THE QUESTION OF ECONOMIC PATRIOTISM: Navigating between minimalist ethos and maximalist consumption

Before delving into the details of the proposed subject, it is crucial to glance at the macroeconomic landscape of Bhutan. The country transitioned from being categorized as a Least Developed Country (LDC) to a lower-middle-income country in December 2023. The latest recorded Gross Domestic Product (GDP) stands at Nu. 227.81 billion. One of the significant economic challenges facing Bhutan is the escalating trade deficit, which surged from Nu 18 billion in 2020 to over Nu 32 billion in 2021, nearly doubling to approximately Nu 62 billion in 2022, as reported by the Ministry of Finance. Bhutan recorded a Current Account deficit of Nu. 81,677.20 million in 2022, as estimated by the Royal Monetary Authority (RMA). The GDP per capita income as of 2023 is USD 3,776.43, and in 2021, the Purchasing Power Parity (PPP) for Bhutan was estimated at 20.6 LCU per international dollar. The total national debt as of December 2023 stands at Nu. 280 billion.

In contrast, Bhutan's consumption patterns, particularly concerning high-end products, often comprising luxury items, have seen a dramatic increase, creating a juxtaposition that suggests Bhutan has achieved a developed country's status. From significant quantities of Coke to expensive smartphones, mainly iPhones, to extravagant compound bows and luxury cars, the variety of imports is extensive. It is noteworthy that Coke rose to the top five import list in 2022, with USD 48.3 million worth imports, marking a concerning trend. Similarly, in the subsequent year, smartphone imports topped the list in 2023, amounting to Nu. 2.2 billion, further contributing to trade imbalances. These imports, along with numerous others, raise significant concerns regarding trade equilibrium.

Certainly, there seems to be a notable lack of concern among many, while others appear to be uninformed about the repercussions. This is apparent in the limited efforts by both the government and individuals to address shifting consumption patterns and financial literacy. So far, there has been a notable absence of comprehensive consumer education initiatives through mainstream media channels like television, radio, and papers. Conversely, social media platforms are flooded with aggressive advertisements targeting consumers. This raises questions about policymakers' awareness of these issues and the necessary policy interventions needed to drive change. How can Bhutan thrive with unchecked consumer behaviour?

On the opposite end of the spectrum, Bhutan is known for its minimalist ethos, deeply rooted in Buddhist principles such as "less is more" and recognizing insatiable desire as a main source of suffering. While this philosophy has progressively evolved into the development concept of Gross National Happiness, emphasizing sustainable economic growth as one of the four pillars of GNH, the current trend of excessive consumption portrays a polar-opposite behaviour. This behaviour, driven by capitalist ideals and a focus on wants rather than needs, has severe implications for a nation already burdened by debt.

Behavioural economists highlight five key principles that influence economic decision-making: bounded rationality, heuristics and biases, social influences, time inconsistency, and context dependence.

Bounded rationality, as applied to Bhutan's consumption behaviour, suggests that people's decision-making abilities are constrained by cognitive limitations, leading to choices that may not be entirely rational. This is exemplified when individuals in rural areas spend substantial amounts on items like compound bows, often at the expense of selling land. In general, one might question the economic contribution of individuals, who are otherwise economically productive, spending significant time and resources on archery, including late nights and weekends. Not only does this represent a misuse of economic resources, but the importation of costly compound bows and accessories from countries like the US and China also worsens trade deficits.

For instance, if there are 50,000 archers and the average cost of a bow (excluding accessories) is estimated at Nu. 70,000, this amounts to a total of Nu. 350 million contributing to balance of payment deficits. Moreover, archery involves inherent risks, and injuries resulting from archery accidents further impact health, human resources, and the economy. However, internationalizing Bhutanese archery may offer economic opportunities. In which case, it could attract tourists interested in traditional sports and cultural experiences, leading to revenue from tourism and merchandise sales. Additionally, international competitions and collaborations might enhance the sport's visibility and commercial appeal.

In the similar vein, cognitive constraints are evident when individuals with limited knowledge of videography and photography use high-end gadgets like smartphones, particularly iPhones, equipped with Full HD and 4K video capabilities. While YouTubers elsewhere leverage these devices for independent content creation and income generation, the full utility of such gadgets remains largely untapped in Bhutan. These devices offer camera qualities comparable to DSLRs, along with numerous applications that may have little relevance to ordinary users. Consequently, this contributes adversely to trade imbalances. Moreover, time inconsistency in human behaviour leads to changing preferences over time, prompting producers to capitalize on consumer psychology by continuously introducing new models with minimal feature changes but extensive advertising to lure buyers.

Social influence in Bhutan, driven by social norms, peer pressure, and the behavior of others, significantly impacts individuals' economic decisions. For instance, there is a societal expectation that affluent individuals must own luxury cars (such as Prados), use high-end bows like Hoyt, wear expensive clothing, and conform to perceived standards to avoid societal judgment. This creates a peer pressure to adhere to social norms, even if doing so incurs substantial financial costs. This phenomenon, known as the "Jinda or Dasho mentality," highlights the pressure to project a certain image of affluence. In reality, individuals perceived as wealthy may be struggling with financial burdens like loans or other obligations despite outward appearances of affluence.

In economic decision-making, heuristics and biases play a critical role. For instance, in platforms like "B-Bay Buying and Selling Forums," numerous second-hand items are advertised for sale. The rise in sales of used items can be attributed to individuals using mental shortcuts (heuristics) that can lead to systematic errors (biases). This is evident when someone makes an impulsive purchase and later regrets it, subsequently selling the item at a lower price shortly after. Additionally, the general preference for new products over second-hand ones contributes to increased imports.

In Bhutan, the government is a major importer of vehicles. Particularly in urban areas with improved road infrastructure, there is a need to rationalize the use of duty vehicles, especially high CC vehicles like Prados, Fortuners, and Mitsubishi Pajeros, for officials' daily commutes. Similarly, at the individual level, purchasing luxury items like Land Cruisers or BMWs without a clear economic purpose raises questions about consumption choices and personal financial responsibility.

Beyond consumption, various other behaviors, including but not limited to seeking basic healthcare services in neighboring countries, engaging in neykor culture, and undertaking casual shopping trips, could be revisited to enhance the macroeconomic outlook of the country.

These considerations not only reflect individual decisions and purchasing power but also highlight a sense of "economic patriotism" that emphasizes minimalism and responsible consumption for the nation's economic security. 

In conclusion, it is recommended that the government engages in diverse forums to promote "economic patriotism" and enhance "financial literacy" among Bhutanese consumers. Encouraging alternative choices from within the country and prioritizing essential imports can help reduce trade deficits. Strategic public advocacy plays a crucial role in promoting these ideals. By blending Buddhist ethos of minimalism with economic principles of distinguishing between needs and wants, Bhutan can improve its trade balance and enhance individual economic well-being in the long run. Policy interventions, where necessary, should be implemented without compromising consumers' essential choices.

Published in Business Bhutan, April 27, 2024 issue.