ABSTRACT
Our economy grows because individual agents invest money in income-creating projects. Motivated by the desire for profit that accrues to investors whenever new income revenues exceed original cost outlays, these investments add value and expand production capacity. In this way money accumulates as capital. That process of capital accumulation, which the classical economists analyzed so beautifully as one of "self-expanding value," gives the capitalist system its powerful dynamism. Competition forces producers to invest constantly in the development of new products and better production technologies. Otherwise they run the risk of falling behind in the race for profits and market share. On the sidelines are all kinds of financial investors who want to capture a share of those profits and who in the process make bets on the relative strengths and weaknesses of producers. Their choices reinforce the perceived qualitative differences in competitiveness. Firms, and in today's globalized economy even entire nations, must therefore shape up or decline. That pressure is sweetened by the prospect of enjoying the fruits of their effort. Investment and reorganization may eventually payoff.
