Capital accumulation

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Capital accumulation is the investment of financial assets with the goal of increasing their value; the growth being accounted for by workers' surplus value. It is the motivation for the pursuit of profit in capitalism, as well as one of the defining characteristics of it. The motivation of capital accumulation is divided into two reasons, being the capitalist race for maximum profit as well as the pressure of competition, compelling capitalists to increase their scale of production in order to maintain or improve their market position. These dynamics of capitalism demand an expansion — accumulation, of capital, in the process of which capitalist relations are reproduced.

Even at the stage of simple reproduction, where production is at a level which only sustains a current standard of living for society, capital over time inevitably emerges as the outgrowth of the capitalist’s appropriation of the unpaid labor of others. Consuming a part of existing surplus value each year (or in simple reproduction consuming all), the capitalist consumes all the capital initially advanced after the number of years equal to the amount of advanced capital divided by the amount of surplus capital consumed each year. The fact that he still has an unchanged amount of capital would signify that during this time he has appropriated surplus value equivalent to the capital initially advanced. Thus, after a certain time, any capital becomes capitalized surplus value regardless of its initial source.

The worker who is constantly productive is creating capital, that is, the means of his own exploitation. But the worker himself emerges from the process of production just as he entered it, because the capitalist pays him only the equivalent of essential means of subsistence sufficient to reproduce the labor power of the worker. The worker continues to be deprived of the means of production. After consuming these living essentials, the worker again appears on the labor market. Thus, individual consumption by the worker operates as one aspect of the reproduction of capital. In the process of capitalist reproduction, not only goods which embody surplus value are produced but also the capitalist relationship itself, with the capitalist on the one hand and the hired worker on the other.

Capitalism is typified by expanded reproduction, where part of the surplus product is used to maintain the standard of living and the rest used for investments. The accumulation of surplus value or its conversion into capital is possible above all if the surplus product contains the constituent parts of new capital; these would include both additional means of production and the available means of subsistence essential for attracting additional labor.

Bourgeois economists have come up with numerous theories to justify the acquisition of profit by capitalists. In particular, representatives of vulgar political economy have posed the “theory of abstention”, according to which society is obligated to the capitalist because he supposedly limits his consumption in the interests of the development of social production. In reality, what motivates the capitalist is not concern for social welfare but the objective economic laws of capitalism. The capitalist emerges as the personification of capital, and therefore the motive for his activity is not consumption but growth in value. In the earliest stages of development, the capitalist limits his own personal consumption in order to increase the accumulation of capital, that is, to increase his wealth, influence, and domination in society. But as Marx pointed out, the capitalist’s “expenditure grows with his accumulation, without the one necessarily restricting the other”.[1] Growth in the amount of his private capital permits him to live more and more luxuriously and at the same time increase his accumulation of capital by increasing the proportion of surplus value used for accumulation. Where the proportions of surplus value devoted to accumulation and income for the capitalist remain unchanged, growth in the scale of accumulation is linked to an increase in the sheer amount of surplus value and thus to increased exploitation of the working class. All methods of producing absolute and relative surplus value create a basis for expanding accumulation of capital while not infringing on the scope of the capitalist’s personal consumption.

As one of the historical forms of expanded reproduction, the accumulation of capital leads to the development of productive forces and to the creation of the physical conditions of production suited to a higher stage in the development of human society, one in which exploitation is absent. On the other hand, the accumulation of capital also represents the expanded reproduction of the capitalist system of production relationships, as well as an increase in the scale and degree of exploitation of the working people. Along with this, the concentration of wealth in the hands of a small group of capitalists intensifies.

The historical prerequisite for the accumulation of capital is the primitive accumulation of capital. Further capital accumulation takes place in two forms: the concentration of capital and the centralization of capital. Such consolidation of capital in turn creates conditions for the development of large-scale production, which makes it possible to raise labor productivity. The processes of concentration and centralization both lead, at a certain stage in the concentration of production and capital, to the appearance of monopolies. At the monopolistic stage of capitalist development, monopolies are economically able to systematically increase the accumulation of capital through monopoly profit, monopoly pricing, and the export of capital. The high monopoly prices at which international monopolies sell goods in the world capitalist market are also a source of capital accumulation. At the same time, there are factors that operate under monopoly domination that limit the accumulation of capital. In an effort to preserve high monopoly prices, monopolies often limit production growth and consequently also limit capital accumulation. Growth in parasitic consumption by the monopolistic bourgeoisie and its servants also limits the accumulation of capital. The opportunities for accumulation of capital in the nonmonopoly sector are restricted because part of the surplus value created in this sector is appropriated by the monopolies. In addition, the monopolies take over any area where their capital can be invested profitably. The state also plays an important part in accumulation of capital in the developed capitalist countries. The capitalist state accumulates significant amounts of capital, including part of the essential product needed by the working people, in the state budget through the tax system and then uses this capital to create favorable conditions for capital accumulation by the monopolies.

