Sunday, 13 September 2015

Capital III, Chapter 15 - Part 4

For Ricardo and others, the fall in the rate of profit was the same kind of Law of Nature that Malthus saw in relation to food production and population. In other words, it is a form of diminishing returns, in which, at some point, not only the rate of profit falls, but also the mass of profit. For Ricardo, its rising food prices, caused by a growing workforce's demand for food, which causes wages to have to rise and profits to fall.

This is what causes the fear, for these previous economists, because, if, at some point, the mass of profit also falls, it means that the capitalist system must then go into absolute decline. But, Marx demonstrates that this belief is wrong. There is no permanent crisis for capitalism, no absolute decline leading to collapse.

Marx then demonstrates that, whether the rate of profit is rising or falling, this is consistent with a continual rise in the mass of surplus value, indeed the fall in the rate of profit must be accompanied by a rise in the mass of surplus value. Moreover, the rate of interest and of rent may be rising or falling, whether or not the rate of profit is rising or falling. So, it may be the case that the rate of profit, interest and rent may all be rising or falling, at the same time, or the rate of one may be falling as the others rise and so on.

“If we consider the total social capital C, and use p1 for the industrial profit that remains after deducting interest and ground-rent, i for interest, and r for ground-rent, then s/C = p/C = p1 + i + r/C = p1/C + i/C + r/C. We have seen that while s, the total amount of surplus-value, is continually increasing in the course of capitalist development, s/C is just as steadily declining, because C grows still more rapidly than s. Therefore it is by no means a contradiction for p1, i, and r to be steadily increasing, each individually, while s/C = p/C, as well as p1/C, i/C, and r/C, should each by itself be steadily shrinking, or that p1 should increase in relation to i, or r in relation to p1 or to p1 and i. With a rising total surplus-value or profit s = p, and a simultaneously falling rate of profit s/C = p/C, the proportions of the parts p1, i, and r, which make up s = p, may change at will within the limits set by the total amount of s without thereby affecting the magnitude of s or s/C.” (p 242)

In other words, s is divided between the various exploiters as profit, rent and interest. If the total quantity of s rises, then how the rate of each of these moves depends upon what proportion of this each is able to grab for themselves, at the expense of the others. The total surplus value may rise, and its proportion to the total advanced capital C remain constant, for example, but the rate of profit pocketed by the industrial capitalist may fall, if the amount he has to pay to the money-dealing capitalist in interest, for the money-capital he has borrowed, rises. That may be so even if the actual amount of profit they make rises. Similarly, a capitalist farmer may see the surplus value they produce rise, and their rate of profit, but if the rent they pay to the landlord rises, then the rate of profit made by the farmer may fall.

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