Abstract
The limitations of gross domestic product (GDP) to measure people’s well-being have been widely discussed and documented in the literature. In this context, Bhutan’s pioneering experience with gross national happiness (GNH) is a welcome departure from traditional global practices to measure a nation’s wealth and well-being. Bhutan’s concept of GNH promoting education and human capital as pivotal forces in human centred development in a small sized developing country provide unique opportunity to test integration of GNH and GDP necessary to attain economic, social, technological, environmental (ESTE) balanced sustainable development. The article concludes that GNH and GDP can be complimentary development strategies.
Introduction
Gross domestic product (GDP) has been the standard metrics of economic growth and progress for half a century. But despite multiple benefits of this instrument to quantify growth within and across countries and to monitor economic policy, its limitations to measure human well-being and quality of life require further scrutiny for improvement. American economist Edward Denison, who participated in the development of this measurement instrument and was one of the pioneers in the emerging human capital field, recognized from its inception that the GDP formula could not explain a considerable portion of economic growth. He coined the unexplained residual the measure of our ignorance (Denison, 1962). Pressing demands in the knowledge economy increase the need to understand the “unexplained portion” to expedite the search for solutions and better alignment of economic development with human well-being and happiness beyond monetary progress. Bhutan offers unique opportunity for this analysis given that it is a developing country with special emphasis on happiness. This article addresses the human centred approach from economic and management dimensions that underline human capital and talent management in labour markets in countries inserted in the global volatile, uncertain, complex, ambiguous (VUCA) environment (Lepeley, 2017).
Human Centred Economics and Management
The human centred economy is propelled by latest developments in neuroscience that is unlocking new dimensions of human behaviour. Multidisciplinary approaches of economics and management with psychology are bridging disconnects that long obstructed advancement of the human centred paradigm perpetuating humans as resource of production instead of the centre of attention in economics and management.
The concern for people is not new in economics. People’s well-being was central to Adam Smith (1723–1790) who wrote The Theory of Moral Sentiments in 1759 two decades before his economic masterpiece The Wealth of Nations. During the last century, the Nobel Prize economists Theodore Schultz and Gary Becker pioneered human capital theories promoting investment in people and education to foster economic growth and social development. Recent studies show that the human centred paradigm is advancing through cross-fertilisation of economics and psychology (Frey & Stutzer, 2010), neuro-economics (Camerer, Cohen, Fehr, Glimcher, & Laibson, 2016), international studies on well-being and happiness (Diener, Helliwell, & Kahneman, 2016), happiness and economic growth (Clark & Senik, 2014).
In management, the human centred approach is advancing in parallel with the economic science, increasing attention to the well-being of the individual in the organisational context (Helliwell & Putnam, 2004) psychological capital in the workplace (Youssef & Luthans, 2010) positive psychology and happiness (Seligman, 2002), well-being assessment in organisations (Bakker & Oerlemans, 2011), organisational climate, performance and productivity related to people’s well-being at work (European Commission, 2010), and human capital, talent management and quality standards for sustainability (Lepeley, 2017).
In 2001, the Academy of Management conducted a survey to identify the 25 most influential management books of the twentieth century (Bedeian & Wren, 2001). Among them, the following six books pioneered the human centred approach. Order of publication from oldest to most recent is as follows: (a) Elton Mayo’s The Human Problem of an Industrial Civilization (1933) and the Hawthorne studies on workers’ well-being and productivity; (b) Abraham Maslow’s Theory of Human Needs and his fundamental principle Human life will never be understood unless higher aspirations are taken into account. Growth, self-actualization, striving for health, quest for identity and autonomy, yearning for excellence must be accepted beyond question as a widespread and perhaps universal human tendency (Maslow, 1954). In contrast with mainstream psychologists of that time, Freud and Skinner, who focused in pathological behaviour, depression and unhappiness, Maslow studied behaviour of normal and thriving people (Maslow, 1999); (c) Douglas McGregor’s The Human Side of Enterprise (1960) and his Theory “X” and Theory “Y” transformed management contrasting the human centred approach in Theory “Y” with the industrial bureaucratic approach in Theory “X” treating workers like others production resources; (d) Peter Drucker’s The Practice of Management (1955) consolidated him as the founder of management education. In the 1959 book Landmarks of Tomorrow Drucker forecasted the advent of the knowledge society and emergence of the “Knowledge Workers” whose ingenuity and productivity would reach the next human frontier; (e) Chris Argyris became best known for