But Still It Falls: On the Rate of Profit

With regard to the rate of profit ( s/C , where s = surplus-value, and C = total capital laid out), and the factors that influence it, the fundamental relation that Marx establishes (in chapter 3 of volume 3 of Capital) is π = δ.v/C , in which π = rate of profit, δ = rate of surplus-value ( s/v ), and v = variable capital (capital laid out as wages): ‘The rate of profit is thus determined by two major factors; the rate of surplus-value and the value composition of the capital.’ The rate of profit increases in function of a rise in the rate of surplus-value, and falls in function of an increase in the constant part of capital with respect to variable. Marx’s purpose in this chapter was to delink the rate of surplus-value from the rate of profit: to show that the same rate of surplus-value can find expression as different rates of profit, and that the same rate of profit can arise from different rates of surplus-value.

It is intrinsic to capitalist production that the productivity of labour rises. This is because it is inherent on each capital to seek a surplus profit, and a surplus profit is achieved by increasing the productivity of labour over that of competing capitalists in order to reduce per-unit output prices (most importantly as set out in Capital volume 1, chapter 12; and volume 3, chapter 10). A capitalist that achieves this is able to realise a surplus profit because the per-unit cost price of her commodity product falls below that of her competitors’, allowing her, if she sells at the old price, or even below it (which she will almost certainly have to do to fulfil conditions of social demand) to achieve a rate of profit on her capital higher than that her competitors do. Yet when the new productive technique is generalised in the sector of production in question (and then beyond it), when a new level of productivity of labour is reached, when the socially-necessary value (labour-time) of the commodity in question falls to a new level – ignoring for the moment the question of social demand and the realisation of the commodity value – what happens then?

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