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Accumulation in United Kingdom

Definition of Accumulation

In accordance with the work A Dictionary of Law, this is a description of Accumulation :

The continual addition of the income of a fund to the capital, so that the fund grows indefinitely. Before the Accumulation Act 1800 accumulation was permitted for the length of the perpetuity period (i.e. lives in being plus 21 years: See rule against perpetuities). The periods for which accumulation is now permitted are shorter; they are listed in the Law of Property Act 1925 and the Perpetuities and Accumulations Act 1964 and include a period of 21 years from the date of the disposition, the period of the life of the settlor, and the duration of the minority of any person mentioned in the dispositio Income is often directed to be accumulated if (for example) the beneficiary is a minor, or the interest in his favour is protected or contingent, or if the terms of a trust are discretionary.

Accumulation in Political Economy

Without entering into the difficulties involved in the definitions of Wealth Capital, and simply assuming that accumulation refers to wealth set aside from present consumption for future uses, the rate of accumulation in any country at any time is held to depend upon two groups of causes:

  • causes affecting the fund from which savings can be made;
  • causes which induce people to save rather than to consume their wealth.

Under the first group of causes may be enumerated:

  • natural resources, e.g. minerals, climate, harbours, rivers, etc.;
  • efficiency of labour and capital, including industrial skill and organisation (see EFFICIENCY OF LABOUR);
  • the amount taken by government for public purposes either directly by taxation or indirectly by exacting services, as in conscription for military purposes. The indirect effects and methods of expending it must always be taken into account (see TAXATION);
  • foreign trade, ender which we must take into account the various elements of international indebtedness (see FOREIGN EXCHANGES), e.g. earnings for freight and returns on foreign investments;
  • credit, which indirectly and directly saves both labour and capital. Division of labour in the modern sense would hardly be possible without credit, and it is largely owing to credit that saving in the economic sense has taken the place of hoarding (see CREDIT);
  • means of communication, e.g. roads, canals, and railways, play an important part in the production of wealth, for the act of production is not complete till the commodity is in the hands of the consumer.

To summarise in a sentence, the amount of the fund from which savings can be made depends upon the efficiency of the three great agents of production—natural agents, labour, and capital, as compared with the total expenses of all kinds, both of individuals and governments, which are necessary to preserve what is called the STATIONARY STATE (q.v.) Secondly we must consider the motives which induce people to save rather than to consume this real net produce. The following are held to be the most important factors:

  • security that what is saved will be preserved to or enjoyed by the owner. Even slaves, out of their small peculium have been known to save if they were sure of their savings. Security, as Mitt. points out, must be given not only by the government but against the government (compare Turkey at present or the old Roman provinces). Security of life owing to climatic or other natural causes may also be mentioned;
  • effective desire of accumulation; this consists really of a group of motives. It may be weak from intellectual deficiency, mere want of power to look forward (compare American Indians and Chinese), or from moral deficiency, no interest in others, no sufficient care to avoid pauperism in old age, or to provide for a family, etc.;
  • desire to rise in the social scale—the importance attached to the mere possession of wealth apart from its uses—a point too often overlooked;
  • facilities for investment; this is specially illustrated by the case of labourers and savings facilitated by growth of savings banks, building societies, etc., and by insurance companies for all classes;
  • the difference of the classes among which the national wealth is distributed, as certain classes tend to save more than others (compare France before and after the Revolution, the waste of the aristocracy and the saving of the peasants);
  • the rate of interest, which operates in two ways.

If the return is high there is a greater inducement to invest, though Adam SMITH, in speaking of the high profits of the monopoly of the colonial trade, thinks it tends to promote extravagance. If the return is low, however, there is need to save more to make a certain provision against old age, sickness, etc.[1]

Resources

Notes

  1. Robert Harry Inglis, Sir, Dictionary of Political Economy, Vol. 1, 1915

See Also

Further Reading

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Schema Summary

  • Article Name: Accumulation
  • Author: MacCallum
  • Description: Definition of Accumulation In accordance with the work A Dictionary of Law, this is a description of Accumulation : The [...]

This entry was last updated: September 5, 2017

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