4. The Relevance of the Tendency for the Rate of Profit to Fall
If there is nothing in the model of capitalism that prevents continuing growth in decadence, there is, in fact a law that says it must continue – the law of the tendency for the rate of profit to fall (TROPF). (1)
It is noteworthy that C.Mcl., having disposed of Luxemburg’s theory of accumulation, has not taken up any other analyses of accumulation or crisis theories in his text. He completely avoids any mention of the tendency of the rate of profit to fall and its impact on capital’s development despite Marx’s voluminous writings on the topic.
So what are the key points that Marx makes about the impact of the falling rate of profit?
“We have shown how the same causes that bring about a tendency for the general rate of profit to fall necessitate an accelerated accumulation of capital and, consequently, an increase in the absolute magnitude, or total mass, of the surplus-labour (surplus-value, profit) appropriated by it… It is evident that within the proportions indicated above a capitalist disposing of a large capital will receive a larger mass of profit than a small capitalist making seemingly high profits.” (2) (my emphasis)
To emphasise this point, the impact of the FROP is that it leads not only to increased accumulation, and accelerated accumulation at that, but also to a continual increase in the mass of profit.
“The law that a fall in the rate of profit due to the development of productiveness is accompanied by an increase in the mass of profit, also expresses itself in the fact that a fall in the price of commodities produced by a capital is accompanied by a relative increase of the masses of profit contained in them and realised by their sale.” (3)
What this means is that as the capitalist economy increases in size, the rate of profit gets smaller and the mass of profit increases. This is a key indicator that growth in capitalism and into its period of decline is to be expected. It is a permanent consequence of the TROPF and must be present in both ascendancy and decadence. Outside a total failure of production the mass of profit must tend to grow. Is this not a very good description of what has happened to capitalism over the past 4 centuries?
It is an obvious thing to say that in 1762, when Matthew Boulton built the first modern factory and the remainder of the economy comprised mostly of small craft workshops, it was relatively easy for capital to double in size because that increase was not that large. Today it is very much harder and takes longer to double in size but the scale of capitalism today means that an average 3% growth in GDP per year leads to a much greater economy doubling in size in little more than 20 years; this is a tremendous volume of growth.
The rate of profit is an indicator of accumulation that is falling proportionately and drives individual capitals forward, but contradictorily enough, it is at the same time a sign of the enormous level of growth that the economy as a whole is achieving. The mass of growth is a product of the exploitation of the working class and the increasing levels of surplus value created by the capitalist production. It is what is called enhanced reproduction and this is the norm for capitalism probably until the very end of its life. (4)
To summarise this section, I am arguing that both growth and fetters on production exist within a declining capitalism.
I think it is clear that we can see fetters on production in the way that capital produces for exchange and for profit and not for need, in the nation state and in the class struggle itself, but this does not prevent increasing growth of capital.
I do not argue that capitalism is capable of infinite growth. I do however suggest that growth in decadence is not something that should be ignored and dismissed; it needs explanation and clarification by the communist left.
I do also accept that it does raise questions about crisis theory and how the decay of capitalism will present itself.
Next page: External Influences on Capitalism
1 There is obviously a debate as to what happens when insufficient profit is produced but proponents of the theory see the consequence as war leading to a reduction in the value of constant capital. In any case no one suggests that there is a set rate that would cause a crisis let alone the decadence of capitalism.
2 Marx, 1894: Capital Volume 3, Chapter 13.
4 See Text Box 1: Marx and Enhanced Reproduction.