In most western economies today policymakers are counting on the private sector to drive growth.
In understanding where future growth might come from it helps to distinguish between its two main drivers.
First, more and better inputs – from people to capital and raw materials - can be put into the production process to increase the pace of activity. This helps explains why policymakers are keen to boost investment, improve education and raise the participation of women or older people in the workforce.
Second, innovation allows more, new or better products and services to be produced, so raising productivity.
Innovations such as mass production, railways, the jet engine and electrification played a major role in delivering growth over the last century. In the decade preceding the financial crisis growth was bolstered by innovations in computing and communications technology that continue to change the way we live and work today.
So what transformational inventions could drive growth over coming years? The material graphene can stake a strong claim to such potential.
First created at Manchester University in 2004, graphene is a form of carbon like diamond or graphite. It comes in sheets just one atom thick, is the best conductor of heat at room temperature and is forty times stronger than steel. It electrical conductivity is a thousand times better than silicon's.
Due to these properties graphene has a long list of potential applications. It could be used to develop ultra-fast transistors, foldable computer displays, ultra-sensitive solar cells, better medical imaging and more powerful digital cameras. Some hope that one day graphene might replace silicon in computers.
The physicists Andre Geim and Konstantin Novoselov who discovered graphene won the Nobel Prize in 2010, barely six years after their breakthrough creation.
Research into graphene is accelerating. Manchester University has recently revealed plans for a £60 million National Graphene Institute which aims to be "the world's leading centre of graphene research". Cambridge University is planning a £30 million Graphene Centre. The European Union has recently announced research funding worth €1bn. Private firms such as Samsung and IBM are investing heavily into graphene research.
Through history innovations in materials, from bronze, to steel to plastics have been a key driver of economic growth. Yet despite the intense commercial interest the commercial applications of graphene are, so far, limited.
History suggests that fundamental innovations often take decades to find their way into commercial products and sometimes even longer to find their most transformational uses. As Professor Geim has observed, "Normally it takes 40 years for a new material to move from academia to consumer products, so graphene is just a bambina."
It took 150 years for the full effect of steam power to be felt on UK productivity. And the big impact of electricity on American productivity was in the 1920s, when US factories became organised around electrical power, a full 40 years after the pioneering experiments of Thomas Edison.
The first digital, electronic computers were built by US universities in the mid-forties as specialised scientific instruments performing complex calculations. But it took a good four decades for computers to turn up on everyone's desks in their most transformational incarnation as the PC.
What is clear is that the development and application of new technologies is at least as important as the process of innovation.
The good news is that the gap between invention and innovation seems to be narrowing. This may partly reflect the speed with which new ideas can be disseminated and tested by a global audience.
It may be that we will have to wait rather less than forty years for widespread applications for graphene to emerge. The scale of the resources deployed, and the 5000 plus patents already filed, point to a feverish search to put this remarkable discovery into action.
MARKETS & NEWS
UK's FTSE 100 ended the week up 0.7%.
Here are some recent news stories that caught our eye as reflecting key economic themes:
KEY THEMES
The International Monetary Fund (IMF) said that it will lower its growth forecasts for the US if $85bn in automatic government spending cuts go into effect as expected in March, predicting a negative impact of at least 0.5% percentage points to the US economy – "sequesteration"
UK manufacturing activity unexpectedly shrank in February, registering its first contraction since November, according to survey data – slowdown
Credit ratings agency Moody's downgraded the ratings of some UK councils, housing associations, universities and Transport for London, citing the threat of future austerity measures – austerity Britain
US house prices rose at a monthly rate of 0.9% in December, according to the S&P/Case Schiller Index, registering the biggest annual gain in more than 6 years – US housing growth
US home improvement firm Home Depot recorded net income of just over $1bn in 2012, up a third on the previous year, with the chain benefitting from the housing market upturn and repairs after Storm Sandy – US housing growth
Italy's unemployment rate rose to 11.7% in January, its highest level for at least 21 years – Italian unemployment
Ireland's unemployment rate fell to 14.2% in the Q4 2012, from 14.6% in the previous quarter – Irish unemployment
Irish Prime Minister Edna Kenny claimed that despite significant progress there are still "enormous challenges ahead" for the Irish economy – Ireland
European migration statistics show the number of Spaniards living in Berlin jumped to 11,473 in 2011 from 8,223 the previous year – euro crisis migration
Ben Bernanke, Chairman of the US Federal Reserve, claimed that US unemployment is "unlikely" to reach 6% until 2016, with the Fed promising to keep interest rates low until unemployment reaches about 6.5% - US unemployment
The price of gold fell for the fifth consecutive month in February, registering the longest sequence of monthly declines since 1996 – commodities
2012 was the first year of global revenue growth for the global music industry since 1999 according to the International Federation of the Phonographic Industry (IFPI), with download sales, subscription services, music video streaming, digital radio, performance rights and synchronisation revenues are all seeing growth – digital revolution
Supermarket chain Morrisons acquired 6 HMV stores from the music company's administrators, as part of its continuing drive to expand its convenience store operation – M&A
Thorntons, the choclatier, announced a 71% rise in pre-tax profits in the 28 weeks to January 12th, with the company benefitting from a shift from high street stores to supplying supermarkets and other retailers - Thorntons
The Chief Executive of internet firm Yahoo! Has banned home working among staff, citing the benefits of "being physically together" and "impromptu team meetings" – home working
Figures from the Office for National Statistics show that more than 33m adults use the internet every day, two-thirds of the population, twice the proportion who did in 2006 – internet revolution
The London stock exchange has developed its very own version of America's Vix Index, launching the FTSE 100 Implied Volatility Index, which tracks when investors get nervous about the future price of UK stocks – "fear factor"
Sirius Minerals have filed plans to mine one of the world's largest potash mines under the North York Moors, with a proposed £1.7bn project potentially creating 1,000 new jobs – potash
SplashData's list of frequently used passwords for 2012 shows that the most popular passwords remained unchanged from 2011, with "password", "123456" and "12345678" filling the top 3 spots once again – safety in numbers?
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