One of the distinguishing characteristics of a capitalist economic system is the capital accumulation process, which is capitalism’s foundation. Capital accumulation aims to build new permanent and functional capitals, widen and modernize current means, expand the material base for socio-cultural activities, and provide the required reserve and insurance resources. In theory, a long and deep crisis can trigger a revolutionary situation capable of escalating the class struggle to the point where capitalism is abolished, but only if the external conditions elicit a subjective willingness to change production conditions.
Plenty of the time, capital accumulation entails both a net contribution and wealth redistribution, raising the question of who gains the most. A community becomes wealthier when more wealth is generated; the entire stock of prosperity rises. However, if some people amass riches at the expense of others, wealth will shift from one place to another. It’s also likely that some people gather wealth far more quickly than others. Despite being hampered by moments of crisis and depression, capitalism has maintained itself through sustained capital expansion and the extension of labor productivity. Reclaiming a previously lost profit was feasible but could also raise it sufficiently to continue the accumulation process.
Measurement of Accumulation
Economic experts and innovation scholars have had mixed reactions to the proposal. Criticism and appeals for common sense and reasonableness are made elsewhere in more obscure publications. The monetary worth of investments, the quantity of income reinvested, or the change in the value of assets owned, which is the value of the capital stock, are all examples of accumulation. Government statistics estimate total investment and assets for national accounts, the federal balance of payments, and flow of funds statistics using business balance sheets, tax data, and direct surveys. Reserve banks and the Treasury are usually the ones who interpret and analyze the data. Standard indicators include capital formation, total gross assets, structural capital, personal savings, and capital inflows.
Demand-Driven Growth Models
In macroeconomics, savings and the capital coefficient are critical for accumulation and growth, assuming that all savings are used to finance fixed investments. For example, suppose a country saves and invests 12% of its national revenue, and the capital coefficient is 6:2 (which means it must fund six billion to increase national income by two billion). In that case, the annual growth rate of national income can be 4 percent. Suppose total invested working capital turnover remains constant. In that case, the share of the total investment that maintains rather than expands the entire capital stock will typically rise as the total stock rises. To rapidly increase the growth of the capital stock, income growth, and net investments must increase.
Marxist Concept
The Marxist study of capital accumulation and capitalism’s evolution exposes systemic flaws in the process that occurs when productive forces expand. When the profit level exceeds the proportion of new lucrative investment placed in the economy, which results from improved productivity from a rising organic composition of capital, a capital over-accumulation crisis occurs (higher capital input to labor input ratio). As a result, wages are depressed, resulting in wage stagnation and high interest rates on working-class unemployment, while excess profits look for new profitable investment possibilities.
According to Marx, this repetitive process would be the primary cause of capitalism’s demise and its replacement by communism, which would operate under a diverse financial mechanism. As per Marx, capital accumulation has two sources: commerce and appropriation, which can be legitimate or unlawful. The rationale is that a company’s share capital can be grown through an exchange procedure or trading up by taking an item or resource from someone else without paying for it. Marx does not go into length on gifts and grants as a source of capital accumulation, nor does he detail taxation.
Conclusion
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