Why Do Economies Grow?

1
Why Do Economies Grow?

• Lesson 3

2
Colonial Economy Mystery

• North America offered no known gold or silver
  for the taking. There were no spices to trade.
  Eventually, however, the colonies were able to
  prosper. Why?

3
Mystery Nations
4
Who is Wealthy?

• Some nations of the world have become wealthy,
  while others have not.
• What do you think are the most important reasons
  this has been so?

5
Who Has the Highest Income?

• Country A Wealth Score ___ Give wealthiest 4,
  next wealthiest 3 next wealthiest 2 and poorest 1
• Under European colonial rule from early 1500s
  until 1816
• Benefits from rich natural resources including
  fertile plains, lead, zinc, iron ore, petroleum
  and uranium
• Population of nearly 40 million people in 2004
  (small for a nation of this size)
• Land size about three-tenths the size of the
  United States

• Country B Wealth Score ___ Give wealthiest 4,
  next wealthiest 3 next wealthiest 2 and poorest 1
• Under European colonial rule from early 1500s
  until 1822
• Benefits from rich natural resources including
  bauxite, gold, iron ore, nickel, phosphates, tin,
  uranium, petroleum, hydropower and timber
• Population of over 184 million
• Land area slightly smaller than the United States

6
Who Has the Highest Income?

• Country C Wealth Score ___ Give wealthiest 4,
  next wealthiest 3 next wealthiest 2 and poorest 1
• Under European rule from the nineteenth century
  until 1947
• Benefits from rich natural resources including
  large coal reserves, iron ore, manganese, mica,
  titanium ore, chromite, natural gas, petroleum,
  limestone and agricultural land
• Population of more than 1 billion
• Land area slightly more than one-third of the
  United States

• Country D Wealth Score ___ Give wealthiest 4,
  next wealthiest 3 next wealthiest 2 and poorest 1
• Under European rule from 1841 to 1997
• Good harbor but no natural resources
• Population of nearly 7 million
• Land area six times larger than Washington D.C.

7
Mystery Nations Revealed
8
Country A

• Argentina
• Population
• 39,921,833 (July 2006 est.)
• GDP per capita
• 13,700 (2005 est)
• Life Expectancy
• 76.12
• Literacy Rate
• 97.1
• Infant Mortality
• 12.78 deaths/1,000 live births

9
Country B

• Brazil
• Population
• 188,078,227 (July 2006 est.)
• GDP per capita
• 8,400 (2005 est)
• Life expectancy
• 71.97
• Literacy rate
• 86.4
• Infant mortality
• 28.6 deaths/1,000 live births

10
Country C

• India
• Population
• 1,095,351,995 (July 2006 est.)
• GDP per capita
• 3,400 (2005 est)
• Life Expectancy
• 64.71
• Literacy Rate
• 59.5
• Infant Mortality
• 54.63 deaths/1,000 live births

11
Country D

• Hong Kong
• Population
• 6,940,432 (July 2006 est.)
• GDP per capita
• 37,400 (2005 est.)
• Life Expectancy
• 81.59
• Literacy Rate
• 93.5
• Infant Mortality
• 2.95 deaths/1,000 live births

12
Two Additional Cases
13
United States

• United States
• Population
• 298,444,215 (July 2006 est.)
• GDP per capita
• 42,000 (2005 est.)
• Life Expectancy
• 77.85
• Literacy Rate
• 99
• Infant Mortality
• 6.43 deaths/1,000 live births

14
Saudi Arabia

• Saudi Arabia
• Population
• 27,019,731 (July 2006 est.)
• GDP per capita
• 12,900 (2005 est.)
• Life Expectancy
• 75.67
• Literacy Rate
• 78.8
• Infant Mortality
• 12.81 deaths/1,000 live births

15
Natural Resources Paradox

• Natural resources have contributed to the
  economic success of some nations.
• Yet, many nations with vast stocks of natural
  resources are poor.

16
Factors Associated with Economic Growth

• Lesson 3 Activity 3.1

17
Activity 3.1Factors Associated with Economic
Growth

• Private Property Rights
• Question A Would you keep a savings account or
  want to own a farm in a nation that expropriated
  savings and farmland every few years?

• Physical Capital Question B What incentives
  might encourage the development of physical
  capital?
• Human Capital
• Question C What incentives could a nation
  provide to encourage the development of human
  capital?

18
Activity 3.1Factors Associated with Economic
Growth

• Investment
• Question D What incentives might encourage
  people to save and invest?

• Infrastructure
• Question E How is infrastructure similar to
  investment?

19
Be a Planet Planner

• Lesson 3 Activity 3.2

20
Activity 3.2Be A Planet Planner

• The Spanish and the English had much in common.
  Both were powerful European colonial powers. But
  the results of colonial development led to
  different outcomes in North and South America.
  Why?

21
Be A Planet Planner

• You have just been appointed by Dr. Julie Verne
  to the United Nations Intergalactic Development
  Administration (UNIDA) Task Force for Planet Z93.
• Your job is to advise Dr. Verne on Z93
  development plans by applying two rules
• 1. People respond to incentives in predictable
  ways. Rewarding people for their work, for
  example, encourages them to be productive.
• 2. People create economic systems that
  influence individual choices and incentives. In
  order for an economy to grow, its rules must
  include a system of incentives that encourages
  people to produce.

22
English Development

• England by the 17th century had transferred some
  power from the king to the parliament.
  Individual property rights were better defined
  and enforced.
• The Pilgrims experimented with common land
  ownership but nearly starved.
• In 1623, they replaced group land ownership with
  individual ownership.

• This had very good success for it made all hands
  very industrious, so as much more corn was
  planted than otherwise would have been by any
  means the Governor or any other could use.
• William Bradford
• Of Plymouth Plantation, 1620-1647

23
Spanish Development

• Spain in the 16th century was an absolute
  monarchy. Individual property rights were not
  well defined and enforced.
• The plan for development was to seek gold and
  riches - - a transfer of wealth, not expansion.

24
Questions for Discussion

• Questions for Discussion
• How did the political institutions differ between
  Spain and England?
• Describe ways in which Spain influenced the
  economic development of South and Central
  America?
• Describe ways in which the English developed the
  eastern coast of North America?
• Policy Recommendations
• Who should be allowed to own property in Z93?
  Individuals? Government? Why?