Capital accumulation

Capital accumulation (also termed the accumulation of capital) 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 of profit, rent, interest, royalties or capital gains. The aim of capital accumulation is to create new fixed and working capitals, broaden and modernize the existing ones, grow the material basis of social-cultural activities, as well as constituting the necessary resource for reserve and insurance. The process of capital accumulation forms the basis of capitalism, and is one of the defining characteristics of a capitalist economic system.
Definition.
The definition of capital accumulation is subject to controversy and ambiguities, because it could refer to:
Most often, capital accumulation involves both a net addition and a redistribution of wealth, which may raise the question of who really benefits from it most. If more wealth is produced than there was before, a society becomes richer; the total stock of wealth increases. But if some accumulate capital only at the expense of others, wealth is merely shifted from A to B. It is also possible that some accumulate capital much faster than others. When one person is enriched at the expense of another in circumstances that the law sees as unjust it is called unjust enrichment. In principle, it is possible that a few people or organisations accumulate capital and grow richer, although the total stock of wealth of society "decreases".
In economics and accounting, capital accumulation is often equated with investment of profit income or savings, especially in real capital goods. The concentration and centralisation of capital are two of the results of such accumulation (see below).
Capital accumulation refers ordinarily to:
and by extension to:
Both non-financial and financial capital accumulation is usually needed for economic growth, since additional production usually requires additional funds to enlarge the scale of production. Smarter and more productive organization of production can also increase production without increased capital. Capital can be created without increased investment by inventions or improved organization that increase productivity, discoveries of new assets (oil, gold, minerals, etc.), the sale of property, etc.
In modern macroeconomics and econometrics the term "capital formation" is often used in preference to "accumulation", though the United Nations Conference on Trade and Development (UNCTAD) refers nowadays to "accumulation". The term is occasionally used in national accounts.
Measurement of accumulation.
Accumulation can be measured as the monetary value of investments, the amount of income that is reinvested, or as the change in the value of assets owned (the increase in the value of the capital stock). Using company balance sheets, tax data and direct surveys as a basis, government statisticians estimate total investments and assets for the purpose of national accounts, national balance of payments and flow of funds statistics. Usually, the reserve banks and the Treasury provide interpretations and analysis of this data. Standard indicators include Capital formation, Gross fixed capital formation, fixed capital, household asset wealth, and foreign direct investment.
Organisations such as the International Monetary Fund, UNCTAD, the World Bank Group, the OECD, and the Bank for International Settlements used national investment data to estimate world trends. The Bureau of Economic Analysis, Eurostat and the Japan Statistical Office provide data on the US, Europe and Japan respectively.
Other useful sources of investment information are business magazines such as "Fortune, Forbes, The Economist, Business Week", etc., and various corporate "watchdog" organisations and non-governmental organization publications. A reputable scientific journal is the "Review of Income and Wealth". In the case of the US, the "Analytical Perspectives" document (an annex to the yearly budget) provides useful wealth and capital estimates applying to the whole country.
Demand-led growth models.
In macroeconomics, following the Harrod–Domar model, the savings ratio (formula_1) and the capital coefficient (formula_2) are regarded as critical factors for accumulation and growth, assuming that all saving is used to finance fixed investment. The rate of growth of the real stock of fixed capital (formula_3) is: