Economic and Financial Education for the 21st Century

By Schug, Mark; Lopus, Jane | Social Education, November-December 2008 | Go to article overview

Economic and Financial Education for the 21st Century


Schug, Mark, Lopus, Jane, Social Education


The Partnership for 21st Century Skills places an important emphasis on fundamental social science subjects including history, geography, government and civics, and economics as well as a stress on other important subjects such as English, foreign languages, arts, and science in the school curriculum. It has also identified what it calls 21st century themes, which include global awareness; financial, economic, business and entrepreneurial literacy; and civic literacy. The message is clear: young people cannot effectively participate in the global economy without a deep understanding of basic economics. In fact, the success of the economic system of the United States and its trade partners depends to a large extent on young people understanding its basic characteristics.

The Basics in Economics

What substantive economic understandings might be the most important for young people to have in the 21st century? We believe that young people need an understanding of how market systems decrease poverty and produce wealth. People have been writing about the importance of wealth creation since the days of Adam Smith. But merely because the topic gets a lot if discussion, doesn't mean it is not an important starting point for economic education. Wealthy nations have many advantages over poorer nations. When people have higher incomes, these individuals are less dependent on government and are able to exercise more political and economic freedom. Market economies produce income that allows private sector and public sector institutions to accomplish important social goals including providing high quality health care, improving the environment, reducing poverty, investing in socially important research, improving education, supporting the arts and so forth. It is hard to imagine the world's poorest economies--each of which discourages market activity--generating the income and resources necessary to confront deep social issues. Yet when these nations embrace markets and generate wealth, things begin to change.

So, what are the characteristics of those nations that are able to achieve high levels of wealth? It's not much of a secret. Wealthy nations--even those with vast differences in history, geography, and culture--share certain institutional characteristics. Among these characteristics are:

* Vigorous protection of private ownership;

* Widespread competition among producers;

* Use of the profit motive to engage producers to voluntarily produce the goods and services desired by consumers;

* Respect for consumer sovereignty--consumers are the final authorities regarding what goods and services

should be produced and which should not;

* Reduced trade barriers and the expansion of international trade;

* Maintaining a limited economic role of government so that the vast majority of economic choices are made by producers and consumers.

Nations that have created legal and financial institutions that strengthen these characteristics have experienced widespread economic success. Hunt-Ferrarini and Schug have explained how the Constitution of the United States provides important protections of private ownership and free trade and how these, in turn, helped to produce wealth. (1)

The opposite is also true. Nations that ignore these characteristics have impoverished their people. Let's take North and South Korea as an example. Here are two peoples who had a common, independent country from the seventh century until the 20th century. They share a common history, culture, homogeneous ethnic composition, similar geography, and the same language. Yet today the economy of South Korea is nearly 14 times larger on a per capita basis than the economy of North Korea. As of 2007, the economy of South Korea had a GDP of more than $1 trillion and a per capita income of $24,500. It now ranks among the wealthiest nations in Asia. In contrast, North Korea has a GDP of $40 billion and a per capita income of $1,800. …

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