Accumulation of capital shapes the social system.

a. avoid destabilising capital flows to maximise benefits from globalised capital markets, thereby minimising risk

In many developing countries, IPAs do not pay adequate attention to the potential for attracting FDI that could contribute to knowledge accumulation but focus rather on capital accumulation in tangible assets.

It undertook reserve accumulation in the late 1990 s as a form of self insurance against capital flight.

As the accumulation and deepening of capital accelerate growth, they perpetuate the low efficiency investment pattern and stimulate overproduction.

That means that China is beginning to rejoin the human race as capital accumulation meets scarcer labor and growth slows.

Sustained economic growth requires, everywhere, the accumulation of physical and human capital, as well as the acquisition of technological capabilities.

Pursuing its comparative advantage strengthens a country s resilience to crisis and allows for the rapid accumulation of human and physical capital.

We economists were by and large capital boosters, and our magic formula for economic development was saving, investment, thrift, and wealth accumulation.

They have acted as gateways connecting South Asia to the developed world, and have benefited from globalization, education, capital accumulation, and technological advancement.

By 2012, human capital s contribution to China s GDP growth fell almost to zero, with fixed capital accumulation accounting for roughly 60 of total growth.

Capital controls, whatever their benefits in terms of mitigating the risks associated with volatile capital flows, are costly in a variety of ways.

Indeed, while China s overall capital stock is by no means small, capital structure and maturity mismatches have led to the accumulation of massive volumes of non performing assets, undermining China s economic stability and financial efficiency.

Adam Smith focused on the role of enlightened self interest (the invisible hand ) and the role of specialization in promoting the efficiency of capital accumulation.

In the long run, trade's positive influence comes through the utilization and upgrading of productive capacities, innovation and accumulation of physical, human and organizational capital.

At present, the accumulation of wealth is accompanied by the accumulation of poverty.

It requires an industrialization drive, accompanied by the steady accumulation of human capital and institutional capabilities to sustain services driven growth once industrialization reaches its limits.

This obvious externality required policy responses in the emerging countries limits on capital inflows, reserve accumulation, and measures to restrict credit and restrain asset price inflation.

Thus, the IMF s recommendation to use capital controls only after exhausting interest rate adjustment, reserve accumulation, and prudential regulation is out of step with the profession.

And a foreign exchange control enacted in 1993 ensures that only France benefits from this capital drain by limiting the free flow of capital to France alone.

Nevertheless, the global gains from allowing freer flows of unskilled labor (even temporarily), let alone the benefits to developing countries, far outweigh the benefits from capital market liberalization.

Standard growth theory predicts convergence of per capita GDP a fast growing country will eventually encounter difficulty maintaining high rates of labor mobilization, capital accumulation, and technological progress.

Traditional growth theories focus on systematic forces for example, capital accumulation, employment, and technical change that, by definition, operate all the time, although with varying degrees of intensity.

Most economists in China seem to support the PBOC s stance, citing the potential benefits of capital account liberalization.

Enterprises that interact with university based research laboratories have been offered venture capital, tax benefits and other incentives.

The latter course risks the worst of all worlds all of the costs of capital controls and all of the domestic policy complications from volatile capital flows, but few of the potential benefits of foreign capital.

To stop this accumulation of foreign exchange reserves, and thus minimize China s welfare and capital losses, the simplest solution would be for the PBOC to call a halt to intervention.

Most economists in China seem to support the PBOC s stance, citing the potential benefits of capital account liberalization. But Chinese policymakers should also recognize the significant risks inherent in relaxing capital controls.

That said, in the interplay of linkages making up a virtuous growth regime, capital accumulation seems to provide one important link from launching an industrial take off to sustaining catch up growth.

Developing countries' alleged gains from capital market liberalization have been widely discussed (although recent studies raise some doubts about these benefits).

But in any discussion of the forces governing the process of capital accumulation, the manner in which the richest stratum of society acquires and uses its income appears to be of particular significance.

Regulations should also have a strong counter cyclical focus, preventing excessive accumulation of leverage and increasing capital and provisions (reserves) during booms, as well as preventing asset price bubbles from feeding into credit expansion.

A factor worthy of note is that developing economies in the ESCAP region have become net exporters of capital as persistent current account surpluses in some countries combined with a sharp increase in net private capital flows have been reflected primarily in the substantial accumulation of official reserves.

The result is the accumulation of innovative capital and productive labour in the most developed countries, with a corresponding impoverishment of countries most in need of those resources, generating yet greater divergence and more inequalities.

Despite being seen as a poster child for the benefits of globalization, India is not unduly dependent on global flows of trade and capital.

If trading today is not helping to move capital to its highest and best use, reallocating inefficiently employed financial talent could yield big benefits.

Abolishing the NEP, it was the first of a number of plans aimed at swift accumulation of capital resources through the buildup of heavy industry, the collectivization of agriculture, and the restricted manufacture of consumer goods.

In many cases, a combination of capital outflows, profit remittances and the accumulation of exchange reserves greatly reduced net inflows, and of these a growing proportion was absorbed by activities which added little to productive capacity.

Similar motives dictate reserve accumulation in other emerging markets.

And amongst our compiled results was the startling revelation that, in fact, we were losing natural capital the benefits that flow from nature to us.

Given China s extensive reform agenda, further opening of the capital account can wait and, in view of liberalization s ambiguous benefits and significant risks, it should.

Managing growth Accumulation and structural change in an interdependent world

China was clearly able for many years to exploit a reserve army of the unemployed à la Karl Marx to grow rapidly without facing a labor supply constraint, so that capital accumulation would not run into diminishing returns.

By contrast, the countries in East and South Asia that bucked this trend in the 1980s were able to maintain a fast and reasonably stable pace of capital accumulation for most of the 1990s (UNCTAD, 2003 65 73).

It must be recognized that the concept of ownership by the people will have value added benefits both in terms of economic and of human capital.