Capital III, Chapter 13 - Part 4

Marx then says,

“If it is further assumed that this gradual change in the composition of capital is not confined only to individual spheres of production, but that it occurs more or less in all, or at least in the key spheres of production, so that it involves changes in the average organic composition of the total capital of a certain society, then the gradual growth of constant capital in relation to variable capital must necessarily lead to a gradual fall of the general rate of profit, so long as the rate of surplus-value, or the intensity of exploitation of labour by capital, remain the same.” (p 212)

But, there is no reason to believe that this assumption is valid, and typical of Marx's method of exposition, he later not only discards it, but reverses it to show how, in reality, the same forces that tend towards a higher average organic composition of capital, also tend towards a lower organic composition that neutralises the first. For example, suppose that capital first becomes involved in agriculture because it is labour rather than capital intensive, and thereby offers the best prospect of higher profits. It will continue to invest in agriculture until such time as the rate of profit falls to a level whereby capital might spot that engaging in some other industry might be more profitable – say spinning. Besides the fact that spinning previously provided no profits, because it was a peasant rather than capitalist industry, the reason that capital now enters it is because its organic composition is low, as originally was agriculture (before it became capitalist). Its possible then that this lower organic composition in spinning could reduce the aggregate figure.

This does not just apply to the initial spread of capitalist production. Take something current. Steel production is now highly developed and uses large quantities of constant relative to variable capital. But, the new high value/high profit industries such as the production of carbon fibre or graphene are the opposite of this. A large part of their value comes not from the material used in their production, or even from the machines used in their production, but comes from the very complex labour required for the development of these substances and processes, and the highly skilled labour involved in their production. Its true that these industries comprise a relatively small component of the total social capital, and so their low organic composition will have a relatively small effect on reducing the aggregate composition, but as these industries grow to a larger component of the aggregate social capital, so they may act to reduce the average composition even as their own composition rises.

For example, the following table shows the effects of changing compositions of the aggregate social capital by sector.

Effect Of Changes Of Social Capital On The Average Rate of Profit
	Sector
		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
							28
1961	Agriculture	5	40	60	60	60	300
	Industry	48	85	15	15	15	720
	Services	47	45	55	55	55	2585
							36.05
1976	Agriculture	3	50	50	50	50	150
	Industry	40	88	12	12	12	480
	Services	57	50	50	50	50	2850
							34.8
2013	Agriculture	1	60	40	40	40	40
	Industry	18	90	10	10	10	180
	Services	81	60	40	40	40	3240
							34.6

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