Parameters of Progress
Moving forward but on certain conditions.
Bhutan has won the honor of being recognized at the 87th freest economy in the world out of 157 countries and territories by the Fraser Institute, a Canadian public policy think tank. According to the report, the degree of economic freedom in Bhutan is the best among not just South Asian nations but also among giants such as Russia (which ranked 99th), China (111th), India (114th) and Brazil (118th). The country has been featured for the first time on the World Economic Freedom list that measures the degree to which policies and institutions of a particular country are supportive of economic freedom. To put it simply, economic freedom occurs when individuals enjoy the right to choose their trade, market, transactions and resources without the use of violence, theft and/or fraud. As per the report, the government’s role in an economically free nation is limited to protection of its people and their property by upholding the rule of law and safeguarding their rights. The less the government intervenes in business and trade transactions, the better it is for the economy.
Being included for the first time since its publication in 1996, Bhutan has scored a total of 6.86 in the measure of economic freedom. The average score of the top 10 countries is 9.4 and the average score of the world is 8.1 while that of the SAARC countries is 6.6.
The report measures degrees of freedom in five major areas with 24 components and 42 distinct variables which include size of government, legal system and security of property rights, sound money, freedom to trade internationally etc. Data from the World Bank, IMF and other institutions were also considered.
According to the World Bank, in the last 20 years, Bhutan has outpaced other South Asian countries in terms of poverty reduction and Bhutan’s poverty reduction leads countries with similar 1990 poverty levels like India, Indonesia, Sudan, Cambodia and Pakistan. Bhutan performed very well in the area of rule of law where the people have the freedom to choose their resources and market with the law protecting their rights, eliminating the threat of fraud or any other violation of law. While its rank is the best in South Asia, Bhutan falls behind in size of government on the world average (6.6 vs. 8) which is for government consumption and government enterprise or investment. Bhutan also falls behind the world average in sound money (6.9 vs. 8.1 ) which is freedom to own foreign currency bank accounts and also on freedom to trade which is the same as that of Nepal (6.5 vs. 7). This has to do with regulatory trade barriers and controls on the movement of capital and people.
For a country that has long believed in and promoted the concept of Gross National Happiness (GNH), experts agree that enhancing economic freedom would lead to further happiness among Bhutan’s people. GNH covers many issues that the GDP measure does not cover. Enhancing economic freedom would, therefore, lead to speedy economic growth and swift poverty reduction, thus supporting the GNH model and strengthening Bhutan’s position in the world.
Experts also say that economic freedom increases life control factors such as trust, employment, health and education, all of which are not just indicators of a progressive country but are factors that can lead to happiness among individuals. “Corruption, for instance, decreases happiness but economic freedom decreases corruption,” says Fred McMahon, a Fraser Institute fellow who manages the world economic freedom network. “If more permissions are required to do something, there emerges a need to pay off someone and if no permission is required, there is no one to pay off,” he adds. Countries with little corruption are prosperous and happy nations by default so Bhutan can certainly stand to benefit on the global front given its GNH measure.
At the same time, however, happiness or economic freedom does not mean an absolute lack of government intervention. In fact, the latter is necessary to maintain security and ensure that people abide by the rules of the game. If the government makes and implements laws to protect the people, property and intellectual rights, then businessmen need not worry about crime or property theft. It’s the role of the government to give subsidies and tax benefits for specific areas, explains McMahon. Having said that, if the government interferes or tries to do too much in business, it can quickly turn into Socialist or Communist ideology, which has had mixed results to date. Given the lack of government intervention in such matters, more and more opportunities are offered to the Bhutanese people to carry out activities that lead to economic wellbeing by meeting their own needs as well as providing services that fulfill others’ needs.
Today, Bhutan’s biggest challenge is the efficient use of available resources to achieve economic independence. The only way towards this goal is to promote a business model that would enable each individual to be productive, creative, hardworking and risk taking. A citizen can only look up to the state to provide an enabling platform to nurture its risk-taking aptitude to be a creative entrepreneur. A simple step towards such objective could be an initiative on the part of the government to spell out clear and stable regulations on each potential sector; active participation of the state in promoting and taking ownership in every business unit along with private entrepreneurs. Only then, Bhutan could possibly harness the best of its human as well as other natural capital to realize its monarch’s and the nation’s dream of realizing economic self-reliance.