Of course, that is only true of the total social capital. One firm may expand beyond the limits of its own rate of profit by borrowing money-capital from the money-market. That money exists because other firms have not used their money-capital to expand to the extent of their profit rate, but have deposited the surplus in the money-market.
The total social capital can never expand to the full extent of the rate of profit (without external borrowing or additional primary accumulation) because the surplus value is always shared with other exploiting classes (landlords, merchant and money capitalists,) and with the capitalist state, that use their share as revenues to consume unproductively. The capitalists themselves use a portion of their profits in order to live, and to engage in luxury consumption.
As seen earlier in the chapter, the portion of industrial profit can then vary quite apart from any change in the general rate of profit, as a result of changes in these other shares of the mass of surplus value.
The general rate of profit may fall, but if the mass of profit rises, whilst the demand for money-capital rises by a smaller amount, the rate of interest will fall. As the rate of interest falls, the proportion available for industrial profit may rise so that the rate of accumulation rises and vice versa. The same applies with changes in rents.
But, similarly, capitalists themselves may vary how much they spend on luxuries, thereby making available more or less funds for accumulation. A fall in the rate of profit, far from causing a reduction in accumulation, may cause the opposite as each firm seeks to capture market share, by producing more efficiently, buying a new machine etc.
“If the rate of profit falls, there follows, on the one hand, an exertion of capital in order that the individual capitalists, through improved methods, etc., may depress the value of their individual commodity below the social average value and thereby realise an extra profit at the prevailing market-price. On the other hand, there appears swindling and a general promotion of swindling by recourse to frenzied ventures with new methods of production, new investments of capital, new adventures, all for the sake of securing a shred of extra profit which is independent of the general average and rises above it.” (p 258-9)
But, as Marx has pointed out earlier, when it comes to accumulation and production decisions, the rate of profit is really only decisive for the small capitals. A big capital can accumulate more with a low rate of profit than can a small capital with a high rate of profit. That is not just the case purely on an absolute basis. Take a capital of £10,000 on which the owner makes a profit of 50%. But, in order to live, the owner needs £4,000 as revenue. That leaves them £1,000 to accumulate or 10%. Now take a capital of £1 million, with a rate of profit of only 20%. Even with a lavish lifestyle, where the owner takes a revenue of £50,000, for their consumption, that leaves them £150,000 to accumulate, or 15%. Not only is their rate of accumulation 50% higher, but the mass of their accumulation is 150 times greater.
As Marx points out, for these big capitals, the increase in the mass of profit, which is the necessary corollary of the process of rising social productivity, behind the tendency for the rate of profit to fall, more than compensates for any such fall.
“The rate of profit, i.e., the relative increment of capital, is above all important to all new offshoots of capital seeking to find an independent place for themselves. And as soon as formation of capital were to fall into the hands of a few established big capitals, for which the mass of profit compensates for the falling rate of profit, the vital flame of production would be altogether extinguished. It would die out.” (p 259)
Of course, in modern capitalism, mammoth corporations do dominate the economy, and their dynamic, the basis on which they develop long-term investment plans is different, as Marx suggests, and Engels describes in his Critique of the Erfurt Programme. But, fortunately for capitalism, not only are the mass of firms still comprised of these small companies, but, by definition, nearly all of the new companies that are continually being created, are the kind of small companies described by Marx.
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