What is important to realize is that capital in this context not only includes physical capital. It also includes natural capital, i.e., the natural resources of all types that serve as inputs into the production process, and human capital, i.e., the quality and ability of the human labour used in the production process. The accumulation of physical capital occurs through investment in physical capital units. Human capital is accumulated by education, training and by the accumulation of knowledge. Natural resources by their very nature cannot be produced. Therefore to increase their contribution to net production it is first of all clearly important to increase the access to these resources and, consequently, their flow into the production process. Secondly, for long term economic growth it is important to extract natural resources wisely and, if at all possible, on a sustainable basis.
Specialization basically enables the producers (i) focus on what they do best and, (ii) to get better at what they are doing. Both items increase productivity and hence production as illustrated in Figure 2. Specialization occurs both on a small
