ACCUMULATION. Without entering into the difficulties involved in the definitions of CAPITAL ; WEALTH (q.v.), 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 : (I.) causes affecting the fund from which savings can be made ; (II.) causes which induce people to save rather than to consume their wealth.
Under the first group of causes may be enumerated—(1) natural resources, e.g. minerals, climate, harbours, rivers, etc. ; (2) efficiency of labour and capital, including industrial skill and organisation (see EFFICIENCY OF LABOUR) ; (3) 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) ; (4) 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 ; (5) 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) ; (6) 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 : (1) 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 ; (2) 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. ; (3) 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 ; (4) 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 ; (5) 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) ; (6) 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.