Tendency of
the Rate of Profit to Fall
Capital
Volume 3, Part 3, The Law of the Tendency of the Rate of Profit to Fall
The most well-known insight of
Capital Volume 3 is the Law of the Tendency of the Rate of Profit to Fall,
often abbreviated to “TRPF”.
Chapter 13 (attached) describes the Law very directly and
simply.
The TRPF is not a mystical
law. The TPRF is in the first place a consequence of the simple fact that
surplus value extracted from wage-workers is the only source of increase of
capital, and profit is surplus value less the capitalists’ other costs, (where
these other costs are what Marx calls “constant capital”, and where wages are
“variable capital”).
The tendency for the amount
of labour-power used to become less over time, as compared to the “constant
capital” used, is what causes the TRPF - the tendency of the rate of profit to
fall.
The constant capital includes
technology, and the cost of technological inputs rises in relation to the
amount of labour applied, as more scientific methods are used (often described
as labour-saving methods).
This produces an apparent
paradox: When productivity of labour rises, profits fall. The more
“capital-intensive” is a business, the less profit is made in proportion to the
amount of money invested.
Does this mean that
capitalism is going to fade away? Does it mean that there is an entropy in play
for capitalism, like the winding-down of the solar system? So that profits will
eventually reduce almost to zero, and the capitalist relationship therefore
become unsustainable and cease to exist?
Perhaps Kautsky might have
thought so, but there are “counteracting influences”, some of which Marx
describes in the following Chapter 14
of Capital Volume 3. Wikipedia (here)
lists Marx’s “counteracting influences” as follows:
·
more intense
exploitation of labour (raising the rate of exploitation)
·
reduction of
wages below the value of labour power
·
cheapening the
elements of constant capital by various means
·
the growth and
utilization of a relative surplus population (the reserve army of labour)
·
foreign trade
reducing the cost of industrial inputs and consumer goods
·
the increase in
share capital which devolves part of the costs of using capital on others.
Do the “counteracting
influences” balance out the TRPF and produce a capitalist equilibrium?
No, not exactly. Instead,
what we actually have is a very dynamic, unstable, and finally political,
living world. We have constant crises, contradictions, and conflict.
“Marxism” is for many
purposes practiced as a hidden science in capitalist society. For example, the
business pages of newspapers seldom relate what is happening in businesses from
day to day, to theories of surplus value. Marx gets a nod now and again, but
mostly he is ignored.
But it is not the case that
in the world of economic theory, Marx is never consulted by bourgeois
economists. The terrain on which the parlay happens is here, in Capital Volume
3. The TRPF and its countervailing tendencies are familiar to bourgeois
economists. They have their own variations on the problematisation of the TRPF,
or its equivalent as they see it, such as what they call “the law of
diminishing returns”.
·
The above is to
introduce the original reading-text: Capital Volume 3, Chapter
13, The Law As Such.
