Economic Systems of Europe: Influences of Economic Growth SS6E7: The student will describe factors that influence economic growth and examine their presence or absence in Europe. a.Explain the relationship between investment in human capital (education and training) and gross domestic product (GDP). b.Explain the relationship between investment in capital (factories, machinery, and technology) and the gross domestic product (GDP). c.Describe the role of natural resources in a country’s economy. d.Describe the role of entrepreneurship.

Basic Questions: What to produce, how to produce, for whom to produce? What to produce, how to produce, for whom to produce? All nations of Europe must answer these questions All nations of Europe must answer these questions The economic choices that governments make affects its people and how strong its economy will be The economic choices that governments make affects its people and how strong its economy will be

4 factors of economic growth: 1. Human capital: the value of people to an economy Investing in health, education, and training of workers helps economy Investing in health, education, and training of workers helps economy Better education and training = coming up with new technology Better education and training = coming up with new technology Leads to better use of resources Leads to better use of resources

4 factors of economic growth: 2. Capital goods: products that have value Factories, machinery, new technology Factories, machinery, new technology 3. Entrepreneurs: people who start new businesses to sell a new technique, idea, or product 4. Natural resources: land, air, water, and minerals

Economic Growth takes time It takes time for changes of an economy to take effect It takes time for changes of an economy to take effect Countries that were communist (command) economies and switched to democratic countries with mixed economies: improvement is slow Countries that were communist (command) economies and switched to democratic countries with mixed economies: improvement is slow Ex: Romania: good resources, good human capital (educated people), bad economy…it had been communist, so there was an unwise use of capital goods… Ex: Romania: good resources, good human capital (educated people), bad economy…it had been communist, so there was an unwise use of capital goods…

United Kingdom Role of government: Role of government: Mixed economy: mostly market (people start businesses). Government controls some industries (welfare, medicine, oversees banking and money) Mixed economy: mostly market (people start businesses). Government controls some industries (welfare, medicine, oversees banking and money) Economic history: Economic history: When economy struggled in past, government controlled economy more When economy struggled in past, government controlled economy more After World War II, war had destroyed the country After World War II, war had destroyed the country Government took control of coal, oil, electricity, and shipbuilding Government took control of coal, oil, electricity, and shipbuilding

Factors of economic growth: Factors of economic growth: Human capital: skilled workers and competent managers Human capital: skilled workers and competent managers Capital goods: less efficient industries shut down, high-tech industries started to create jobs Capital goods: less efficient industries shut down, high-tech industries started to create jobs Entrepreneurs: many successful entrepreneurs Entrepreneurs: many successful entrepreneurs Natural resources: makes wise use of what they have, including oil in the North sea Natural resources: makes wise use of what they have, including oil in the North sea How are they doing? How are they doing? Large population, high standard of living, low unemployment and inflation Large population, high standard of living, low unemployment and inflation

Russia Role of government: Role of government: Mixed, trying to move towards a market economy Mixed, trying to move towards a market economy Economic history: Economic history: Communist for 70 years (part of the Soviet Union) Communist for 70 years (part of the Soviet Union) Government planned and owned everything in the economy (command) Government planned and owned everything in the economy (command) Unwise use of resources and factories Unwise use of resources and factories Trying to make big change since end of U.S.S.R: taking a long time to improve Trying to make big change since end of U.S.S.R: taking a long time to improve

Factors of growth: Factors of growth: Human capital: skilled and educated workers (one thing the Soviet Union did well) Human capital: skilled and educated workers (one thing the Soviet Union did well) Capital goods: Capital goods: returning businesses to private control (individual people own): many people resisted, thought government should own returning businesses to private control (individual people own): many people resisted, thought government should own improving factories and technology improving factories and technology Natural resources: has a lot of oil Natural resources: has a lot of oil How are they doing? How are they doing? GDP has been growing a lot in recent years, showing they are doing better overall GDP has been growing a lot in recent years, showing they are doing better overall

Germany Role of government: mixed economy Role of government: mixed economy Economic history: Economic history: Before reunification: Before reunification: West Germany: mixed economy, efficient farms, strong industry West Germany: mixed economy, efficient farms, strong industry East Germany: command (communist) economy, collectivized (government-owned) farms, weak industry East Germany: command (communist) economy, collectivized (government-owned) farms, weak industry Since reunification: west part of Germany has had to finance (pay for) improving east Germany Since reunification: west part of Germany has had to finance (pay for) improving east Germany Changing economy of east Germany to be like the west has been difficult Changing economy of east Germany to be like the west has been difficult

Factors of economic growth: Factors of economic growth: Human capital: Human capital: strong, competitive education system. strong, competitive education system. Train students for skilled professions from early age. Train students for skilled professions from early age. Capital goods: Capital goods: Large and successful industry (western part of the country) Large and successful industry (western part of the country) How are they doing? How are they doing? Some struggles because of reunification Some struggles because of reunification

Whole Class Discussion How are the economies of the United Kingdom, Russia, and Germany similar? How are the economies of the United Kingdom, Russia, and Germany similar? How can a country’s history affect its economy? How can a country’s history affect its economy? Consider instability vs. stability, past economic systems Consider instability vs. stability, past economic systems