Hey there!
This is your teacher Mr. H.,
and you’re watching History in a Hoodie.
Today’s episode is about economic growth
where we will learn all about how different
countries approach making more money.
I can’t wait to find out!
Well then, let’s get this show started!
What are we learning about today?
The standard for today’s lesson asks the
students describe factors that influence economic
growth including literacy, entrepreneurship,
natural resources, and investments in human
capital and capital goods.
Before we start, let’s go over some vocabulary
for today’s lesson.
Let’s return to our fictional, island nation…
Pine Moria.
We have big plans for our tiny country.
I want it to be a major trader internationally
within the next few years, and I want to significantly
increase the GDP per capita to make my people
happier.
Right now, the GDP per capita is about $15,000
per year (or 13,500 Hofbucks per year) which
means that pretty much everybody living on
my island is poor.
I want to change that, so I’m going to have
to make some economic decisions that will
improve the per capita GDP both in the short
term and the long term.
I have five ideas that I am hopeful will result
in more money in my citizen’s pockets – improving
literacy rate, encouraging entrepreneurship,
taking advantage of natural resources, and
investing in both human capital and capital
goods.
Why are you sent to school?
Because the best educated people get the best
paying jobs.
Did you know that the day you graduate high
school, you earn a piece of paper that says
you are now worth at least $30,500 per year?
That’s a $10,000 raise over not having a
high school diploma… pretty sweet if you
ask me.
When you earned that diploma, your Standard
of Living increased because you had more money
– and with that money you could spend it
on better living spaces, healthier food, medical
visits to check on your health, or getting
more education.
If a high school grade earns at least $30
grand, a college graduate earns on average
$56 thousand – another huge raise for improving
your education.
In economics, we recognize that education
(measured by Literacy Rate) is connected to
a country’s Standard of Living.
The more educated people in a country, the
better living in the country is going to be.
Entrepreneurs are the people who take significant
risk to start up a new business.
Entrepreneurship is an important quality to
encourage in a country because most economic
growth comes from new start-up businesses
that become successful, rather than existing
big businesses that make tiny gains each year.
Starting a business is difficult because it
can mean losing everything if the business
fails, so it is helpful if national governments
support new businesses with loans and make
creating the business easier.
An entrepreneur with a dream and an idea should
never hesitate to start their business because
the government is making them jump through
hoops.
Of all the ideas I’ve presented to jump-start
an economy, natural resources is really the
only one that we have no control over.
Natural resources are like the lottery – either
you win big when you discover a rare and valuable
resource within your borders, or you are stuck
with nothing.
And there is little that a country can do
now to get more natural resources… unless
they’re planning on invading another country
for resources (which never ends well… see
Japan in WWII).
There’s an old business saying – “You’ve
got to spend money to make money.”
This is the idea of investment.
Capital goods is one area a business or a
country may decide to invest in.
Capital goods are the things you need to make
things.
Whatever tools, technologies, machines, factories,
etc. that go into making your product are
your capital goods.
If you’re going to start up a business,
you will spend a ton of money on capital goods
(which is called the ‘overhead cost’).
If you are going to expand your business,
you will need to buy more, bigger, and better
capital goods as well.
Countries and governments can support start-up
businesses and growing businesses by making
loans available to buy all these capital goods.
Finally, human capital means investing money
on training people to do their jobs better.
A few years ago, your teacher, Mr. H., went
back to college to earn a second college degree,
a master’s degree, in education.
My school and district loved me getting more
education because it meant I would be a stronger
teacher than before.
They demonstrated their enthusiasm for me
going back to school by helping to pay for
part of my college tuition and by giving me
a $5,000 raise when I finished.
This is common in many businesses – employees
who get extra training or education get raises
because they become more valuable to the company
when they can do their jobs better.
Hopefully, with all of these five plans put
in place, my country of Pine Moria will start
raking in the Hofbucks!
So, what?
How do the economic choices affect peoples’
standard of living in Southwest Asian countries?
We are now going to compare three Southwest
Asian countries, Israel, Turkey, and Saudi
Arabia, on how they’re working to improve
their economies using these 5 categories:
literacy, human capital, capital goods, natural
resources, and entrepreneurship.
Literacy rate is in the high 90s percent-wise
in each of these countries, but human capital
investment shows a more telling story of these
three countries.
Israel is in the top 25 worldwide in human
capital investment and is probably rising
up the list as they continue to pour investment
money into educating workers.
Turkey may currently be rated higher on the
investment list than Saudi Arabia, but the
country will likely be dropping down the list
as they have de-prioritized human capital
while Saudi Arabia has recently begun prioritizing
education more and more.
This has become increasingly important for
the Saudi economy as the oil industry requires
highly educated individuals to run.
While oil resources have been well-invested
into over the past century, the Saudi economy
would do well to diversify their investments
by attempting to grow other industries as
well.
Israel and Turkey have diversified their economies
to focus on areas like technology, textiles,
and manufacturing because of their lack of
natural resources, and they have also done
the most to make entrepreneurship easy as
starting a business is simpler and quicker
than in Saudi Arabia.
Now, what?
What am I going to do with this information?
I was in an economics class years ago and
the professor made the point that there are
three types of people: those who spend every
cent they can, those who save every cent they
can, and those who invest every cent they
can.
Of those three categories, you can see the
mental process about how people go about money.
Some people are only concerned about their
finances right now and don’t consider the
future, just hoping the money will be there
when they next need it.
Some people are the ‘play it safe’ types,
budget their money wisely, and put the rest
away to make sure they will be fine in their
future, but never doing great.
And some people are risk takers with their
money, betting it all on the growth of the
stock market, but ultimately becoming the
biggest winners or the biggest losers.
Just as everything else we have discussed
with this economics unit, the best plan with
your personal money is a combination of all
three types of people.
You should invest some money (or put your
money to work for you, as some financial types
would say).
You should save some money.
But you should also enjoy the rewards of your
hard work here and now as well.
Financial planning is a very difficult task
that many adults struggle with, which is why
many adults seek out advisers for how to handle
their money.
When it comes to your money and being secure
in your future, guessing isn’t going to
cut it.
Wow!
So, learning about countries’ economies
is really important for us to understand.
I’m glad we learned it today!
Are you ready for some review questions?
I hope all of you learned a lot from today’s
episode of “History in a Hoodie” about
economic systems of the Middle East.
If you did, don’t forget to like, subscribe,
and share….
Just kidding, I don’t care about that stuff.
But do make sure you study this lesson.
Bye now!
