Cloistered in splendid isolation high atop the majestic eastern Himalayas, the Kingdom of Bhutan is considered by some to be the world’s last Shangri-la. For the rare traveler who’s lucky enough to be granted a visa to visit, it must surely seem the case.

A land of pristine forests, sparkling lakes, and spectacular alpine geography, Bhutan is an eco-tourist’s dream. Citizens are required by law to wear traditional Buddhist costume. TV and internet service has been available only since 1999. There are exactly zero traffic lights operating in the entire country.

Bhutanese society is nothing short of an anomaly in today’s modern world. But make no mistake—Bhutan’s measured approach to development has been by design.

After the Dragon King, Jigme Singye Wangchuck, ascended to the throne in 1972, he made the maximization of “Gross National Happiness” (GNH) the country’s priority, instead of focusing only on economic growth. At the center of all Bhutanese policymaking, the concept of GNH is essentially based on four pillars: balanced equitable development; environmental conservation; preservation and promotion of cultural heritage; and good governance.

Some 35 years later, while standard measures of wealth such as GDP rank Bhutan squarely in the bottom quartile, GNH is generally considered to have been a success and the citizens seem happy, at least from anecdotal accounts.

As observed by William Sutcliffe of The Observer: “Bhutan does seem to be better run than any democracy in the region. No other ruler seems to have understood and acted on the fact that a subsistence farmer earning £300 a year in a stable village society is infinitely better off than an urban slum-dweller earning £1,500 a year sewing Nike footballs.”

2007 marks the centennial of the Wangchuck dynasty’s revered line of ruling kings. However, as encroachment from the modern world looms, changes are afoot. Already, the nation’s young love affair with mass media and information technology is altering the daily patterns of citizens, and threatens to quickly unravel the unique way-of-life that has been carefully cultivated over the last 100 years.

In response, the country’s rulers are implementing major political reforms to return power back to the people. A new constitution envisions a democratically based constitutional monarchy and the kingdom’s first open elections are expected in 2008.

However, whether the Bhutanese people choose to maintain the GNH-based, cautious direction charted by its absolute rulers remains an open question. What seems more certain is Bhutan’s continued emergence into modernity, which is inherently and ultimately globalizing.

As the process evolves, the rest of the world will be waiting to see if this last Shangri-la can remain true to its idealistic pursuit of happiness.