Generating Generating Wealth to Wealth to

Support a Living Support a Living Standard Standard

A Basic Understanding of A Basic Understanding of GDP and HDIGDP and HDI

Generating Wealth to Generating Wealth to Support A Living StandardSupport A Living Standard

Wealth can only be generated from the physical and human Wealth can only be generated from the physical and human resources which are available in a society. resources which are available in a society.

Availability of resources is based on: Availability of resources is based on: the quality and quantity of the resource in the environment. the quality and quantity of the resource in the environment. whether people know about the resource, (this applies to whether people know about the resource, (this applies to

both physical and human resources) both physical and human resources) whether people have the knowledge necessary to exploit the whether people have the knowledge necessary to exploit the

resource; andresource; and

Resources are also known as the factors of production. These Resources are also known as the factors of production. These include: include: land (natural resources); land (natural resources); capital (money, tools, equipment etc.); capital (money, tools, equipment etc.); labour (& education of labour); labour (& education of labour); entrepreneurship (the organization and/or management of entrepreneurship (the organization and/or management of

resources and capital for production);resources and capital for production);

In order to create wealth, resources In order to create wealth, resources and the factors of production have to be and the factors of production have to be brought together (transportation) brought together (transportation) refined and combined by labour and refined and combined by labour and capital into products and services that capital into products and services that can be used by consumers. can be used by consumers.

Modern technological societies are Modern technological societies are possible only when a complex system of possible only when a complex system of political and economic organizations political and economic organizations work cooperatively to produce wealth.work cooperatively to produce wealth.

Generating Wealth to Generating Wealth to Support A Living StandardSupport A Living Standard

Factors Of Production: Factors Of Production: LandLand

Land (natural resources) is the Land (natural resources) is the raw materials in their natural raw materials in their natural state which are used in the state which are used in the production of goods and production of goods and services (air, minerals, animals, services (air, minerals, animals, oil, fish, water and soil. oil, fish, water and soil.

Source: Digital Saskatchewan

Source: Digital Saskatchewan

Source: Digital SaskatchewanSource: Peter Butala

Factors of Production: Factors of Production: LabourLabour

Labour is the work Labour is the work done by people in done by people in the production of the production of goods and services.goods and services.

A large labour force A large labour force is required by an is required by an industrial nation.industrial nation.

It should be trained It should be trained so it is skilled and so it is skilled and operates at a fairly operates at a fairly high level of high level of technologytechnologySource: Digital Saskatchewan

Source: Digital Saskatchewan

Factors of Production: Factors of Production: CapitalCapital

Capital is necessary Capital is necessary to produce goods to produce goods and services.and services.

Capital is used to Capital is used to generate income generate income that goes towards that goes towards people’s salaries, people’s salaries, wages, and fees. wages, and fees. As well as financial As well as financial capital.capital.

Factors of Production: Factors of Production: EntrepreneurshipEntrepreneurship

Is the skill and organization necessary to Is the skill and organization necessary to bring all the resources together so that the bring all the resources together so that the production of goods and services can occur. production of goods and services can occur.

InfrastructureInfrastructure

Infrastructure consists of a nation's roads, Infrastructure consists of a nation's roads, housing, hospitals, schools, etcetera which housing, hospitals, schools, etcetera which make possible reasonable living conditions make possible reasonable living conditions and create a healthy, educated, and trained and create a healthy, educated, and trained labour force. labour force.

Industrial societies have developed a Industrial societies have developed a complex system of social organizations which complex system of social organizations which make up an infrastructure (government, make up an infrastructure (government, healthcare, transportation, etc…). healthcare, transportation, etc…).

ProductivityProductivity The purpose of an economic system is to The purpose of an economic system is to

enable the production of goods and services.enable the production of goods and services. The economic system is the organizational The economic system is the organizational

structure by which all production is based on.structure by which all production is based on.

Gross Domestic ProductGross Domestic Product

Gross domestic product (GDP), is the Gross domestic product (GDP), is the unduplicated value of all goods and services unduplicated value of all goods and services produced in a year within Canada’s borders produced in a year within Canada’s borders measured at market prices.measured at market prices.

It is the standard measure of the overall size of It is the standard measure of the overall size of the economy . the economy .

How Does it Affect Us?How Does it Affect Us? You often hear about gross domestic product in the news. You often hear about gross domestic product in the news.

The growth in real GDP—that is, GDP after inflation has been The growth in real GDP—that is, GDP after inflation has been taken into account—is often used as an indicator of the taken into account—is often used as an indicator of the general health of the economy. general health of the economy.

When real GDP is growing near its long-term potential When real GDP is growing near its long-term potential growth rate—a rate which, in turn, is determined by the growth rate—a rate which, in turn, is determined by the underlying growth of the labor force and the capital stock, underlying growth of the labor force and the capital stock, and the pace of technological change—then the economy is and the pace of technological change—then the economy is generally in good shape. A negative rate of change in GDP is generally in good shape. A negative rate of change in GDP is typically bad news. When an economy produces less than it typically bad news. When an economy produces less than it did in the previous year, it usually means higher did in the previous year, it usually means higher unemployment and a lower standard of living for the unemployment and a lower standard of living for the population.population.

GDP is a limited measure insofar as it does not take certain GDP is a limited measure insofar as it does not take certain activities into account that are “outside the market”—for activities into account that are “outside the market”—for example, the value of work done within the home, or by example, the value of work done within the home, or by volunteer workers, or the harmful effects on human health volunteer workers, or the harmful effects on human health from air and water pollution. from air and water pollution.

Human Development Human Development IndexIndex

Human development is about much more than the rise or Human development is about much more than the rise or fall of national incomes.fall of national incomes.

It is about creating an environment in which people can It is about creating an environment in which people can develop their full potential and lead productive, creative develop their full potential and lead productive, creative lives in accord with their needs and interests. People are lives in accord with their needs and interests. People are the real wealth of nations. the real wealth of nations.

Development is thus about expanding the choices people Development is thus about expanding the choices people have to lead lives that they value. And it is thus about have to lead lives that they value. And it is thus about much more than economic growth, which is only a means much more than economic growth, which is only a means —if a very important one —of enlarging people’s choices.—if a very important one —of enlarging people’s choices.

Human Development IndexHuman Development Index

Fundamental to enlarging these choices is building human Fundamental to enlarging these choices is building human capabilities —the range of things that people can do or be in capabilities —the range of things that people can do or be in life.life.

The most basic capabilities for human development are to The most basic capabilities for human development are to lead long and healthy lives, to be knowledgeable, to have lead long and healthy lives, to be knowledgeable, to have access to the resources needed for a decent standard of living access to the resources needed for a decent standard of living and to be able to participate in the life of the community.and to be able to participate in the life of the community.

Without these, many choices are simply not available, and Without these, many choices are simply not available, and many opportunities in life remain inaccessible. many opportunities in life remain inaccessible.

HDI in PerspectiveHDI in Perspective

The following links provide animation which allow The following links provide animation which allow a better understanding of the concepts and effects a better understanding of the concepts and effects of promoting Human Development.of promoting Human Development.

HDI Development Trends (2005) HDI Development Trends (2005)

Human Development and Income GrowthHuman Development and Income Growth

ConclusionConclusion

If we could have everything we If we could have everything we wanted, would the world be a better wanted, would the world be a better place? place?