The Citadel ECON 202 - Policies and Prospects for Global Economic Growth

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Chapter 19IntroductionLearning ObjectivesLearning Objectives (cont'd)Chapter OutlineDid You Know That...Labor Resources and Economic GrowthLabor Resources and Economic Growth (cont'd)Slide 9Table 19-1 Population Growth and Growth in Per Capita Real GDP in Selected Nations Since 1965Slide 11Slide 12Slide 13Slide 14International Example: The Rule of Law and Per Capita Real GDPFigure 19-1 The Relationship Between Adherence to the Rule of Law and Per Capita Real GDPCapital Goods and Economic GrowthCapital Goods and Economic Growth (cont'd)Slide 19Slide 20Slide 21Figure 19-2 Bureaucratic Inefficiency and Economic GrowthPrivate International Financial Flows as a Source of Global GrowthPrivate International Financial Flows as a Source of Global Growth (cont'd)Slide 25Slide 26Slide 27Figure 19-3 Sources of International Investment FundsSlide 29Slide 30Slide 31International Example: Investing in the Usual PlacesSlide 33International Institutions and Policies for Global GrowthInternational Institutions and Policies for Global Growth (cont'd)Figure 19-4 The Distribution of World Bank Lending Since 1990Slide 37Slide 38Slide 39Slide 40Figure 19-5 IMF Quota SubscriptionsSlide 42Slide 43International Policy Example: Using Catastrophe Bonds to Aid Drought-Stricken NationsSlide 45Slide 46Issues and Applications: Bogging Down Business in BrazilIssues and Applications: Bogging Down Business in Brazil (cont'd)Slide 49Summary Discussion of Learning ObjectivesSummary Discussion of Learning Objectives (cont'd)Slide 52Slide 53Slide 54Slide 55End of Chapter 19Chapter 19Policies and Prospects for Global Economic GrowthCopyright © 2008 Pearson Addison Wesley. All rights reserved.19-2IntroductionBuilders in Brazil devote much time and expense to obtain legal permits from local and national government agencies.Construction costs can be driven up by as much as 400%.In this chapter, you will learn why relatively complicated, slow-moving, and expensive legal systems are holding back economic growth in Brazil and other developing countries.Copyright © 2008 Pearson Addison Wesley. All rights reserved.19-3Learning Objectives•Explain why population growth can have uncertain effects on economic growth•Understand why the existence of dead capital retards investment and economic growth in much of the developing world•Describe how government inefficiencies have contributed to the creation of relatively large quantities of dead capital in the world’s developing nationsCopyright © 2008 Pearson Addison Wesley. All rights reserved.19-4Learning Objectives (cont'd)•Discuss the sources of international investment funds for developing nations and identify obstacles to international investment in these nations•Identify the key functions of the World Bank and the International Monetary Fund•Explain the basis for recent criticisms of policymaking at the World Bank and the International Monetary FundCopyright © 2008 Pearson Addison Wesley. All rights reserved.19-5Chapter Outline•Labor Resources and Economic Growth•Capital Goods and Economic Growth•Private International Financial Flows as a Source of Global Growth•International Institutions and Policies for Global GrowthCopyright © 2008 Pearson Addison Wesley. All rights reserved.19-6Did You Know That...•In Haiti, registering a new company takes 203 days, which is at least 198 days longer than is required in the United States?•In Sierra Leone, the cost of officially establishing a business is 1,200 times the average resident’s annual income?•In Nigeria, to record a sale of land, a business must complete 21 different procedures?Copyright © 2008 Pearson Addison Wesley. All rights reserved.19-7Labor Resources and Economic Growth •Population growth does not necessarily translate into an increase in labor resources.•In poor areas, many people do not join the labor force, or they may remain unemployed for long periods.Copyright © 2008 Pearson Addison Wesley. All rights reserved.19-8Labor Resources and Economic Growth (cont'd)•We can express the growth rate of per capita real GDP in a nation as the difference between the rate of growth in real GDP and the population growth rate.•Hence, if real GDP grows at a rate of 4% per year and population growth increases from 2 to 3%, then per capita real GDP will decline, from 2 to 1%.Copyright © 2008 Pearson Addison Wesley. All rights reserved.19-9Labor Resources and Economic Growth (cont'd)•Population growth can contribute to economic growth.•Whether population growth hinders or contributes to economic growth depends on where you live.Copyright © 2008 Pearson Addison Wesley. All rights reserved.19-10Table 19-1 Population Growth and Growth in Per Capita Real GDP in Selected Nations Since 1965Copyright © 2008 Pearson Addison Wesley. All rights reserved.19-11Labor Resources and Economic Growth (cont'd)•The role of economic freedomA crucial factor influencing economic growth is the relative freedom of a nation’s residents.Only 17 nations, with 17% of the world’s people, grant their residents high degrees of economic freedom.Copyright © 2008 Pearson Addison Wesley. All rights reserved.19-12Labor Resources and Economic Growth (cont'd)•Economic Freedom The rights to own private property and to exchange goods, services, and financial assets with minimal government interferenceCopyright © 2008 Pearson Addison Wesley. All rights reserved.19-13Labor Resources and Economic Growth (cont'd)•The role of political freedomPolitical freedom: the right to openly support and democratically select national leaders Economic freedom tends to stimulate economic growth, which then leads to more political freedom.Copyright © 2008 Pearson Addison Wesley. All rights reserved.19-14Labor Resources and Economic Growth (cont'd)•QuestionWhy do you suppose that per capita real GDP appears to be related to the extent to which the rule of law prevails?Copyright © 2008 Pearson Addison Wesley. All rights reserved.19-15International Example: The Rule of Law and Per Capita Real GDP•Failure to abide by the rule of law makes the return on capital dependent more on the whims of individuals than on laws.•Property rights become less secure, which discourages individuals and businesses from investing and using property for productive purposes.•The growth-reducing effects of a breakdown in the rule of law should show up in the form of lower levels of per capital real GDP.Copyright © 2008 Pearson


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