The following article that I wrote was published by KUENSEL on 7th August 2010.
It is a common view among both decision makers and general public, at least at the back of their mind, that the reason why Bhutan hasn’t yet joined World Trade Organization (WTO) is because of ideological differences between social scientists and the capitalist economists. It is perceived that while most economists advise Bhutan to join WTO, social scientists do not favour the idea of Bhutan joining WTO. However, it can be argued that if we go by the truest concepts of economics, even the economists would rather advocate against joining WTO without necessarily agreeing to the ideologies of social scientists.
The argument here is solely based on Mancur Olson’s theory of collective action from his first book titled ‘The Logic of Collective Action: Public Goods and the Theory of Groups’ written in 1965. Mancur Olson (1932-1998) was a leading American economist and social scientist. His theory of collective action is based on the economists’ core assumption of rational choice, wherein an activity is determined by cost-benefit analysis.
His theory challenges the common assumption that when interests existed in a society, groups with special concerns or interests would naturally form organizations to represent those interests. Based on the rational choice assumption, Olson reasons that participation in a group to represent an interest is neither rational nor natural unless the desired objective is maximized with a minimal cost of achieving it. Therefore, if the cost far surpasses benefit, and the organization exists, the rational thing an individual or a group ought to be doing in this case is to be a free-rider. He explains that, however, those individual or a group with higher stake in the common interests will join an organization even if the cost is higher because without their participation, the organization to represent their interests will not come into existence.
WTO was formed by a group of countries in achieving their common interest of accessing global market, which is being moderately achieved. However, the major players or beneficiaries of WTO are the developed countries and the common interest has never been fairly distributed. Therefore, it is in the interest of those countries with high stake to keep the organization functioning and keep persuading non-member countries to join them.
Nevertheless, we have benefited a lot from the fierce global market competition among WTO members. The prices of goods and services have become cheaper, especially in the area of information and communication technology, which helped Bhutan’s socio-economic development by many folds.
Having said that, should Bhutan join WTO? The answer is straight NO going by Olson’s logic of collective action. Joining the league of WTO involves costs. Apart from financial costs, other important costs include losing control over regulations of important areas such as environment, markets, immigration, agriculture, etc. Most importantly, it can have political costs too. Therefore, following Olson’s theory of collective action based on rational choice and self-interest, it would not be rational for Bhutan to join WTO. It makes little sense for Bhutan to accept the costs when we have the choice of not bearing the costs and availing the benefits of cheaper goods and services without being a WTO member. The rational choice for Bhutan in this situation is to be a free-rider by not joining WTO, reaping the benefits of global competition without having to abide by WTO rules.
The above argument is solely based on one theory. There could be many other theories, cases, logics, evidences which could feed into our policy decisions. This can help decision makers to look at one issue from various perspectives. Bhutanese public policies and decisions should gradually move away from normative reasoning.
-Sonam Tobgyal
