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Overaccumulation is one of the potential causes of the crisis of
capital accumulation Capital accumulation is the dynamic that motivates the pursuit of profit, involving the investment of money or any financial asset with the goal of increasing the initial monetary value of said asset as a financial return whether in the form o ...
. In
crisis theory Crisis theory, concerning the causes and consequences of the tendency for the rate of profit to fall in a capitalist system, is associated with Marxian critique of political economy, and was further popularised through Marxist economics. Histo ...
, a crisis of
capital Capital may refer to: Common uses * Capital city, a municipality of primary status ** List of national capital cities * Capital letter, an upper-case letter Economics and social sciences * Capital (economics), the durable produced goods used f ...
occurs due to what
Karl Marx Karl Heinrich Marx (; 5 May 1818 – 14 March 1883) was a German philosopher, economist, historian, sociologist, political theorist, journalist, critic of political economy, and socialist revolutionary. His best-known titles are the 1848 ...
refers to as the internal contradictions inherent in the
capitalist system Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. Central characteristics of capitalism include capital accumulation, competitive markets, price system, private pr ...
which result in the reconfiguration of production. The contradiction in this situation is realized because of the condition of capitalism that requires the accumulation of capital through the continual reinvestment of
surplus value In Marxian economics, surplus value is the difference between the amount raised through a sale of a product and the amount it cost to the owner of that product to manufacture it: i.e. the amount raised through sale of the product minus the cost ...
. Accumulation can reach a point where the reinvestment of capital no longer produces returns. When a market becomes flooded with capital, a massive devaluation occurs. This overaccumulation is a condition that occurs when surpluses of devalued capital and labor exist side by side with seemingly no way to bring them together. The inability to procure adequate value stems from a lack of demand. The term "overaccumulation" is also used in a neoclassical context.


Examples

The
Great Depression The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...
of the 1930s and 40s resulted, in part, due to major devaluation of capital and labor concluding in massive unemployment. The 1980s were also dangerous times for capitalist industrial nations when unemployment rose over 10 percent in 1983 and massive amounts of inventory lay unsold.


Strategies

Capitalism has adapted to this crisis in two ways. The first solution to the problem is resolved using a "spatial fix". The regionality of overaccumulation allows the crisis to be relieved by moving capital or labor to a different territory and beginning new production. This solution relieves the surplus by moving it into a region that has a higher demand for it. A second solution to overaccumulation involves the creation of new markets. If demand does not exist for the excess accumulation, then one can be created by opening up non-capitalist markets.


See also

*
Crisis theory Crisis theory, concerning the causes and consequences of the tendency for the rate of profit to fall in a capitalist system, is associated with Marxian critique of political economy, and was further popularised through Marxist economics. Histo ...
*
Overproduction In economics, overproduction, oversupply, excess of supply or glut refers to excess of supply over demand of products being offered to the market. This leads to lower prices and/or unsold goods along with the possibility of unemployment. The de ...
*
Underconsumption Underconsumption is a theory in economics that recessions and stagnation arise from an inadequate consumer demand, relative to the amount produced. In other words, there is a problem of overproduction and overinvestment during a demand crisis. The ...
*
Law of accumulation Capital accumulation is the dynamic that motivates the pursuit of profit, involving the investment of money or any financial asset with the goal of increasing the initial monetary value of said asset as a financial return whether in the form o ...
*
Business cycle Business cycles are intervals of Economic expansion, expansion followed by recession in economic activity. These changes have implications for the welfare of the broad population as well as for private institutions. Typically business cycles are ...
*
Capitalism Capitalism is an economic system based on the private ownership of the means of production and their operation for Profit (economics), profit. Central characteristics of capitalism include capital accumulation, competitive markets, pric ...


Notes


References

*Arrighi, G. (2006). Global Social Change: Historical and Comparative Perspectives. ''Spatial and Other "Fixes" of Historical Capitalism.'' *D. Gregory, R. Johnston, G. Pratt, M. Watts, S. Whatmore (2009). The Dictionary of Human Geography. ''Crisis.'' *Harvey, D. (1985). The Geopolitics of Capitalism. ''Social Relations and Spatial Structures'', 128–163. *Harvey, D. (2001). ''Globalization and the "Spatial Fix".'' *Jessop, B. (2004). ''Spatial Fixes, Temporal Fixes and Spatio-Temporal Fixes.'' {{Extreme wealth Marxian economics Macroeconomic problems Crisis