By the end of this year, King Jigme Singye Wangchuck, whose family has ruled over Bhutan for almost a hundred years, will officially hand over power to the people. Nobody wants to see him go, but the king himself has decided that he must take a less active role in government. By his own account, he does not want to see the throne stand in the way of the remarkable modernization under way in Bhutan.

Under the current king’s rule, this tiny Himalayan kingdom (whose population is still unknown, but which is estimated to range from 700,000 to about two million people) has become a rare innovator among developing nations. Rejecting the models of urbanization and unregulated market development usually promoted by the U.S. government, the king has crafted the framework for a political economy based on a theoretically harmonious mix of representative government, south-Asian-style capitalism, traditional religious values, environmentalism, hydropower, tourism, mandated preventative medicine, and universal health care.

Now comes the real test: can Bhutan and the king’s enlightened framework withstand the messy business of democracy and development, and the problems that tend to follow? “With China, India, and Nepal sitting on its borders,” says Stephen Cohen, a senior fellow at the Washington, DC, policy think tank the Brookings Institution who specializes in south-Asia security matters, “and donor nations in the West constantly pushing new models upon the developing nations they fund, anything can happen.”

But if Bhutan can prove that democracy, social equality, sustainable development, environmental protection, and limited technology are compatible with Buddhism and 21st-century modernization, it will be an interesting example for other poor nations who want modern technology and economies–but who want them on their own terms.

Or as the king explained at a conference in his country last year, “There must be some convergence among nations on the idea of what the end objective of development and progress should be.”

The Happy Factor
If Bhutan’s experiment succeeds or fails, many will credit or blame the country’s very Buddhist (or very eccentric, depending on whom you ask) notion of “gross national happiness.” In the late 1980s, Bhutan’s University of Oxford-educated king famously asserted that gross national happiness (GNH) was more important than gross national product (GNP). Among the core principles of GNH, he said, are good governance and sustainable economic development, cultural and religious preservation, eradication of poverty, and environmental protection. More recently, health care and education have been added to the concept.

Even those who like the idea of GNH would admit that it is half-baked. The Centre for Bhutan Studies, the agency in the capital city of Thimphu responsible for the promotion of GNH nationwide, concedes that GNH can’t be measured yet – but promises it will be someday. The center is already trying to create a baseline. In May, Bhutan’s first nationwide census set about trying to find out whether people are happier than they were 10 years ago. Conclusions will be published next year.

It’s easy to find GNH quaint. Nevertheless, when I was in Bhutan earlier this year, everyone I spoke to – from intellectuals to entrepreneurs to young students in the countryside – said GNH was a good way of keeping government honest.

In his modest office in Thimphu, over a cup of ginger tea with milk, Prime Minister Lyonpo Yeshey Zimba told me, “Bhutan’s most valuable assets are its culture, religion, language, environment, and people. In a sense, we’re like any small company with a niche. We must modernize to survive. But we must do it in a way that ensures that we are not destroying, in the process, what makes us unique. GNH was the king’s effort to make sure that we don’t lose ourselves in modernization.”

Deep Impact?
What about more-conventional measurements? There’s plenty to measure in Bhutan: some of it good, some of it less so. First, the bad. By some estimates, as much as 90 percent of the population lives at subsistence level. The country has a $598 million debt. Nearly two-thirds of Bhutan is still without electricity, while a quarter are without clean drinking water.

This last fact may be one reason why Bhutan is not a very healthy place to live. The average life expectancy is 63 years – much lower than is common in richer countries. There are only a handful of ambulances. Those lucky enough to make it to a hospital in one of the larger towns, like Thimphu or Phuentsholing, will find large, modern-looking facilities. Trouble is, most of the staff aren’t trained in basics like surgery or outpatient care. Diagnostics and acute and chronic care are virtually nonexistent.

But then, Bhutan only began modernizing in the 1950s. Previously, there were no paved roads, most homes were built from mud and grass, literacy was low, and the death rate was high. That Bhutan has progressed so far is thus remarkable. The current king, who came to the throne in 1974, invested the country’s meager finances in an airport, an east-west road, bridges, national education, health care, and select energy-producing technologies like hydropower, which provides almost all the country’s electricity. And it has worked, after a fashion.

According to the Asian Development Bank, Bhutan’s GNP in 1985 barely topped $45 million. By 2002, it was more than $590 million. From 1999 to 2003, Bhutan’s average GDP grew by 6.72 percent every year. Save for China, none of Bhutan’s regional neighbors – including India – saw more GDP growth during the same period.

If Bhutan is still not a very healthy place to live, it’s certainly better than it was. The number of health facilities in the country rose from 65 in 1985 to more than 200 today. Infant mortality rates in 2000 were half of what they were in 1985, while average life expectancy rose from 48 years to 63 during the same period.

