Definition
Over-accumulation is the condition in which the stock of capital seeking profitable investment exceeds the available outlets for productive investment at the prevailing rate of profit. The result is a glut of savings chasing a shrinking pool of high-return real-economy investments — which pushes capital into financial speculation, asset-price inflation, foreign lending, and increasingly exotic instruments in search of return.
The concept has Marxist roots — Marx's tendency of the rate of profit to fall — but has been developed by post-Keynesian and political-economy theorists (Harvey, Brenner, Arrighi) to explain why financialisation rises and why crises become more frequent in the late phases of an accumulation cycle. It is also implicit in Bernanke's "global savings glut" hypothesis and Summers' "secular stagnation" thesis.
Why it matters
How it works
In the simplest version, an expansion produces high profits, which are reinvested. The reinvestment increases productive capacity. If demand does not grow as fast as capacity, returns fall. Firms with cash look for investment outlets and find fewer productive ones, so they push their money into financial markets, foreign markets, or unproductive uses (luxury consumption, asset speculation).
This drives down the rate of return everywhere. Central banks respond by lowering interest rates to encourage borrowing — which produces asset-price bubbles rather than real investment, because real returns are already inadequate. When the bubble bursts, the over-accumulated capital is destroyed in the crisis: bankruptcies, write-downs, fire sales. The destruction restores profitability for what survives and the cycle begins again.