August 5, 2010

Sachs, GNH, and Bhutan

Sachs, GNH, and Bhutan

Jeffrey Sachs ( is a well known economist with decades of work behind him. Hearing him speak at the Royal Institute of Management (RIM) in Bhutan this week, I wondered why when I was doing my first degree way back in the mid 90s (economics honours with a fabulously in-depth undergraduate program), some of my best professors frowned at the mention of Sachs. Now here was this perfectly pleasing economist talking about development and happiness in Bhutan in a sane equable manner. Why was he reviled by the campus progressives in the 90s? Some clues to this can be found in the article ‘The long, strange career of Jeffrey Sachs’ ( Yes, there was, of course, the intoxicating rush in the west following on from the end of the cold war, and economists (like Sachs) were part of the resuscitation corps with their shock therapy approach to transition that ultimately failed in the long run (having travelled through parts of Russia, east europe and the baltic states recently, I don’t feel queasy about using the word ‘failed’; plus the social statistics talk for themselves). Whatever contribution he may (not) have made to the 90s fiasco in Russia and parts of Europe, the mature Sachs whom I encountered in Bhutan this week made a lot of sense. Artists have phases, why shouldn’t economists?

He spoke about GNH (Gross National Happiness) as a global challenge by addressing some specific issues – challenges and risks that Bhutan faces, and made some comparison with how poorly the US is doing. As an economist and philosopher (setting aside for a moment the novelist, traveller, poet) with experience of and expertise on Bhutan, here is my verdict on, and engagement with, his prescriptions for Bhutan:

First the points of agreement. I agree with him that Bhutan is a low income country and a certain amount of material advance is necessary for its links to health and education. We do need technological understanding and governance that taps deep values. Bhutan is, as I have also argued in my work repeatedly (see weblinks on the CV page at, an oasis of peaceful economic development in a complicated geopolitical neighbourhood. Sachs sees the need for a rural development policy and agricultural development policy, especially in the face of the poverty incidence figures (urban poverty is about 2% and rural nearly 30%).

It is for this reason that I’m a great fan of the 10th five year plan of Bhutan with its focus on poverty reduction. Rural povery can be a crushing blight and a source of constant misery in the form of unending rural-urban migration and associated impact on city infrastructure and social friction.

Sachs recommended that the hydropower sector (which he said is environmentally a benign sector) should be kept publicly owned and as a national industry, it can provide significant earnings from export that can be reinvested in health, education, poverty mitigation, infrastructure, and connectivity. He was clear that hydropower ought to be developed expeditiously and the bargaining terms for its export (primarily to India) ought to be scrutinised very carefully and supplemented by adjusting contracts terms for future inflation. A grant isn’t necessarily a good deal, he said.

Absolutely. Especially since grants aren’t what they used to be anyway. The old ratio in hydropower projects with India of 60:40 (60% grant, 40% loan) is now 70:30 (70% loan and 30% grant). I mentioned this to Sachs in my comment – hydropower development is necessary and it should not be privatised, but there are also crucial considerations in general about investment sources and environmental issues for hydropower. I gave the rather shocking example of Kárahnjúkar dam in Iceland where Europe’s largest hydropower project is located; it is detrimental and environmentally problematic (see the previous article ‘April is the cruellest month/I will show you fear in a handful of dust’ on this blog ‘Propaganda of the Reed’ where I probe beneath the Icelandic volcano). Further, I feel only partically able to agree on his recommendation that some of the earnings from hydropower could be used to gradually introduce a kind of old-age benefit system. Bhutan as a society is emotive about family ties and somehow I feel that something fundamental changes when care for the old passes away from the family to the state.

I think many of us dream of having a big canvas and an ability to move things around on it so that the best outcome results. Focus on connectivity, Sachs stressed, use of science and technology can improve lives. Make more roads, get more phones, more internet, more infrastructure, more connectivity.

Yes, connectivity is good. I agree. But, as I said to him, we must not miss out on the essential counterpart to connectivity, which is relationality.  Connectivity connects objects. Relationality connects people. We live, I feel, in an inalienably enchanted world (in Bhutan, we largely do, inspite of the disenchanting effects in the west of the european enlightenment that robbed the universe of its breath). We can live in a world where everything is accessible but that does not necessarily mean that we will be able to relate to the various aspects of our connectedness. There is Mechanism. And then there is Meaning. It is, I would argue, far more important to relate than to connect. Infrastructure may give us a phone or a road, but the real task is how we would speak or travel. It is not inconceivable that the more people are connected (such as in the most prosperous and infrastructurally enabled economies), the more they are alienated.

Another point where I would disagree with him is his focus on intensive agriculture. He stressed repeatedly, go for intensive agriculture – the yields in Bhutan are low, you can produce more. Give farmers subsidies. Use chemicals and fertilisers. Get high yield seed varieties. Grow more. The plant doesn’t care where it gets its Nitrogen from. The world can’t feed itself on organic farming. And so on.

