1. Economics for Leaders Economics Mr. Hellums Economic Growth: The Solution to Scarcity

2. Economics for Leaders Lesson Objective: Analyze economic growth in countries that protect private property rights and encourage voluntary trade.

3. Economics for Leaders The Problem - Scarcity Available resources are limited but human wants are infinite

4. Economics for Leaders Scarcity: Why Should We Care? http://www.flatrock.org.nz/topics/odds_and_oddities/ultimate_in_unfair.htm

5. Economics for Leaders Low, Middle, & High Income Nations Why are some countries rich and others poor? Can everybody be made better off?

6. Economics for Leaders Economic Growth Definition: Economic growth increases Incomes (GDP per capita) —a bigger pie for everybody—even in the face of scarcity Growth does not eliminate scarcity but makes some things less scarce Growth is  Not even across times and countries  Not automatic  Not irreversible BUT! It is the most powerful weapon against poverty ever discovered!

7. Economics for Leaders Economic Growth improves the lives of the poor by making the pie bigger Bigger “slices” mean higher standards of living

8. Economics for Leaders ~1750 Population Growth and Important World Events

9. Economics for Leaders Key to Growth = Productivity Productivity: The output produced from a set of resources in a period of time. Direct sources of increased productivity: Technological change (new inventions) Technological change (new inventions) Better management of production (Henry Ford, J-I-T…) Better management of production (Henry Ford, J-I-T…) Skill and education (and learning by doing) Skill and education (and learning by doing)

10. Economics for Leaders The Story of Two Canals Source: Wikimedia Commons

11. Economics for Leaders How could 101 mi. of Suez canal… …do more for economic growth… …than 1,104 mi. of the Grand canal?

12. The Suez Canal is an artificial sea-level waterway in Egypt, connecting the Mediterranean Sea and the Red Sea. – The Suez canal is 101 miles long – It saves ships thousands of miles of travel around Africa. – It was built by a private company—mainly funded by French investors, it eventually made profits and encouraged trade. Opened in November 1869, the canal had an immediate and dramatic effect on world trade. Combined with the transcontinental railroad in America completed six months earlier, it allowed the entire world to be circled in record time. The Suez Canal

13. Economics for Leaders Started in the 10 th century, the Grand Canal of China is 1,104 miles long. Built by the Chinese government with a purpose to stifle sea-faring trade along the coast, which was banned from 15 th century to the 19 th century, and to aid armies with grain and material supplies. Even though the Grand Canal is an engineering marvel, in economic terms it is a depressing and destructive story. The Grand canal is a monument to bureaucratic cost and taxes. Why? The Grand Canal

14. Economics for Leaders Role of the Government Within an economy, government institutions define the formal and informal “rules of the game.”

15. Economics for Leaders Role of the Government These rules shape incentives and define acceptable forms of behavior in an economy. “Incentives” are rewards or penalties that influence people’s choices and behavior.

16. Economics for Leaders The poverty of some nations and the wealth of others is not an accident; it is the result of choices

17. Economics for Leaders The World at Night

18. Economics for Leaders Review What is the best way to alleviate scarcity? Economic growth What is the source of economic growth? Increasing productivity How could productivity increase? TTechnological change IImproved management SSkill and education What turns “could” into “will”? The right INSTITUTIONS.

19. Economics for Leaders The Institutions that matter for economic growth... Open markets Property rights The rule of law Entrepreneurship and innovation

20. Economics for Leaders Country150017001850190019501970198019902000 United States4005271,8064,0919,56115,03018,57723,20128,403 Canada4004301,3302,9117,29112,05016,17618,87222,366 France7279101,5972,8765,27111,66415,10618,09321,277 Japan5005706791,1801,9219,71413,42818,78921,051 United Kingdom7141,2502,3304,4926,93910,76712,93116,43020,159 Germany6889101,4282,9853,88110,83914,11415,92918,982 Italy1,100 1,3501,7853,5029,71913,14916,31318,786 Mexico425568 6741,3662,3654,3206,3206,0857,249 Brazil4004596866781,6723,0575,1984,9235,556 China600 5454487781,0611,8713,421 India550 5335996198689381,3091,885 Total Africa4144215006018901,3551,5381,4491,474 World Per Capita REAL GDP: 1500 - 2000 http://www.ggdc.net/maddison/ Source: GDP data from Angus Maddison, "Historical Statistics of the World Economy: 1-2003 AD.“