Economists have used the term accumulation of capital to express several conceptual ideas in economics. Avoiding those having to do with obtaining more money, more bonds, or more stocks, two principal uses remain: an increase in the amount of physical means of production within an economy or its firms, or an increase in the power of the capitalist class. The former is the usage in neoclassical or mainstream economics while the latter is often considered within Marxist economics (although the exact meaning is still subject to various considerations). It is not unusual for either consideration to lead to discussion of economic crises, specifically to what might be their origins. The issue of crises may be, in turn, connected to disproportional ties among supplies and demands across industries within the economy.


In 1776 the Scottish economist Adam Smith made some attempt to define capital, but not its accumulation, while in 1821 the English economist David Ricardo introduced serious discussion of the effects upon workers of the introduction of new machinery, finding that it would not necessarily be beneficial. Ricardo was probably persuaded to undertake this investigation under the influence of the Swiss economist Jean-Charles-Leonard Simonde de Sismondi (1773-1842), whom Ricardo respected enough to visit from the United Kingdom. Sismondi was quite critical of the influence of capitalism upon the population and explicitly discussed the crisis aspects of capitalist development.

The German economist and political philosopher Karl Marx discussed accumulation of capital, yet there are ambiguities in his discussion. Marx was concerned, fundamentally, with the exploitation of the working class by the capitalist class and the capitalist class’s capability of earning surplus value off the workers. Surplus value is the difference between working time of workers and the time required to produce the goods workers are able to buy with their wages. His principal book Capital (1867) is precisely a focus on that exploitation, so his accumulation of capital ought to be understood as an increase in the numbers of workers being exploited, including the related requirement to have built the factories within which the workers would be working. Crises could result from dis-proportionalities in production but also from the inability to find outlets for all the products produced under capitalist relations when the standard of living for the mass of workers is continually depressed. The latter concern dates back to Sismondi and the English economist Thomas Malthus (1766-1834), yet has unique aspects of analysis in Marx. The emphasis, generally, on means of production (e.g., machinery) in referring to accumulation of capital did penetrate Marx to some extent and his writing on accumulation.

In the 1890s the Russian Communist leader Vladimir Lenin brought Marxist economic thought back toward Ricardo, and also included more emphasis on technological development and disproportional ties in production than would be consistent with Marx himself. Becoming leader of the Bolshevik Revolution in Russia in 1917, his influence on Marxist economic thought was greater than his depth of understanding of Marx’s political economy. Nevertheless, Lenin was not alone as Mikhail Tugan-Baranowsky (1865-1919) and the German economist and statesman Rudolf Hilferding (1877-1941) also emphasized disproportional ties in explaining crises.


A distinct approach away from Lenin, Tugan-Baranowsky, and Hilferding was undertaken by Rosa Luxemburg, whose The Accumulation of Capital (1913) had a major, albeit controversial, impact. This volume was the first of only two substantial books with the words "accumulation of capital" as the title, both written by women economists. Luxemburg’s focus was on the incapacity of a closed capitalist system to find sufficient markets, since workers’ wages are naturally suppressed, capitalist luxury consumption has its limits (considering the massive quantities of products that can be produced), and producing more and more machines just for its own sake makes no sense. She criticized certain aspects of Marx’s work for failure to recognize the problem, even as she is firmly considered to be a Marxist economist.

Following upon the development of neoclassical economics beginning in the 1870s, John Bates Clark’s The Distribution of Wealth solidified a distinct interpretation of capital as a measure of machines, like acres of land. In other words, all those different types of machines in industrial society were to be reduced to a homogenous measure called real capital. However, unlike land, machinery is a produced element of the production process and is changing much of the time, not just in numbers, but in its very physical characteristics. This was a strange innovation on the part of Clark, but it allowed him to render a marginal productivity theory of income distribution to explain why workers, capitalists, and landowners get what they get out of the national output.

As the mathematization of mainstream economics proceeded apace, capital in the sense of Clark, including its accumulation, proceeded along with it, and the neoclassical production function became widespread, both at the microeconomic level of the firm as well as for national economies.

When Luxemburg’s book was translated into English in 1951 it had an introduction by Joan Robinson, and soon thereafter Robinson published her own book, The Accumulation of Capital (1956). Having come out of the Keynesian tradition of the 1930s that shared concerns of Malthus, Sismondi, and Marx regarding the possible deficiencies of aggregate demand to sustain the mammoth potentials on the supply side, Robinson’s work was little concerned with disproportional ties as an explanation of economic crises.

During the 1960s Clark’s conception of capital came under strong criticism when the so-called reswitching controversy arose. This controversy is too involved to summarize in this entry, but it starts with a proof that a simple economy, as wages moved in one direction, could switch from one technology to a second technology, and then, as wages continued to move in the same direction, switch back to the initial technology. The significance was to question how marginal productivity a la Clark could have any meaning.

Meanwhile, the Marxist tradition continued to refer to accumulation of capital as an expression of the inherent tendency of capitalism to extend its domination, but now connected to the possibility of a falling tendency of the average profit rate and thus to economic crises. By and large, accumulation of capital as a concept was anything but well defined and often functioned similarly to the term capitalism, with a more serious sound to it. A resolution that refers to increasing proletarianization of the world under the thrust of capital is not well accepted as of 2006.


Possible empirical work on accumulation of capital follows from the conceptualization. Should capital be measured as real capital then disparate physical items are typically aggregated by some type of weighting by relative prices exhibited in product markets. The trend of capital accumulation would therefore seem to be reflected in the increasing amounts of the individual items of equipment and structures. Yet, there are deep index number problems involved, including the initial base of the weighting, changing relative prices, and, most significantly, the introduction of totally new technologies and the disappearance of old (tractors substituting for iron plows pulled by horses, mules, or oxen; electrical lighting substituting for candles; cash registers for abacuses). In spite of difficulties, a whole segment of empirical economics has developed around such accounting, sometimes additionally integrated into profit-rate calculations.

Should capital be measured by capacity to exploit the labor hours of wage workers one would first have to measure the total employed wage workers and the length of their work hours. One would need to make a distinction between those who produce for capitalists commodities to be sold in the market and those who perform functions such as selling or administrative, as well as exclude those who do not work for capitalists (such productive/unproductive distinction appears, in differing forms, in portions of Smith’s and Marx’s works). At the level of an enterprise, data may be available, but for national economies they are much less so. No satisfactory work has been done on a global scale.

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