The Law of the Tendency of the Rate of Profit to Fall
On one hand, human labour is the only source of value and of value appreciation of capital, that is to say, of surplus-value. But, on the other hand, the accumulation process takes place in a fatal dynamic set by the objective tendency -independent of the capitalists’ will- to displace labour power by the machine. So, as the accumulation process advances through the successive rotation periods, the increase of investment in additional capital of means of production, that is to say in the constant part of the increase, becomes progressively bigger than the increase invested in labour power, in salaries, in variable capital. It increases the relation Cc/Vc, what Marx calls the organic composition of capital (O.C.C.), the sign of the increasing economic power of capital over labour; but Cc/Vc is, as we’ve just saw, the translation in value terms of Means of Production /Labour power that expresses the degree of development of the productive force of labour.
Well then, this tendency of capital towards an incessant progress of the productive forces of social labour and to the corresponding increase in OCC -that strongly determines the behaviour of every burgess- also prompts the relation between the bulk of surplus-value and the whole of the invested capital Cc + Vc to decrease after each period of capital rotation and each accumulation cycle. That is to say, the general rate of profit decreases at the same pace as living labour is replaced by the machinery.
In the well-known Marx’s formulas
Profit measure
G=Pl/Cc+Cv
According to this formula, for the tendency of the rate of profit to fall, P, enunciated by Marx, the progressive growth of the bulk of surplus-value must necessarily be smaller than the increase in the OCC. If now we divide the terms of this fraction by Sv we have
| Pl | ||||
| Pl | 1 |
|||
G= |
G= |
|||
| Cc+Cv | Cc+Cv | |||
| Pl | Pl |
From this we can see that for the profit rate not to decrease, the increase in the OCC must be balanced by an increase in the profit rate or the exploitation rate of labour. In other words, the performance or exploitation of the labour in operations has to surpass the gradual decrease of the resulting surplus-value from the every time smaller increase in the number of employed workers caused by the increase in the OCC, that is, of the relative decrease in employed workers. But it turns out, that although they extend the surplus-labour by the employment of machinery at the expense of the number of employed workers, the capitalists cannot avoid the profit rate to decrease. It is impossible, for example, to extract from two workers as much surplus-value as from 24. In fact, if each one of the 24 workers only supplies one hour of surplus-value in each 12 hours working day, as a whole they will supply 24 hours of surplus-value, the two workers should have to work completely gratis, because all of their salary would be transformed in surplus-value.
To mathematically show that the exploitation rate cannot overcome the depressing effects of the increase in the OCC above the profit rate, it is necessary to express the relation P between the obtained surplus-value and the invested capital, in terms of global living labour, that is to say (Vc + Sv) that represents the whole of the working day. In our example 24 hours
Pl |
||||||
Pl |
||||||
G= |
G= |
|||||
Cc+Cv |
Cc |
+ | Cv |
|||
Supposing that the exploitation rate reaches the possible maximum, that is to say, that the surplus-value Sv takes all the working day, then Vc= 0 and Sv=1. Replacing these values of Vc and Sv in the last part of the formula
1
|
||||||||
1 |
1 |
|||||||
|
G= |
G= |
= |
||||||
Cc 0+1 |
+ |
0 |
Cc |
Cc |
||||
So, although the surplus-value contributed by our two workers to the capitalist occupies the 24 hours of the day, reducing their salaries to no value: Vc=0 (a supposition that makes them live of the air) even so, the exploitation rate represented in the fraction numerator cannot exceed the limit of 1(the salary is totally transformed in surplus-value) which is the 100% of the working day, while the organic composition of the capital represented in the denominator can increase whatever we want, the more it increases the more P decreases. It is then categorically shown, that the fall of the profit rate is inevitable when the OCC increases, independently of any increase of the exploitation rate, whose limit is strongly set by biological reasons.
As we can see, the employment of machinery for the production of surplus-value implies an immanent contradiction since of the two factors of the bulk of surplus-value obtained by a capital of given magnitude, one factor, the rate of surplus-value, only increases to the extent that the other factor, the number of workers, decreases(3). This contradiction is inherent to the capitalist relation and is imposed to the individual employers through competition, because of the reciprocal pressure that one exercises over the others by the reduction of their salaries costs as the technical degree of their factories increases. The capitalists which introduce improvements in the methods and means of labour in their factories, cut costs in labour and reduce the production time. They are able to drop the prices of their goods and so they get extraordinary profits. At the expense of their rival colleagues. This behaviour pushes the rest to do the same. So a dynamic of global social capital is set free that increases the OCC and decreases the profit rate.
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(3) The exploitation rate Sv/s expresses the profit that the capital gets from each employed worker during the working day. Then the bulk of surplus-value results by multiplying the exploitation rate by the number of employed workers.
October 1998
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