Capital accumulation

Accumulation (from the Latin accumulare, "to accumulate") in classical national economics is the expansion of capital driven by reinvestment of surplus value realized in the market.

According to Karl Marx, accumulation has two sides: on the one hand, more and more capital in the hands of the capitalists, on the other hand, more and more misery for the workers. But it is precisely this that keeps capitalism going, since it means that wage workers are always economically forced to sell their labour power to the capitalists on their terms.

Accumulation can refer to the means of production, that is, to constant capital, but it can also refer to employment, in that part of the surplus value is used to employ more workers. In this case, variable capital is accumulated, that is, part of the surplus value is used to increase the wage bill in order to employ more workers. As a rule, however, not all surplus value is reinvested, but part of the surplus value is spent unproductively as personal income ("revenue") of the capitalists, for example for luxury or prestige consumption.

While in the economy as a whole the accumulation of capital is limited by surplus value, individual capital can also accumulate more rapidly by merging with other capitals, merging, taking over or buying up other capitals. Thus a centralization of capital takes place, since in the competitive struggle the large enterprises, through the advantages of mass production, defeat the smaller ones, and thus not only their average size constantly increases, but, moreover, the number of enterprises constantly diminishes. Credit is an important instrument in buying up enterprises. The mere increase in the size of enterprises, when, therefore, more and more capital is concentrated in the hands of the individual capitalist, is called capital concentration, in contrast to capital centralization, in which, moreover, this growth is accelerated by the acquisition of foreign capital.

The decisive element from Marx's point of view: there is only one commodity whose use-value consists in producing surplus-value: that is labour-power. For: only labour power is a commodity whose (re)production is cheaper than the value it produces - in other words: the exchange value of the commodity labour power (wage/salary) is smaller than the sum of value what its use value produces (surplus product); the difference is surplus value.

Production, distribution, crisis

If effective demand changes, the production system can be adjusted in several ways:

1. By changing the intensity of use or utilization of the means of production,
2. through the medium-term flexibility of factor input proportions,
3. by the long-term adjustment of production capacity through accumulation or de-accumulation processes.

Neoclassical theory is based on Say's theorem and the flexibility of the proportions of inputs. Marx, in connection with the introduction of machinery, notes an elasticity, a sudden jump in adaptability, which finds barriers only in the raw material and the sales market, and bases on this his theory of the industrial cycle, according to which industry passes through a "succession of periods of medium vivacity, prosperity, overproduction, crisis and stagnation". Like Marx, John Maynard Keynes breaks with Say's theorem; investment decisions are assumed by him to be independent of saving. Roy F. Harrod and Nicholas Kaldor then undertook to extend Keynes's analysis to the long-run dynamic view. The intentions and problems of Karl Marx's accumulation theory are thus taken up again by the more recent growth theory.

Original accumulation

Original accumulation" refers to the process by which capitalism as a social formation emerged. The prerequisite for this was that agriculture was transformed from an economy in kind to production for the market; in the process, the peasants working in agriculture were "freed up". In addition, trade capital has always been present on account of trade relations, and under favourable conditions it could be thrown into commercial and industrial production.