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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outdated technology.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

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