Foremost among the factors that stimulate growth in accumulation of capital is the scientific and technological revolution, which has brought about the appearance of new economic sectors, areas of production, and types of products, all requiring major capital investment. Scientific and technological progress accelerates the rate of renewal of the production apparatus and sharpens the competitive struggle among monopolies on the domestic and particularly on the world market. The winners in this struggle will be those that invest more capital in technological improvements in production and in the development of new types of production facilities. But the scientific and technological revolution leads to an increase in the efficiency of fixed capital, a decrease in the capital intensity of output, and an increase in the return on capital; this makes it possible to increase production with a relatively small investment. This operates as a factor in the trend toward a reduction in the norm of accumulation.

The rates of capital accumulation in various capitalist countries differ. The highest such level since World War II has been in Japan. Between 1950 and 1959 capital investment constituted 28.7% of the gross national product; for the period between 1966 and 1969 it was 33.3%. Figures for other major countries during the same periods are the Federal Republic of Germany, 26.3% and 21.9%; France, 18.4% and 24.4%; and Italy, 19.5% and 19.4%. The figures for the United States (18.6% and 16%) and Great Britain (15.2% and 17.8%) are somewhat lower. The world socialist system also influences the level of accumulation in the capitalist countries toward further increase. The growing strength of socialism forces the ruling circles in imperialist countries to follow a policy of increasing investment in order to preserve and strengthen their position in the competition between the two systems.

The accumulation of capital in the developing countries has important special characteristics. The low level of development of productive forces and the relatively small amount of surplus product created inhibit the scale of accumulation. The fact that foreign capitalists have kept their positions in most of the developing countries and usually dominate the most profitable spheres of the economy, sending a significant portion of the profits home to the mother country, also has a negative effect. Upon gaining political independence, these countries encounter relatively improved conditions for the accumulation of national capital. A significant part is played by the state, which limits the sphere of activity of foreign capital by reducing the amount of profit that may be repatriated to the mother country and by nationalizing foreign-owned enterprises. The state attempts to attract the capital owned by the noncapitalist classes of society, such as the feudal lords and peasantry, and to obtain foreign loans for purposes of capital accumulation. As a result of this policy, the rate of capital accumulation has increased under present-day conditions. A growing number of countries are now seeking the solution to the problems of expanded reproduction, not on the basis of capital accumulation but on the path of noncapitalist development that leads to socialism.

The accumulation of capital is accompanied by a sharpening of the contradictions of capitalism, which make elimination of the capitalist order historically inevitable. Changes in the organic composition of capital lead to an increase in the proportion of surplus value converted into constant capital. The increase in wealth held by the capitalists is accompanied by a decrease in the share of national income and national wealth that goes to the working people; this intensifies social inequality between the bourgeoisie and proletariat.

Accumulation of capital occurs under such typical conditions as anarchy and disproportion. Production increases on such a scale that the market is unable to absorb it, leading to overproduction of capital or to overaccumulation. With respect to accumulation, “the contradiction of this capitalist mode of production, however, lies precisely in its tendency toward an absolute development of the productive forces, which continually come into conflict with the specific conditions of production in which capital moves and alone can move”.[2] The capitalist process of production is disrupted by economic crises; thus under capitalist conditions, the accumulation of capital becomes cyclical in nature.

Accumulation of capital intensifies the socialization of production and labor, which leads to a sharpening of the basic contradiction of capitalism, the contradiction that sets the social nature of production against appropriation through private ownership. This brings about the objective and subjective prerequisites for the elimination of capitalist production relationships. Characterizing the historical trend of capitalist accumulation, Marx demonstrated the inherently contradictory nature of this process and, by the same token, the place of capitalism in the development of society and its historically transitional nature. By itself, the accumulation of capital does not introduce fundamental changes in the production relationships of capitalist society; on the contrary, its aim is to expand the reproduction of these relationships of capitalist exploitation. However, the development of productive forces in the process of capital accumulation reaches a level at which the shell of capitalism becomes an impediment to further development. This shell cracks open and capitalism gives way to the more progressive social order of socialism, based on public ownership of the means of production.[3]


  1. K. Marx and F. Engels, Soch., 2nd ed., vol. 23, p. 607
  2. K. Marx and E. Engels, ibid., vol. 25, part 1, pp. 282–83)
  3. "Accumulation of Capital" from The Great Soviet Encyclopedia (1979)