his seminal work in the Learning Organisations and his book Personality and Organization: The Conflict between the System and the Individual (1957); (f) Edwards Deming, the father of Total Quality Management (TQM) and his book Quality, Productivity and Competitive Position (Deming, 1982b) changed the course of productive processes and competitiveness shifting to emphasize the human approach. Compared with other human centred scholars, Deming advanced a new management model integrating internal organisational structures with external constituencies as an essential condition to attain quality standards and organisation sustainability. Deming’s standards were based in the satisfaction of customers’ needs and the presumption that employees who work in the organisation need to have their needs satisfied first by the organisation to fulfil customers’ expectations for quality products or services. His management approach based on continuous improvement as a core element of quality is displayed in his book Out of the Crisis (1982a) and The New Economics for Industry, Government and Education (1994) (Deming, 1982a, 1994). Deming’s principles were later adopted as evaluation criteria for National Quality Award programmes around the world. His Quality initiative started during 1951 in Japan with the deployment of the first National Quality Award called the Deming Award. It was followed by the Baldrige National Quality Award of the United States (Founded 1987) (Baldrige Performance Excellence Program, 2017), the EFQM Award of the European Foundation for Quality Management, 2017 (Founded 1991) and National Quality Awards around the world (National Institute of Standards & Technology [NIST], 2010). A unique aspect of quality awards is that continuous improvement assessment and quality principles and practices are focused in people’s well-being and happiness and apply to organisations in all sectors, industries and Regions worldwide. This global dimension of quality is the most effective tool available to increase performance, productivity and competitiveness in organisations in high synchrony with the human centred paradigm, which is essential to attain sustainable well-being.
Bhutan: Historical Experiment with the Gross National Happiness Development Strategy
Bhutan is a land-locked small size developing country in South Asia in the outskirts of the Himalayas Mountain. It is approximately 39,000 square kilometres territory, which are 71 per cent covered by forest. A population close to 775,000 includes 38 per cent urban and 62 per cent rural. The World Bank identifies Bhutan as lower middle-income developing country, $US 2,380 income per capita, 6.5 per cent growth rate and 12 per cent of poverty (The World Bank, 2017), a distinctive low rate for developing countries that compares better with rates of developed nations.
In terms of religion, Buddhism is dominant since the seventeenth century. Politically, in 1907, Trongsa Poenlop Ugyen Wangchuck established Bhutan’s first hereditary Kingdom setting-up the dynasty that rules until today. The Kingdom of Bhutan started decentralisation in 1981. In 1998, the King transferred power to a cabinet of ministers serving as Head of the State and since then the government is managed by a Prime Minister. In 2001 on the advice of the Fourth King of Bhutan, a committee chaired by the Chief Justice drafted the first constitution that was launched in 2008 introducing a parliamentary democracy that called for the first democratic national election (Bhutan Tourism Office, Political System, n.d.). In 2013, Bhutan chose the People’s Democratic Party PDP to lead a new government that includes Legislature, Judiciary and Executive branches. The ruling political party, the opposition and the National Council form the legislative body (Bhutan Tourism Office, Political System, n.d.; Centre for Bhutan Studies and Gross National Happiness Research, 2016).
Bhutanese hold the belief that material wealth does not lead to happiness and progress cannot be accurately measured by GDP. To compensate GDP’s shortcomings, the country developed a new formula to measure progress called gross national happiness (GNH). Bhutan’s third King implemented the GNH to make all people prosperous and happy and presented this initiative to the United Nations general assembly in 1971, when Bhutan became member of the United Nations (Bhutan Tourism Office, 2017).
Bhutan’s GNH development strategy is built on four pillars: (a) Equitable socio-economic development, (b) preservation and promotion of cultural and spiritual heritage, (c) conservation of the environment and (d) good governance. These pillars are interwoven and embedded in national and local values and spiritual traditions. Bhutan sources state that economic prosperity and people’s happiness are important, but happiness is more significant. Happiness is based on the premise that development of the human society takes place when material and spiritual development occur side by side complementing and reinforcing each other (Bhutan’s Tourism Office, 2017).
The philosophy of Bhutan’s GNH received international recognition when the United Nations implemented a resolution of limitations of GDP and the need to reflect well-being and the pursuit of happiness as fundamental human and national priorities (Bhutan’s Tourism Office). The United Nations increased attention on the subject and in 2012 launched the publication World Happiness Report conducted by international experts on well-being and happiness (Helliwell, Layard, & Sachs, 2017).
