Presentation on theme: "European Economic Systems"— Presentation transcript:
1 European Economic Systems United KingdomGermanyRussia
2 Review . . . Types of Economies TYPES OF ECONOMIC SYSTEMSDefinitionAssociated TermsExamples in Practice1) Market economyAn economic system in which individuals own and operate the factors of production.Free enterprise Capitalism2) Command economyAn economic system in which the government owns and operates the factors of production.Socialism CommunismCuba China Laos3) Traditional economyAn economic system based upon customs and traditions. Economy is based upon agriculture and hunting.Non-Industrialized Agrarian societiesChad Haiti Rwanda4) Mixed economyAn economic system that has features of both market and command economies.United States Great Britain Japan
3 Economic Continuum No system has a pure command or market economy. All economies combine aspects of both of the command and market economic systems – to different degrees.USA has some government owned businesses – schools, public colleges, postal services – in addition to the privately owned businesses.
4 United Kingdom What to produce? How to produce? For whom to produce? Similar to the USA . . .Largely a service based economyExtremely efficient agricultural sectorHow to produce?Industries have much freedomNationalize some industries – bankingFor whom to produce?Private sector provides goods and services for domestic and international marketsWhere are they on the continuum?Far to the market side
5 Germany What to produce? How to produce? For whom to produce? Export based economyFocused on manufacturing and commoditiesHow to produce?Businesses are largely privately owned and independentIncreasing involvement of government in financial sectors.Still trying to improve the East German economy to match the West German economy.For whom to produce?Exports are the primary focusBillions of dollars are transferred to East German states to help modernize and update factoriesWhere are they on the continuum?Market side But not as far as the UK Closer to a command economy.
6 Russia What to produce? How to produce? For whom to produce? Government is still largely involved in the economyMust approve any investments larger than 50 million rubles.How to produce?Large scale production changes are difficult due to the immense bureaucracy.Some movement towards modernizing factories and agricultural equipment.For whom to produce?Low tax rates to improve domestic purchasesTrying to allow for market interactionsHigh tariffs and minimal protection of private property make this difficult.Where are they on the continuum?Roughly dead center on the continuum
7 The ContinuumThese 3 systems are all mixed economies Leaning mostly towards a market system.They do have some elements of a command economy.
8 Review . . . Key Concepts Tariff – tax Embargo Quota A trade barrier that is used to discourage trade with foreign companiesThis type of barrier would restrict tradeCreated to increase the prices of imported goods and protect a country’s own industries from foreign competitionEmbargoForbidden trade with another countryThis type of barrier would STOP the importing of an itemCan be put in place for safety reasons Unsanitary conditions – lead paintAlso used for political reasons Countries that violate human rightsQuotaRestrictions on the amount of a good that can be imported into a countryThis type of barrier can create shortages and an increase in price.EU placed a quota on Chinese imports of clothing when France and Italy, with strong textile industries, complained about cheap import prices.
9 Summarizing Activity Is it a QUOTA, EMBARGO or TARIFF . . . . Only 3,000 pairs of American blue jeans can enter France.The USA charges an extra 10 cents per pound on bananas from Costa Rica.No Brazilian beef can be sold in Spain.Only 10,000barrels of oil can be delivered from Saudi Arabia to Italy this month.The EU will not accept any products from an African nation because its government will not allow free speech or freedom of religion.
10 Economic Growth How is economic growth measured? 4 factors for economic growthLandCapitalFactories, machines, etc.LaborHuman capitalEntrepreneurshipIdeas, innovation and risk involved in starting a businessHow is economic growth measured?Gross Domestic Product (GDP)Total market value of the goods and services produced by a country’s economy in a specific year.Used to determine the health of a country’s economy and compare it to other countries.
11 How does a country raise its GDP? Invest in human capitalEducation and skills trainingSmarter people leads to a more productive workforceIncrease economic growth.Literacy rate is used to determine the educational level of people . . .Higher the literacy rate Higher the GDPInvest in capital resourcesProvides workers with the most current and updated tools.Increases productivity and economic growthExamples . . .Germany High GDPInvested in education and vocational schoolsRussia and Ukraine Low GDPRebuilding economies after gaining their independence in 1990’sUkraine had little money for schools and teacher salaries.Russia had outdate machines and technology in their manufacturing plants.
12 What role does natural resource play in the success of a country’s economy? Fuel for a country’s industries.Source of income when exported.ExamplesUnited KingdomCoal, oil, gasGermanyRivers, forests, large deposits of coal and iron oreRussiaLocated in remote areasHard to develop due to climate and transportation
13 What role do entrepreneurs play in the success of a country’s economy? Generate new ideasInvest in human, capital and natural resourcesWilling to take risksHelp countries adapt to changing trendsDo not have as much entrepreneurship activity as the USA or developing countries . . .Due to high taxes, lots of regulations and job security.The EU is trying to change this through reducing taxes and regulations on small businesses.