Overaccumulation is one of the potential causes of the Crisis of Capital

Capital (economics)

In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...

. A Crisis of Capital occurs due to what Karl Marx

Karl Marx

Karl Heinrich Marx was a German philosopher, economist, sociologist, historian, journalist, and revolutionary socialist. His ideas played a significant role in the development of social science and the socialist political movement...

 refers to as the internal contradictions inherent in the capitalist system which result in the reconfiguration of production. The contradiction in this situation is realized because of the condition of capitalism

Capitalism

Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...

 that requires the accumulation of capital through the continual reinvestment of surplus value

Surplus value

Surplus value is a concept used famously by Karl Marx in his critique of political economy. Although Marx did not himself invent the term, he developed the concept...

.

Accumulation can reach a point where the reinvestment of capital no longer produces returns. When a market becomes flooded with capital, a massive devaluation occurs. This overaccumulation is a condition that occurs when surpluses of devalued capital and labor exist side by side with seemingly no way to bring them together. The inability to procure adequate value stems from a lack of demand.

The term "overaccumulation" is also used in a neoclassical

Neoclassical economics

Neoclassical economics is a term variously used for approaches to economics focusing on the determination of prices, outputs, and income distributions in markets through supply and demand, often mediated through a hypothesized maximization of utility by income-constrained individuals and of profits...

 context.

Examples

The depression

Great Depression

The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...

of the 1930s and 40s resulted in part, due to major devaluation of capital and labor concluding in massive unemployment. The 1980s were also dangerous times for capitalist industrial nations when unemployment rose over 10 percent in 1983 and massive amounts of inventory lay unsold.

Strategies

Capitalism has adapted to this crisis in two ways. The first solution to the problem is resolved using a "spatial fix". The regionality of overaccumulation allows the crisis to be relieved by moving capital or labor to a different territory and beginning new production. This solution relieves the surplus by moving it into a region that has a higher demand for it.

A second solution to overaccumulation involves the creation of new markets. If demand does not exist for the excess accumulation, then one can be created by opening up non-capitalist markets.