The country has seen a remarkable growth in general education. The literacy rate is almost 50 percent, whereas in the early 1990s it ranked the lowest among the least-developed countries. More than 90 percent of Bhutanese children now reach at least the fifth grade. The country’s first university opened its doors in 2003.

Technology use has increased, too: according to World Bank figures, from 1999 to 2003 the number of fixed-line and mobile-phone subscribers jumped from 18 to 45 per 1,000 people; personal-computer ownership nearly tripled from 5 to 14 per 1,000 people. In 1999, the country introduced its first commercial Internet service provider, DrukNet, and its first television broadcasts, through the Bhutan Broadcasting Service (BBS). For roughly $60 a year, a Bhutanese home can have both. This is, of course, a lot of money in Bhutan. According to DrukNet, neither it nor the BBS has a large subscriber base, as yet, because two-thirds of the households in Bhutan don’t have electricity. But DrukNet claims there are already a combined 120,000 subscribers.

Bhutan has gone from being off-limits to tourists to being the most coveted destination for well-heeled adventurers–in part because travel visas are rationed, giving travelers the sense they are seeing something very special. They are, especially if they are fortunate enough to stay at the five-star Como Uma Paro or the Amankora, or the soon-to-open Yangphel Hotel.

But even as it modernizes, Bhutan has also strengthened or enacted laws designed to control pollution, mining, and logging. Almost 70 percent of the country’s forests are protected. New laws ban smoking, gambling, and prostitution; anticorruption and construction codes have also been enacted.

The Challenge Ahead
In its efforts to promote its citizens’ happiness, the Bhutan government remains preoccupied with health care. Health care in Bhutan is free; but health-care costs are rising, says Gado Tshering, director of Bhutan’s health department. Tshering wants to invest in a magnetic-resonance imaging station that would let doctors diagnose disease earlier and with greater confidence.

“Capturing disease faster would save us a lot of money,” he says. When a patient’s illness exceeds Bhutan’s medical capabilities – which happens often, since most of the country’s health-care facilities are focused on treating pain, broken limbs, and gastrointestinal-tract illnesses – the government pays to have the patient sent to Calcutta or Bangkok. This is expensive and unsustainable.

“Eventually, probably sooner than later, we will need a lot more money, because the nature of disease in Bhutan is changing,” Tshering says. “We’re seeing more obesity, pain, depression, and hypertension.” These are expensive diseases to treat, especially when not caught until late stages. Left unchecked, health-care expenses will impinge on development plans.

George Martin suspects that Bhutan’s king and his GNH framework will be studied for years to come. Recently retired from a career at the National Institutes of Health, Martin traveled to Bhutan last year as part of a delegation to assess the country’s progress in public health. “Health care is still a struggle because of things like geography, finances, training, and sanitation,” he told me recently. “But they get that the name of the game is preventative medicine.”

Shangri-la
Can a poor nation like Bhutan achieve limited modernization, adopting only the media, the particular technologies, and the developmental policies that fit into its odd concept of GNH? Will Bhutan keep its forests off-limits to loggers? Will it continue to put a cap on the number of tourists who visit the country? Can it afford to invest more than a third of its budget in health and education?

So long as Bhutan declines foreign investment that goes against its environmental policies or infringes upon its sovereignty, it can do all of these things. Whether it should is something the Bhutanese themselves must decide.

One can easily imagine an economic liberal arguing that once they are no longer ruled by the king’s whims, the Bhutanese may prefer a more conventional kind of development to their picturesque poverty. The Bhutanese might want more affluence and economic choice for themselves and their families. The economic liberal would insist that it is Westerners who are most bewitched by the idea of Bhutan as an untouched paradise.

The country tends to evoke strong sentiments in visitors. It bewitched me. And I am not alone. Long-time Time essayist and travel writer Pico Iyer has seen more of the world than most. He calls Bhutan the last Shangri-la. In a picture book about Bhutan commissioned by the Amankora hotel, Iyer writes, “We aspire, many of us, to step out of the accelerated rush of our wired planet, and into somewhere pristine; and we find more and more, that it’s nearly impossible….In Bhutan…the King has outlined a notion of gross national happiness to stand for a different kind of wealth and shelter.”

Maybe the Bhutanese think that Shangri-la is worth preserving. During my visit to Bhutan, I felt that most Bhutanese share the king’s aspirations. Iyer saw what I did: “The whole kingdom has made a sustained and conscious effort to hold on to what is precious in its past while trying to bring its people into the comfort and safety of the future.”

Stephan Herrera is a contributing editor to Technology Review.