The Buddhist nation of Bhutan, with its population of around 740,000, draws interest from around the world because of its search for gross national happiness (GNH) rather than a slavish desire for economic growth at any cost.

By taking a cautious approach to its development, the land of the thunder dragon has been largely successful in avoiding the social and environmental destruction wreaked in other developing countries.

But as Bhutan seeks to further open its doors to the outside world and liberalise its economy to provide much-needed jobs and reduce poverty, it is starting to face many of the same challenges that other countries have spent years struggling to contain. The next few years will be critical in determining whether GNH is able to withstand the pincer movement of urbanisation and consumerism.

Tho Ha Vinh, the head of civil society organisation, the Gross National Happiness Centre, says Bhutan's attempt to balance economic prosperity and deep contentment is being closely watched by other countries seeking to understand how to incorporate wellbeing metrics into their own national performance.

"By Chinese standards, Bhutan is just one village, but it's very important because it's kind of a lab for the world," he says. "If one country can show it is possible to have an alternative development paradigm; that it is possible to grow and develop in such a way that is more holistic, more sustainable and that really focuses on what brings wellbeing and happiness to the people and to all life forms, that's a lab and the world can learn from.

"So if it fails here, well for Bhutan it's of course sad and too bad, but it would be even more so for the rest of the world."

In Bhutan's favour is that GNH is not based on a political fad but is borne out of something more profound and enduring. The country, which only saw the emergence of an embryonic private business sector 20 years ago, continues to nurture a deep sense of spirituality that is alive in the people and their relationship to nature. It's in the simple life in the scattered villages and in the scores of monasteries where monks chant through the day, as well as in the many debates ranging from how to manage conflicts between wild animals and humans over access to berries and nuts in the forests, to protecting the sacredness of the soil from chemical fertilisers.

Agricultural sector at risk of stagnating

But as wonderful and rich as the culture is, it is important not to romanticise the kingdom. The predominant agricultural sector is in danger of stagnating. Farming, on which nearly two-thirds of the population depends, is difficult at the best of times in these mountainous regions. Making a living is becoming even harder as weather patterns become more erratic and farms become more fragmented as land is traditionally split between siblings upon the death of the parents.

Many young people no longer want to work the land, get up at 5am to plough the fields with oxen, or spend nights warding off bears, wild boar and porcupines.

Prime minister Tshering Tobgay hopes the introduction of tractors and co-operatives as well as broader access to modern technology will make it more attractive to stay in farming communities. But this is unlikely to put people off the capital Thimphu, which has resulted in a property boom with prices to match.

One 21-year-old farmer I spoke to in the remote Tang valley, who already owns a tractor, seemed to speak for many of her generation when she told me how unhappy she is living in a tiny village. She dreams of a job in the city and the chance to wear makeup and socialise.

Consequences of urbanisation

But while young people are flocking to Thimphu, many have difficulties finding jobs and adapting to being away from their traditional family lives. Tobgay points to growing feelings of isolation and a worrying rise in everything from suicide and addiction to divorce rates.

He says: "Urbanisation is a new phenomenon here, and we have to learn to live in an urban setting. The modern economy is also something that we're still trying to get to grips with, I mean we were all farmers."

The simple fact is that the economy is not in the most healthy of states, facing foreign currency shortfalls and remaining reliant on development aid. State-owned companies still dominate and the private sector remains tiny in size.

Those few entrepreneurs who are trying to make a go of it complain of a lack of access to capital, unnecessary red tape and long delays in providing permits to operate.

Businessman Sonam Tobgay Dorji, who was previously a civil servant, says: "We got carried away by brand Bhutan and our image. We need to get away from a planned economy. We have seen many well-intentioned policies but any time the government tries to intervene we get into trouble. We come from a paternalistic society where government will take care of you and the private sector is extremely tiny."

To address the shortfall in jobs, the government is seeking to liberalise the economy to attract more foreign direct investment in order to diversify away from its reliance on hydro-electric power, which creates little local employment. But what will the impact be?

Money talks

Despite the government's wish to screen out companies that will not respect its GNH philosophy, overseas companies are unlikely to put happiness ahead of maximising profits. Making money for the sake of accumulating wealth is on the rise in Bhutan and when you scratch the surface, it is clear that many Bhutanese have a very limited understanding of what GNH means at a practical level. It is a shame, for example, that the chamber of commerce focuses on talking about the western concept of corporate social responsibility, when it has something much more powerful that is home grown.

A consumer culture is on the rise, driven by greater access to the TV and internet. As consumption tightens it grip, Buddhism is already starting to lose its core essence for many young urban people.

One young man I spoke to says many of his peers have lost their sense of the sacred and have fallen under the spell of the advertising. "We are told that owning more stuff will make them happy, but we are not being shown the suffering this addiction has caused in the West," he says.

Buddhism in retreat?

With the lamas and monks remaining in their mountain retreats, it is being left to others to do their bit to ensure the Buddhist practice, on which GNH is based, remains accessible and relevant.

For example, the GNH centre is flying monks from Vietnamese Zen master Thich Nhat Hanh's monastery in Hong Kong to work with young people on the art of mindfulness because it cannot find monks in Bhutan who are prepared to get involved.

It is impossible to know whether Bhutan will achieve the balancing act of modernising without all the ills that traditionally accompany it. What is clear, however, is that the core Buddhist practice of following the middle path will be a skill that will be critical in determining whether Bhutan becomes another victim of globalisation or continues to be a beacon of hope to other nations.

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