Socialist Action /March 2000
Our Readers Speak Out
Dear editor,
While discussing the concept of the falling rate of profit with a friend,
he asked me if I had evidence or proof that the rule of profit is indeed
falling. I replied that I did not but would seek to obtain it....
A reader,
Brooklyn, N.Y.
NAT WEINSTEIN REPLIES:
Dear reader,
Your question is a very difficult one to answer for two reasons. First,
the "proof" you ask for is a statistical problem that is extremely
difficult to demonstrate.
The reason for this is perhaps illustrated by the fact that Marx's analysis
is based on a multitude of partial explanations of each separate component
of a total proof. But that proof is not based on what he called a historical
or quantitative analysis, but primarily on a logical or qualitative analysis.
That is, he starts from the simplest elements such as what is a commodity
and how it evolves from a simple use value into the various forms of value
or exchange value-that is, the elementary, the relative, the equivalent
and the money forms of value.
And from there he traces it through to its evolution into the different
forms of its existence as capital.
That's why, aside from the many volumes he wrote on the evolution of
capitalist economy and his commentary on the contributions by bourgeois
economists of various theoretical persuasions who came before him, which
are contained in scores of books and pamphlets; and which are summed up
into one logical synthesis in his three volumes of "Capital,"
I am not aware of his producing the kind of "proof" you are looking
for.
That's why in the articles I, and most of us who attempt to popularize
Marxist economics, deal mainly with his logical qualitative analysis, and
how it is manifested in its consequent social and economic impact on the
working class and other interested persons. That is, I for one attempt to
show how the economy works, its consequences, where it is headed, and how
it affects society as a whole.
The other "proof" which you seek would take the form of a statistical
search through the quantitative world of prices, costs of production, and
a literal history of the evolution of values, prices, and profits and finally
the development of the general average rate of profit.
But that is an extremely difficult process since there are a vast multiple
of variables which are all highly contradictory and thus difficult to determine
at any given moment in the complex process called the "tendency of
the rate of profit to fall."
But there is another kind of proof that comes a little closer to what
you would like to have.
That can be boiled down to what I have tried to do-that is, to show how
the falling rate of profit is proved by the periodic crises of overproduction
that are made manifest by a sudden drastic collapses in the prices of commodities,
which is the result of the unending process of the falling value of commodities.
In other words, the general tendency for the expansion of smaller to
ever larger productive enterprises and along with that the greater employment
of science and technology tends to create a greater mass of commodities
at a reduced cost of production for each individual unit. And that amounts
to a steady general process of replacing living labor (human labor power)
with dead labor (machines and greater masses of raw materials).
Even that is an over-simplification since the values of commodities do
not gradually fall and in fact fluctuate higher and lower. It's only over
a period time that the tendency of falling values is registered in a generalized
fall in prices.
And because when such a crisis breaks out, a large sector of the productive
forces suddenly becomes greatly reduced in value-that is, those capitalists
whose costs of production are above the average, and thus produce a smaller
surplus value (rate of profit) relative to their more efficient competitor.
That is, those least efficient capitalists are ultimately driven from the
marketplace and out of business.
And finally their manufacturing enterprises are reduced to the value
of the scrap metal in their machines and the value of their factory buildings-which
are also reduced to a fraction of their former value, and thus price-because
new capital must be invested to make them useful for other purposes than
for what they were designed to do.
In other words, a crisis of overproduction is registered in a qualititative
fall in prices, and consequently the rate of profit in the entire industry
tends to suddenly drop.
This is because the rate of profit in the given sphere of production
is determined by the average cost of production by the most and least efficient
sectors.
Thus, when the least efficient enterprises are eliminated, there is a
sudden fall in average price of commodities and thus a fall in the average
rate of profit for the remaining more-efficient enterprises.
I am not aware of any book that effectively and coherently offers the
kind of proof you are looking for except in the three volumes of "Capital."
Socialist Action /March 2000 |