The World Happiness Report is built on the following six principles: (a) freedom, (b) generosity, (c) health, (d) social support, (e) income and (f) trustworthy governance. The variables used to assess population happiness, within and across countries, explicitly include per capita income and GDP, in addition to social support policies, life expectancy at birth, freedom to make life decisions, generosity and perceptions of corruption.
Differences between Bhutan’s GNH and the World Happiness Report metrics have prompted Bhutan’s concern that a focus on industrial materialism may threaten Buddhist traditions with potential to trickle down the Bhutanese language, consciousness and accountability system (Bhutan’s Tourism Office, 2017). International sources estimate that measuring Bhutan’s progress with a global development scale can put the country under scrutiny when indicators target income or investments that exclude moral truth and values embedded in Bhutan’s happiness (Schultz, 2017).
Measuring Bhutan’s Progress on GNH Index
Bhutan uses the GNH Index to conduct annual population surveys to assess the level of happiness. In 2015, the survey conducted by the Centre for Bhutan Studies and GNH Research reported that 43.4 per cent of the Bhutanese people feel Extensively or Deeply Happy and 56.7 per cent Narrowly Happy or Unhappy. Across population groups, more educated people are happier. Men are happier than women. People living in urban areas are happier than rural residents. Single and married people are happier than widowed, divorced or separated people. Farmers are less happy than other occupational groups (Centre for Bhutan Studies and Gross National Happiness Research, 2016).
The results show that Bhutanese’ perceptions about the benefits of education are consistent with global evidence about the importance of education in the formation of human capital, well-being and economic development emphasized by international development organisations, and the economists and management scholars aforementioned.
But the concern for education quality is increasing worldwide driven by numerous causes. Among others, increasing rates of unemployment and educational systems and institutions that fail to develop abilities and skills of graduates necessary to meet rapid changing demands in the labour force.
Understanding the principles of quality education and the processes that lead to continuous improvement to meet the needs of students learning, problem solving and talent discovery to attain a better life is above and beyond traditional educational focus on testing, class grades or school performance (Busteed, 2014; Lepeley, 2001, 2017). Quality education is attained when institutions and educators care to work and stimulate students to search for happiness, make meaningful contributions to the workforce and the economy to foster inclusive societies (Busteed, 2014; Layard, 2011; Lepeley, 2001, 2017; Seligman, 2002, 2004).
From the education dimension, Bhutan’s Ministry of Education reports that in 2016 the literacy rate was 63 per cent in the general population and 86 per cent among the youth population. In terms of educational expansion, between 1961 and 2016, the educational system increased from 11 to 834 schools, including early childhood care, development centres, primary and secondary schools, tertiary educational institutions and technical and vocational institutes. During the same period, student enrolment increased from 400 to 190,717 at all levels of formal education including higher education. Bhutan has in place a School Performance Assessment System that shows high degree of sophistication compared with other developing countries. Although the performance system guidelines displayed in website mentions the importance of student’s needs, there is no evidence that GNH Progress Wheel addresses the student centred criteria required to meet quality standards in terms of level of satisfaction of students and/or their families with the education received and the benefits accrued in the labour force (Lepeley, 2001, 2017).
Bhutan’s Human Development: Human Capital and Workforce
An important component of global quality standards in education is a close alignment and effective articulation between educational institutions and the workforce. It is apparent that elements of the School-Community Vitality of the GNH School Progress Wheel to some extent may cover this component to advance student’s well-being, and ultimate happiness, but the link is not clearly established opening doubts about the strength of the assessment methodology and coherence with standards of quality in education.
Bhutan’s Ministry of Labour states that its mission is To facilitate human resource development for economic development and to ensure gainful employment for all Bhutanese workforces and it’s Vision as A Nation where all citizen have opportunity for a gainful and quality employment characterized by harmonious and productive relationship in the workplace and the broader community. (Bhutan Ministry of Labour, 2015), both statements follow quality management standards.
