Growth needs more or better factors of production

1. An economy grows when it can produce more, which takes either more factors of production or better ones.
2. Using more resources raises total output directly, while using the same resources more effectively raises output per worker.
3. The six drivers below split between those two routes, and the strongest of them do both at once.

Investment builds up the stock of capital

1. More capital gives each worker better tools, so output per worker rises even though the number of workers has not changed.
2. Investment in infrastructure such as roads, ports, railways and broadband lowers costs for every firm that uses it, not only the one that paid for it.
3. Because it adds to productive capacity instead of being consumed, investment is the main driver of long run growth.
4. Investment depends on confidence and on the cost of borrowing, so firms cut it back when they expect weak demand or face high interest rates.

Technology raises output from the same inputs

1. Changes in technology let firms produce more from the same land, labour and capital, so the gain is a rise in productivity rather than in resources.
2. New technology also creates products and whole industries that did not exist before, adding output rather than only making existing output cheaper.
3. The gain spreads across the economy, because once a technique is known other firms can copy it.

A bigger, better trained workforce produces more

1. Size of workforce matters because more workers can produce more output, and the workforce grows through a rising population, later retirement or net inward migration.
2. A larger workforce raises total output, but it does not raise output per person unless each worker also becomes more productive.
3. Education and training raise what each worker can produce, so a more skilled workforce produces more per hour and can handle more advanced capital.
4. Training also makes workers easier to move between jobs, which keeps output higher when one industry shrinks and another expands.

Natural resources and policy shape the rest

1. Availability of natural resources sets what a country can produce cheaply, so North Sea oil and gas added directly to UK output as it was extracted.
2. Resources only help if a country has the capital and the skills to use them, and a resource being run down cannot support growth indefinitely.
3. Government policies work mainly by strengthening the other five drivers, through funding education and training, building infrastructure and keeping conditions stable enough for firms to invest.
4. Policy can hold growth back as well, because heavy taxation of profits or rules that keep changing make firms delay the investment they were planning.
5. No driver acts alone, since investment needs skilled workers to operate the capital and stable policy to make the spending worth risking.

The policies a government uses to raise the economy's capacity to produce are covered in 3.7.1.