’s policy apparatus that many of McKinsey’s ideas never saw the light of day and the project is now a part of the country’s history. Neither McKinsey nor the government specified a strict timetable for when the targets for new jobs would need to be met, which allowed both sides to save face to some extent as the project fizzled out. Even though the government was meant to be helping the company implement its recommendations, and monitoring them through the Performance Facilitation Unit, officials understood that what was being proposed could impact negatively on the country’s unique culture. As a result, some of the targets were either lowered or postponed to implement later. A few were abandoned altogether.

Bhutan’s opposition party and the press, on the other hand, had other ideas. They ensured that the McKinsey project would become a big issue when the second general elections were held, in 2012, and it was among the reasons why the incumbent party lost and a new government was voted in.

Bhutan’s tradition of Gross National Happiness had effectively stopped it from going down the well-traveled path of economic growth at all costs. Had the McKinsey prescription been followed, and had Bhutan joined the World Trade Organization, GDP may well have increased at an even faster rate than is the case now. But GNH would have been threatened. And so Bhutan’s policy makers stepped back, something that the policy makers of very few countries do.

At the same time, Bhutan’s policy makers discovered that they didn’t really need McKinsey. Bhutan’s national income in 2012 was around $3.5 billion. In 2007 it was around $1.6 billion, which amounts to an economic miracle of sorts. For the past decade, Bhutan’s rate of GDP growth has been averaging 7 to 8 percent each year, helping to lift the country into the lower rungs of middle-income nations. The population clearly has more money to spend. In the five years between 2008 and 2012, spending by households doubled to around $645 million. Government spending nearly doubled to $300 million in the same period.11


And so to the broader question: Can Gross National Happiness be exported to countries outside the Himalayan kingdom? Is it realistic to think that it could have a place elsewhere? If it is, then is it possible to imagine Gross National Happiness becoming a viable alternative to GDP?

To use the language of accounting, on the plus side Gross National Happiness counts among its fans no less than the UK prime minister. David Cameron is among many world leaders to enthusiastically endorse government-sponsored happiness surveys. In the forty-four years since King Wangchuck’s 1972 speech introducing the world to GNH, the idea to try to measure happiness, or well-being, has become a global industry, and well-being surveys are now routinely carried out by governments, international agencies, and NGOs in both developed and developing countries. One of the reasons for this, as we know, is that GDP fails to capture any aspect of well-being, such as job satisfaction, volunteering, friendships, or other kinds of life satisfaction that do not involve money.

Leaders are keener than ever to take the well-being temperature of their electorates, partly to know whether their policies are having a positive impact on the lives of those who will vote come election time. In the UK, one of the more influential proponents of well-being is Lord Gus O’Donnell, an economist and top civil servant who worked with several prime ministers, including David Cameron. O’Donnell has written, “Very few academics of any discipline would now argue that a country should attempt to maximize GDP.” He adds, “The era of GDP being the unique measure is now over, and that is a positive step.”12

On the minus side, while GNH has undoubtedly had an impact at the highest levels in developed economies, it has done so while its supporters try to ignore or downplay one critical feature in its definition: unlike GDP, GNH is essentially anticonsumerism. And that, in turn, has much to do with Bhutan’s cultural context of Buddhism. Madeline Drexler, the editor of Harvard Public Health magazine, who has spent time in Bhutan, is convinced that GNH could have emerged only in a society where there is no incentive to consume. “Bhutan was a GNH country before there was GNH,” she writes.13

One of Buddhism’s central beliefs (if not the central idea) is the need to tackle suffering. Suffering in Buddhist thought is caused by craving. Buddhists believe that we suffer because we crave things, such as material goods. We might want them, Buddhists say, but do we really need them? If we want to reduce suffering, then what we need to do is learn to control our wants; we must learn to control our cravings.

Siddhārta Gautama, Buddhism’s founder, is believed to have outlined an eight-point plan (known more formally as the Eightfold Path) to controlling our wants. Not entirely by coincidence, some of the items in the eight-point plan can also be found in Dasho Karma’s Gross National Happiness checklist. GNH values psychological well-being, the nature of human relationships, environment, and work-life balance. Each of these, in some way or other, is connected to Buddhist beliefs about reducing suffering and controlling wants.

I asked Dasho Karma if he agrees, but he told me that Buddhism isn’t against wealth creation; nor is it anti the enjoyment of wealth. “One Buddhist description of heaven is a bit like a ten-star hotel,” he said with a big chuckle. Dasho Karma is concerned that GNH shouldn’t be seen as too “Buddhicised,” as he calls it. If GNH is to become more of a global export, then its appeal and its attraction have to go beyond one culture or belief system. But at the same time there is no denying that among today’s major religions, Buddhism probably has the strongest anticonsumer message. That is one reason perhaps why GNH doesn’t include consumer spending in the way that GDP does.

Buddhism’s Path to Reducing Suffering

✵ Understanding, believing, and being committed that Buddhism is the right way

✵ Speaking, behaving, and earning a living in a way that doesn’t harm, mock, or insult others, including the natural world

✵ Learning how to meditate, concentrate, and contemplate

Still, the Buddhist-inspired idea that happiness ultimately is about reducing suffering, helping others, and keeping our wants and our desires under control is at odds with how happiness is understood (or defined) elsewhere. In the non-Buddhist universe, happiness and consumption are often linked. Even Bhutan has been unable to escape the connection.

In the final analysis, Bhutan’s own experience is a salutary reminder why GNH is unlikely to work so long as consumption remains an important goal for economies. Bhutan’s myriad policies to promote and measure happiness have undoubtedly had some impact on its growth figures, but, just as is the case with the Human Development Index, ultimately the world is measuring and judging Bhutan, along with everyone else, according to GDP and not according to GNH.

Still, to its credit, small, landlocked Bhutan, arguably one of the world’s happiest nations, had the foresight and the courage to try to run its affairs according to a metric that wasn’t only GDP. Remarkably, the vision for this idea came, not from some wizened academic or from seasoned policy makers, but from a king who was still at school. The fourth King Wangchuck had the foresight to think differently and to a large extent persuaded many other nations of the merits of his case. He may not have succeeded completely in what he was trying to achieve, but we should all be grateful that he had the insight, the wisdom, and the courage to try.