Monday, 29 July 2013

The Effect Of Social Capital On The Rate Of Profit

As part of the discussion on the falling rate of profit I thought I would put this forward, to show just the effect that a shift in the proportions of the total social capital have on the average rate of profit.  The figure for the percentage of social capital is taken from actual economic statistics for all years other than 1851.  The figure for agriculture for that year is based on the percentage of the population employed in Agriculture, and the other two figures are estimates.

Likewise the figures for the percentage of total capital made up of constant capital and variable capital in each sector are guesstimates.  The 80% figure for constant capital for industry in 1851, is based on examples provided by Marx and Engels in Capital.

As will be seen, in line with the concept that the proportion of constant relative to variable capital grows, for industry I have indicated a rise from 80% to 90%, which is consistent with Marx's statement that the value of constant capital does not grow proportionate to its physical proportions in production.  I have made much larger increases in the constant capital of the agricultural and service sectors, even though its possible that rises in productivity may have also restricted the rise in that value too.

However, as can be seen the estimated rate of profit for 1851 of 28%, which again is close to some estimates provided by Engels, actually rises, despite the overall increase in all sectors in the organic composition of capital!  The reason for that is the progressive diminution of the role of industry as a component of the total social capital.

Not too much should be taken from these actual figures which are only estimates for illustrative purposes.  But, that applies in other ways too.  For example, the average rate of profit on this basis falls from 36% in 1961, to 35% in 1976, and 34.6% today.  But, no account is made here of the potential rise in the rate of surplus value, for the undoubted increase in the rate of turnover, which since 1961, would be likely to double, at least the nominal rate of profit.

The significance of these figures, given that they are based on the actual shift in the proportions of total social capital is to emphasise the point I have made previously, which is that the factors that lead to the potential of a falling rate of profit in one sector, do not logically have to apply to the economy as a whole.  New types of industry are arising periodically, for whom existing organic compositions of capital are irrelevant.  To the extent that these new industries have lower organic compositions - and all new industries do - then as these new industries become a more significant element of the total social capital, then even as their own organic composition rises, they can act to lower the overall level, and thereby act as a factor causing a rise rather than a fall in the average rate of profit.

Effect Of Changes Of Social Capital On The Average Rate of Profit


Percentage of Social Capital Constant Capital Variable Capital Surplus Value Rate Of Profit Average Rate Of Profit
1850 Agriculture 7 30 70 70 70 490

Industry 83 80 20 20 20 1660

Services 10 40 60 60 60 600


1961 Agriculture 5 40 60 60 60 300

Industry 48 85 15 15 15 720

Services 47 45 55 55 55 2585


1976 Agriculture 3 50 50 50 50 150

Industry 40 88 12 12 12 480

Services 57 50 50 50 50 2850


2013 Agriculture 1 60 40 40 40 40

Industry 18 90 10 10 10 180

Services 81 60 40 40 40 3240


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