Raise GDP with Capital Goods and Human Capital Germany and the United Kingdom are good examples of how investments in human capital and capital goods can lead to economic strength. Germany and the UK provide public education, and 99 percent of their citizens can read and write. Universities and vocational schools train people to be
productive members of the workforce. In addition, both countries invest billions of dollars each year to update factories, maintain infrastructure, and support advances in technology.
In contrast, Russia has suffered serious financial difficulties since the collapse of the Soviet Union in 1991. Years of low capital investment under Communist rule left manufacturing plants with old, outdated technology. Despite a high literacy rate of 99 percent, Russia’s workers were not trained with the skills needed by the country’s new economy. Unemployment became a serious problem that led to slower economic growth.
Since the early 1990s, Russia has invested billions of dollars to update its factories and train its workforce. As a result, Russia’s economy has improved dramatically since 1991. However, its GDP per capita remains lower than in other industrialized nations.
Assess Your Understanding GDP Per Capita (2015) for
Select European Countries
Belgium $43,584
Bulgaria $20,097
France $41,180
Germany $46,893
Italy $35,708
Poland $26,455
Russia $25,410
Spain $34,819
Switzerland $58,551
Ukraine $7,970
United Kingdom $41,180
Answer the questions using what you have learned as well as the chart showing GDP data for select countries in Europe.
1. How have investments in capital and human capital contributed to high GDP per capita in Germany and the United Kingdom?
________________________________________________________________________________ ______________________________________________________________________________
2. What challenges did Russia face after the collapse of the Soviet Union in 1991? What changes is Russia making to improve its economy and increase GDP per capita?
________________________________________________________________________
3. Which two countries listed in the chart have the lowest GDP per capita? ______________________________________________________________________
4. What can you infer about these countries’ investments in education and capital goods? ________________________________________________________________________
London Parker
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Ukraine and Bulgaria
Entrepreneurship in Europe Entrepreneurs play a vital role in any country’s economy. In general, European countries do not have as much entrepreneurial activity as the United States or developing countries in Latin America and Asia. The reasons include high taxes and lots of regulations in Europe, which lower overall business freedom. However, many European countries are now trying to encourage entrepreneurship by reducing taxes, cutting regulations, and reducing the time it takes to start
a new business.
VOCABULARY Entrepreneurship: someone who has an idea for a good or service and takes risks to produce in
Data Analysis Use the data in the table to answer the questions.
Country United Kingdom Germany Russia World Average
Starting a new business takes…
5 days 11 days 10 days 21 days
Overall Business Freedom
90% 86% 74% 65%
1. The United Kingdom has a higher level of entrepreneurship than Germany and Russia. Use data from the table to explain why. _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________
Apply What You Learned
Imagine the president of Russia is giving a speech on television. He is explaining a plan to improve the Russian economy. Read the excerpt and answer the questions.
1. Read the first bold statement. The president’s plan is based on the conclusion that:
a) exporting natural resources is an excellent source of income for Russia
b) an investment in human capital will increase the country’s overall GDP
c) entrepreneurs bring innovation to the marketplace and spark economic growth
“Our workers must be prepared for a wide variety of jobs in the global economy. (1) My plan is to provide additional funding for students seeking higher education and training in medicine, law, engineering, and the sciences. But the task of moving forward cannot fall on the shoulders of workers alone. (2) Therefore, we will give incentives to companies that invest in new computers, wireless technology, and efficient factories.”
2. Read the second bold statement. The president’s plan is based on the conclusion that:
a) an investment in capital goods will increase the country’s overall GDP
b) exporting natural resources is an excellent source of income for Russia
c) entrepreneurs bring innovation to the marketplace and spark economic growth
