The Rich Nations Mystery - Part 3

Now let's investigate what factors increase productivity:
Read this segment from the World bank and think about these questions: What is GNP or GDP? What does "per capita" mean? What does a country need to do to grow and increase its GDP/GNP per capita?

http://www.worldbank.org/depweb/english/modules/economic/gnp/index.html

From this reading, can you answer these questions?

1. What is GNP per capita? How is it calculated?
2. Why would one prefer to live in a country to with a high GDP per capita?
3. What do countries with high GDP or GNP per capita have in common?
4. What is productivity and how does it influence GNP per capita?
5. According to your reading, what are some of the factors that encourage productivity and economic growth?

Now let's answer the mystery.
How can a country that has fewer natural resources produce more output per person than a country that has more natural resources? The answer: The key is productivity. Productivity depends on land (including all natural resources), capital (machines, tools, and technology), and labor (peoples' health, education, and work skills). Some rich countries have abundant natural resources, and some have relatively few; however, virtually all rich countries high levels of capital investment and technology, and a highly educated population. Almost all rich countries have a high degree of encourage trade and access to world markets.

Extension Activity:
International Research Project.

Let's explore several countries and find the factors that countries with high per capita GDP have in common, and the factors countries with low per capita GDP have in common.

Working individually, or in teams explore these countries.
What factors make a nation rich?

• North Korea
• South Korea
• Hong Kong
• Switzerland
• China
• Ukraine
• United States

Make a table with these along one side:

1. GNP or GDP
2. Population
3. Calculate GNP or GDP per capita
4. Growth in GNP or GDP (growth rate)
5. Labor force
6. Productivity (GDP/labor force)
7. Economic Freedom
8. Protection of Contracts and Private Property
9. Limited government intervention
10. Market or Command Oriented economy
11. Educated work force (Low illiteracy rate)
12. Openness to trade
13. Low taxes
14. Availability of good transportation and communication
15. Availability of technology
16. Capital stock per worker
17. Infant mortality
18. Life expectancy

Here are some online sources to help you with your research: For a description of each economy including the GDP per capita, the growth rate, degree of market orientation, communication, transportation, infant mortality, life expectancy, literacy rate, openness to trade check the CIA World Factbook; https://www.cia.gov/library/publications/the-world-factbook/index.html

To find statistics on protection of property rights, economic freedom ratings, openness to trade, and limited government intervention, (1-5, with 1 being most desirable) go to the Index of Economic Freedom Rankings at the Heritage Foundation; www.heritage.org http://www.heritage.org/index/

another source of information on North America and Western Europe: http://www.unece.org/stats/trend/trend_h.htm

Please collect the data and complete the form for one country. Compare the results from your country with the results of other students. Rank the countries from highest GDP to lowest GDP. What features do the top 3 have in common? What features do the bottom 3 have in common? Why are some nations rich, and some nations poor?

Did high GDP per capita countries have

High levels of Economic Freedom?

government support of contracts and private property?

limited government intervention?

market oriented economies?

educated workforces?

openness to trade?

low tax rates?

Compare these countries. Look at others. What do you think? List elements which seem to correlate with countries that have a higher standard of living. Why do you think that each element would contribute to higher productivity? Which would contribute to a higher standard of living? Adam Smith, a famous economist, had some thoughts on this topic. Do you think he would have expected your findings? See what he had to say: http://www.adamsmith.org/adam-smith/