The origins of a Bhutanese political perspective lie in an intimate relationship with religion. Power is interpreted as divinely endorsed. The legitimacy to rule is therefore embodied within individual agents, rather than determined through rational structures. With power comes responsibility for the national well-being, and the system has retained its coherence by maintaining and promoting this reciprocal paternalistic relationship. The records of successive monarchs reveal success in the implied duties of promoting a stable fostering internal environment and protecting it from external threats. Furthermore, such has been their ability to move with the times whilst placing the national over the personal interest, that labels of "benevolent" or "enlightened" are not inappropriate. How does one interpret preemptory policies that have abolished feudal exploitations, limited the ability of the "elite" to pursue their personal ambitions and even significantly reduced the power of the monarchy itself?

With authority concentrated in the hands of a single ruler, formal politics revolves around interactions with the center. Within a traditional context this happens at "court", the assembled collection of family, confidantes and advisors that surrounds the monarch. Power circulates within this setting, where it is distributed through the nature of individual relationships of trust, respect and influence with the hub. An extremely narrow and vertical formal hierarchy is implied by this style of governance. With the authority to make decisions residing solely with the leadership - whose judgment is not doubted - politics assumes a personal rather than ideological form. Where an individual is assessed in terms of character and loyalty, the system tends to promote political factions, individual and family alliances, secrecy, jealousy, paranoia, subtle intrigues and an overall conservatism. The personal style of political interaction is further reflected throughout a small society, where gossip is prevalent and discussions tend to place more emphasis on the broad personality of protagonists than on policy decisions.

The imperatives of modernization and development have necessitated fundamental ongoing political reforms. In 1953 a National Assembly was established as the first fully representative national forum. Traditional feudal relations were brought to an end with the abolition of serfdom in 1956, soon followed by an extensive series of land reforms. The 1969 Forest Act nationalized all forests, and the 1980 Land Act set a land ceiling of 25 acres (although orchard land is exempted). Such policies have been particularly successful in limiting the abilities of established nobilities to enhance their personal wealth. Since the inception of planned development in the early 1960s state infrastructure has expanded substantially, in keeping with the government's role as principal agent in the development process. State-society relations have now significantly changed in size and scope, and there has been a trend towards increased formalization.

Governance issues in Bhutan essentially comprise of accommodating change within a functioning system. The Kingdom has been blessed with the institution of hereditary monarchy, providing a constant source of wisdom and inspiration, affording a stable and consistent policy environment, ensuring good governance and playing a pivotal role in guiding the nation's development. Good governance is aided by a system of double accountability (to the King and to the National Assembly) and the transparency of a small community. High priority has been given to the promotion of a strong and professional civil service. A new formal political hierarchy has emerged from within the preexisting political culture related to an expanding state. However, although the distribution of power remains concentrated, the will and ability of the elite to further their own interests at the expense of the national interest is limited. As the political climate is being transformed by a series of major structural reforms, power will become increasingly devolved.

The political system remains a monarchy, where His Majesty King Jigme Singye Wangchuck is the head of state. The throne retains its status as the fulcrum of the system, although power and authority is now shared with several other political and administrative institutions. Institutions of state are divided by function and responsibility into legislature (National Assembly), judiciary (courts), advisory (Royal Advisory Council) and executive (Cabinet of Ministers). Government administration consists of seven ministries (Foreign Affairs, Home Affairs, Trade and Industry, Agriculture, Health and Education, Finance and Communications), five commissions (Civil Service, Dzongkha Development, Planning, Environment and Cultural Affairs), and several other bodies. Regional administration is divided into 20 districts (Dzongkhags) under district administrators (dzongdags), and further sub-divided into 196 blocks (gewogs), headed by elected community members (gups).

In 1998, at the insistence of the King, there occurred major reforms in the constitutional setup, including the following important alterations: Ministers are to be elected for a term of 5 years by the National Assembly (previously they were appointed by the King for an indefinite period); the Cabinet of Ministers is vested with full executive powers, where the Chairman of the Cabinet (on a one year rotation among elected Ministers) functions as Head of Government (before the King was Head of Government and Chairman of the Cabinet); the National Assembly can register a vote of no confidence in the King.

The whole social fabric of the nation is undergoing a transformation. Many traditional institutional arrangements are and will increasingly come under threat, and it is crucial that important institutions are either maintained or replaced by alternatives within the modern state infrastructure. A unique system of decentralization has been developed as an ongoing process, based around local institutions and customs, linking the central level to the local level in the decision-making process. Formal institutions were formed at the district and block levels in 1981and 1991 respectively. The eventual aim is to promote a fully participatory approach to decision-making and render the development of the nation an inclusive process.