Internal contradictions of capital accumulation
What is internal contradictions of capital accumulation?
This is an economic theory associated with Marxism. It's a crucial part of crisis theory, which is concerned with the rate of profit falling in a capitalist system
Where have you heard about internal contradictions of capital accumulation?
If you haven't heard of the Marxist version of the theory, you might have heard of it under the name of systematic risk in neoclassical economic theory.
What you need to know about internal contradictions of capital accumulation.
According to the theory, in a capitalist economy wages will eventually fall due to outsourcing and offshoring of production. Corporate profits then increase proportionately to the fall in wages. To keep this growth in profits going, it becomes necessary to sell more goods. But increasing supply causes a problem because the buyers are often the same population whose wages have been repressed. This means credit markets grow as consumers require more capital. Eventually, falling wages and rising debt lead to an increase in debt default, causing banks to fail.