Economic factors are components that affect the production and distribution of wealth. They can lead to both economic growth and its stagnation. There are different classifications, which include a different number of factors. Separate factors of economic growth and economic security.
Classification
The simplest classification considers only 3 fundamental factors: labor, land and financial.
Labor plays an important role in the economic life of society. It is determined by the total labor force and the degree of qualification of workers. With the increasing share of high-tech industries and management systems, qualification is becoming increasingly important. The quality of products and the effectiveness of process control depend on it.
Land can be used for growing crops, mining, building enterprises and residential buildings.
Under the capital is understood not only financial means, but also material objects created by man, various buildings, infrastructure.
An additional economic factor in this classification is information. The accumulated knowledge is important for the continuation of technological progress and therefore directly affects the economy. In recent decades, the importance of this factor is especially great.
According to another classification, economic factors are:
- Interest rate.
- Inflation rate.
- The state of the financial market.
- The structure of consumption and its changes.
- Demand indicators.
- Trade balance.
- Financial and credit policy.
- Stock Indices.
- The state of the global and regional economies in various countries.
- The dynamics of labor productivity and its level.
The degree and nature of the influence of economic factors on the state of the economy depends on the specific country and the current situation.
Additional factors
Also, factors such as:
- Meetings of trade representatives, representatives of central banks, countries-exporters of raw materials.
- Large economic forums (for example, the Davos Forum, G20 meetings, etc.).
- Forecasts of various indicators, indices and trends in the economy from competent organizations.
- Various specs.
- Changes in neighboring markets.
- Actions of banks.
- Political decisions.
The following economic factors have the greatest influence on the development of the national economy:
- Changes in gross domestic product (GDP) affect the average income, employment, wages and social benefits, interest rates on loans and the pace of development of the country as a whole.
- The amount of inflation. Inflation largely determines the value of interest rates on loans, the distribution of demand between different consumer goods, the money supply, the value of goods and resources and its dynamics.
- Changes in the national currency may affect the pricing and structure of exports and imports of a particular country. Most dependent on it are companies having trade relations with other countries.
Political factors
They have a great influence on the state of the economy. Legislative regulation changes the balance of supply and demand, affects the price level for certain types of products, and can set the general vector of development of the state economy. Political impact can occur at the international level (sanctions, global agreements, etc.) or within the state (excise taxes, taxes, subsidies, the distribution of capital between industries, etc.).
Technology development
The introduction of technological innovations in the production of products can make it better, cheaper and more competitive both in the regional and global markets. Until recently, the center of technological progress was the technical innovations of everyday use: computers, mobile phones, cameras, etc. Now this center has shifted to energy and automotive.
In recent years, the development and implementation of new technologies has significantly reduced the cost of energy production, and electric cars are no longer a luxury item, while their technical indicators have grown significantly. According to various forecasts, this will lead to a radical change in the energy market in the coming decades, and even years. As a result, the inflow of foreign currency to oil-producing countries such as Russia and Venezuela may decline sharply.
Geographic factors
These factors are one of those bases on which the economy is built. Each country, due to its geographical location, has a certain set of conditions and resources. Russia's position in this regard is very advantageous, despite the harsh climatic conditions: in our country there are large reserves of mineral raw materials, including oil, gas, diamonds, and non-ferrous metal ores. Russia is also rich in forests and has many opportunities for maintaining and developing agriculture.
Social and demographic factors
The demographic situation and its dynamics have a significant impact on the economic development of the regions. With a lack of population and population density, opportunities for economic growth are limited, which is associated with a shortage of labor resources and a large share of representatives of older age groups in the total population. In countries with a high population density, where it is also growing rapidly (India, China), total GDP is growing rapidly. This is due to the fact that more people of working age are able to produce more products. However, such growth will not necessarily be favorable for the country and the people living in it.
The welfare of the population affects purchasing power, so the higher the average income per capita, the faster the economy can develop. The main driver of growth is precisely the middle class in terms of income, while the large gap between the incomes of different people and the lack of a middle class leads to a decrease in demand for many types of products.
Economic development factors
Factors affecting economic growth were studied using fast-growing economies (China and some other Asian countries). Among them, the main and secondary factors are distinguished. The main factors of economic growth were recognized: human capital, material capital and technological development.
The main factors of economic growth
Human capital is determined by the number of employees, their qualifications, ability to learn, discipline, degree of motivation to work. Education plays an important role here, on the average level of which productivity and quality of labor depend.
Material capital is money, various equipment, housing stock. As economic growth grows, its size increases. The more factories and plants, the more products can be produced per unit time. Thus, as capital goods accumulate, opportunities for economic growth increase.
Scientific and technological progress allows us to produce better products in larger quantities. It includes the accumulation of new knowledge, technologies, modern machinery and equipment. An increase in energy efficiency of production can also become an engine of progress. However, excessive growth of this indicator slows down the development of the economy, as it is often economically unprofitable. This is especially happening under pressure from stricter emission standards.
The possession of diverse natural resources may be one of the factors conducive to economic growth. An example of such a connection is the United States. However, in reality, this factor does not always become decisive. Japan has a small amount of land and resources, but has achieved great results in economic development. China has little oil and gas, but the country is developing dynamically. At the same time, Russia has almost all the necessary resources for successful growth, but has clearly not succeeded in economic development.
Additional economic growth factors
- The fight against monopolies.
- Effective work of the banking system.
- The correct tax policy.
- Diversification of production and export.
- Rational state regulation of the economy.
- Stimulating domestic demand.
- Decrease in money emission.
- Lower government spending.
- Reduced raw material dependence.
- Bet on the development of modern technology.
- Agricultural development.
- A decrease in the share of the poor and very rich, an increase in the share of the middle class.
- Bridging the gap in the level of economic development of different regions.
- The fight against the shadow sector of the economy.
- The fight against the outflow of capital and professional personnel.
Many of these factors are also factors of economic security.