In terms of alignment of human capital with workforce demands, the Ministry of Labour emphasizes the development of entrepreneurship training at all educational levels. Expansion of entrepreneurship education is consistent with global initiatives to foster growth of private enterprises and increase national productivity and competitiveness (ASEAN Regional Entrepreneurship Report, 2016–2017, Global Entrepreneurial Monitor (GEM), 2017, Global Competitiveness Report, 2016–2017). This policy is consistent with Bhutan’s development stage and the need to increase participation of the private sector to expand national economic activity. The entrepreneurial programmes offered by the Ministry of Labour are focused on Mentoring Competition and Innovative Business Ideas. Additionally, a national event conducted with the purpose to orient university graduates on national policies, culture and tradition, governance and socio-economic development was attended by 2.308 university graduates (1.286 male and 1.022 female) who received labour market information as integral part of their employment and training. Given the growing interest and participation of females in education and development initiatives, it is important for Bhutan and the Ministry of Labour to create programmes that incentive participation of women in entrepreneurship as a component of human and economic development that has been highly successful in developing countries (Kuschel & Lepeley, 2016a, 2016b; Kuschel, Lepeley, Espinosa, & Gutierrez, 2017; Lepeley et al., 2015).
The Ministry of Labour conducts an Annual Labour Force Survey and a Job Prospecting Survey targeted to reduce unemployment through programmes implemented by this Ministry in collaboration with other agencies. These programmes claim to have reduced unemployment from 2.9 per cent in 2013 to 2.6 per cent in 2014 and youth unemployment from 9.6 per cent in 2013 to 9.4 per cent in 2014. To address employment challenges, the Ministry is implementing programmes in skills training, entrepreneurship, vocational qualifications and diversification and carrying out labour administration strategies to improve the working environment increasing job satisfaction of workers aligned with higher salaries that impact well-being and happiness at personal and national level.
Bhutan’s Progress Viewed through Global Metrics
As a case study, Bhutan presents a unique environment for human capital formation and development conditions to increasing well-being and happiness of the population. But when compared with global metrics, Bhutan shows less impressive results and evidences of areas of improvement to attain desirable happiness target. Table 1 presents results of a comparison of Bhutan with other countries based on recent reports of international entities that include World Happiness Report, Transparency International, Freedom in the World and the World Economic Forum’ Global Competitive Index.
Bhutan’s Scorecard and Global Metrics
In addition to the previous comparison and based on comprehensive national assessment, the World Bank recommends Bhutan to expand the financial sector to finance growth, sustainable development and economic diversification. The World Bank identifies the following challenges for Bhutan’s economy.
Despite remarkable progress in poverty reduction, urban/rural gaps remain.
High dependency on public sector jobs contributes to increase unemployment rate among urban youth and women and there is widespread informal economy in rural areas.
The country has critical mismatches in the labour market.
The World Bank emphasizes that economies, which rely highly on the government sector as main engine for growth but lack a robust private sector, or policies, aimed to expand the private sector have lower capacity for sustainability and higher potential to jeopardize people’s well-being and happiness in the long-run (The World Bank, 2017).
Conclusion
In the knowledge economy, the imperatives for sustainability depend on the national stock of human capital and the national capacity to continuously improve human talent. Moreover, inclusive societies are embedded in the human centred paradigm at the micro- and macro-level in economics and management. From the human dimension, Bhutan’s GNH development strategy seems to be tuned with the twenty-first century human centred imperatives. Observed separately, Bhutan’s development metrics are pretty impressive for a small size, low population, low-income developing country with a relatively short democratic history. Its 12 per cent poverty rate compares better with developed than developing countries (USA 13.5%, European Union 17.3%). Totally, 6.5 per cent annual growth rate, inflation 3.3 per cent and full primary education coverage are sizable records. Effective educational planning allowed fast expansion across the system from early childhood to tertiary level including equal access, increasing enrolment and graduation of girls, support for lifelong learning and literacy to serve learners of all ages and students with special needs. In terms of the human capital formation, Bhutan seems to be advancing in the right direction. Improvement appears necessary to match school curricula with demands of the workforce aligned with intensification of entrepreneurial education to minimize youth and women unemployment and increasing attention to promote expansion of the private sector.
In comparison with other nations, the World Happiness Report ranks Bhutan in 97th place among 155 countries, above Nepal and South Africa, but below Somalia, Vietnam and Nigeria. The complexity of the metrics used to measure happiness can make comparisons illusive and frequently deceptive. This may partially explain the hesitation of Bhutanese authorities to rely on and accept the findings of global rankings. But for any country, willing to advance in the global VUCA environment, the information provided in global rankings cannot be ignored and Bhutan is no exception.
This analysis shows that Bhutan has substantial potential to increase the benefits of its GNH development strategy matching it closely with elements of the GDP development strategy. Bhutan provides evidence that GDP and GNH are complements, not substitutes, as development strategies aiming to advance human well-being and happiness in the twenty-first century.