Here’s what I think. One, the problem at a global level in relation to hunger is not a technical issue of production, it is an ethical issue about unfair trade practices and skewed terms of trade for countries that are producers of primary commodities. Two, even aside from cost burden, subsidies for intensive farming are not a good idea. The European example of the Common Agriculture Policy (CAP) suggests that it creates perverse incentives and farming lobbies and leads to overproduction which is then destroyed or dumped into other countries, thus ruining their domestic production. Three, while rapid advancement in yield production by using fertilisers, high yield crops and technology sounds good in theory, studies even from the well-known ‘Green Revolution’ show that (speaking in economese) the application of technology is not neutral to scale. In other words, the large producers benefit more, and this may lead to a trend towards large scale intensive farming for greater profits. This would certainly not help inequality in a small society like Bhutan. Four, intensive agriculture is generally bad for the environment; any detrimental effects would be worsened in a complex Himalayan ecology such as that of Bhutan. Five, the question is not one of productivity challenge to improve yield, but of whether there exist in Bhutan adequate facilities to test and monitor instances of ‘biomagnification’ from pesticide residue. Six, there is the fundamental question – why increase productivity? If the answer is not simply a mechanistic efficiency one that would like to see a better relation between inputs and outputs, then the answer must be – because we want to raise the standard of rural farmers and value agriculture better. Well, in this case, the focus must be on increasing the value of agricultural products and changing people’s attitudes and preferences towards agriculture (typically education means people don’t want to go back to farming). Organic farming, which can be a privileged preserve of big landowners in the English countryside (doesn’t have to be, but often is), is then a valuable alternative for the Bhutanese case. Thus, in general terms, instead of Sach’s grow big, grow more, I’d say go niche, grow better.

Do not privatise health and education, he said. For the Bhutanese context, I agree. However, in view of ongoing developments, I think both he and I might be disregarded. There are new systems of paid specialist medical consultations, and new institutions of learning. On the education scenario, I am inclined to think that privatisation of tertiary education is acceptable, but the privatisation of primary and early education is not a good sign. Learning resources get directed to where the monetary incentives are, and affluent children from the earliest ages are immersed in the advantageous environment created by price discrimination.

As far as the USA is concerned, it has lost its way – he said. Not just that, I feel, looking at the political scenario in large parts of the world, the entire world is losing its way alongwith it. The economic recession is just a tip of the iceberg, I maintain that the real crisis of value is a crisis of values. ‘Economic violence’ (my definition of this and views on it are best summarised in ‘economics of turning people into things’,, increases by the day. Krugman’s latest article ‘Defining prosperity down’ ( paints a depressing picture. I see that we accept more and more of what we should never have accepted in the first place. Worldwide, inequality continues to worsen and so does exploitation and repression.

The hypocritical moral veneer of ‘free society’ rhetoric is spread further and gets thinner. The latest (July 2010 end) issue of the Economist magazine focuses the huge problem of imprisoning people in the US. At the same time as domestically more and more people in America are locked up and their rights are trampled on, the American political leaders lecture overseas about free expression and tolerance of dissent. They praise specific countries (examples from central Asia come to mind) for their progress on economic reforms and urge them to be politically more tolerant – refusing to see the links between the two. Presidential type governments in central asian republics which create the economic consensus favoured by the West cannot then allow dissent in the political realm while maintaining the monopoly of thought on economic issues. If people question and express freely, they might also question the reasons for certain economic policies, contracts or incentives. The very reasons they are praised for their economics are also the same reasons they cannot be more liberal politically.

But, this is a digression. To return to Sachs on the USA – americans watch too much TV, there is too much noise in their lives, they are bombarded by propaganda day and night. Politics is ruled by corporate interests, campaign finance is problematic. I agree (see survey about american politics and societies quoted in my paper ‘democracy in the non-west: facts, fictions, and frictions’, e.g., on page 3, Politics is ruled by corporate interests, most of the people are lulled by mass entertainment, and the remaining few grow ever more cynical. In the vanishing space between stimuli and action, thought is constantly erased.

In his summing up, Sachs said that a ‘mindful economy’ would include (in this order): self, children, others, knowledge, nature, future, enemies and humanity. Realising this mindfulness is a real challenge in everyday life.  But one might ask how is this different from, say, Sayer’s concept of the ‘moral economy’ (I discuss some of these issues in my book Imagining Economics Otherwise, see for 2010 edition). And why just restrict this mindfulness to the ‘economy’ (that esoteric and often ill-understood construct)? Ultimately, however, my question to Sachs is: must the mindful economy also (like conventional patterns of thought) begin from the ‘self’ as his does?

I’d argue that the real challenge for mindful existence is to begin from the others and work towards the self.


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