Thinking Aloud: The Darius Index, Bhutan

Apr. 29, 2014 by Darius 

[A month and a half ago I introduced the Darius Index, which aims to measure the discrepancy between a country’s wealth – as measured by GDP per capita – and what that country does with the money – as measured by the UN’s Human Development Index.  See]

This week we’ll check out the #7 country on the list, Bhutan.

Bhutan is quite unlike the other countries preceding it on the Darius Index.  For starters, it is one of the smallest and most remote countries on the planet, nestled in the Himalayas.  Most of Bhutan’s GDP comes from exporting hydroelectric power to India; most of the rest of the country engages in subsistence agriculture.

Why does Bhutan fare relatively poorly on the Human Development Index?  It’s not corruption.  Bhutan was the 31st least corrupt country in the world in 2013, better than Israel, South Korea, and Poland.  Income inequality is also not a major reason for the gap: Bhutan’s score on the GINI Coefficient, which measures income inequality, was 38.7, better than the United States (45.0) and the United Kingdom (40.0).

Part of the problem is Bhutan’s geography: due to the mountainous terrain, infrastructure projects are incredibly difficult and expensive.  Moreover, Bhutan’s electricity sales have climbed in recent years, boosting the GDP before human development has time to catch up.

Furthermore, the Bhutanese government has made a conscious decision to forego faster economic development in favor of safeguarding Bhutan’s natural environment and unique culture.  It is the only country in the world to measure Gross National Happiness.

It’s not like Bhutan is stagnant in terms of human development, either: since 1980, Bhutan’s life expectancy has increased by more than 20 years and expected years of schooling increased by more than 8 years.  In that same time, though, Bhutan’s GDP increased nearly fivefold.

In short, Bhutan may be #7 on the Darius Index, but unlike its compatriots in the top 10, Bhutan’s gap seems to arise from a set of positive circumstances: rapid increases in income paired with strong, but less rapid, increases in living standards and a conscious choice to retain its traditional ways of life.

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