Capital III, Chapter 15 - Part 41

What concerned the bourgeois economists, like Ricardo, was that the Law of Falling profits meant that capitalism must collapse under its own weight, as continued accumulation resulted in a continued fall in the rate of profit until the mass of profit itself began to fall. Marx shows that this concern was unfounded. The Law of falling profits can only ever be a tendency, which has many countervailing forces that are as likely to cause the rate to rise as to fall. Moreover, the tendency of this rate to fall brings with it a necessity for the mass of profits, not to fall, as Ricardo and others feared, but to rise. Finally, the “Rate of Profit” he discusses here is the rate of profit used by the bourgeoisie. It is, if its based on a single turnover of the laid-out capital, including, therefore, the fixed capital, essentially the profit margin, the proportion of the price of each commodity unit comprising profit, or put another way, the proportion of the surplus value produced in a year, relative to the laid-out capital for the year.

But, Marx shows that this “Rate of Profit” is a fraud. Its use is important to understand how the profit margin per unit necessarily falls, and the problems that creates, but it tells us nothing about the actual amount of profit produced relative to the advanced capital, which is the real measure of the extent to which production can be expanded, it is the basis for understanding how much capital is released, along with the creation of relative surplus population.

The very process of rising social productivity not only results in all of the countervailing forces, set out in Chapter 13 and 14, it also necessarily results in a rise in the rate of turnover of capital, and so raises the annual rate of profit. It also results in a release of capital, which facilitates additional capital accumulation in existing industries, as well as the establishment of a range of new industries.

But, this rise in social productivity has other consequences. On the one hand, it results in the kind of continual expansion of the range of use values, he describes in the Grundrisse, as part of the “Civilising Mission” of capital to continually expand the desires of the workers and thereby to transform them culturally. In so doing, it not only prepared the means of production for the socialist society, but it also prepares the workers for taking on the role of ruling class.

“Development of the productive forces of social labour is the historical task and justification of capital. This is just the way in which it unconsciously creates the material requirements of a higher mode of production.” (p 259)

Yet, the only way it can achieve this is within its own limits, and each time it reaches those limits, it can only continue via a crisis, which resolves the contradictions. The continual drive forward of social productivity drives the quantity of output beyond the quantity of use values that can be absorbed by the market. It is this fact which Marx says gives Ricardo the fear that the system may collapse. But, its not that the system must collapse, as Marx has demonstrated, it is that it is historically limited. The repeated crises are simply an indication that it can only go forward each time within those constraints. But, go forward it does, and each time the quantity and value of capital expands, and along with it the quantity and range of use values.

For society to go forward without these crises, the constraints themselves must be removed, and the only way the constraints can be removed is by removing production from capitalism, from the basis of production decisions being profit, and instead to base them on the needs of society.

“What worries Ricardo is the fact that the rate of profit, the stimulating principle of capitalist production, the fundamental premise and driving force of accumulation, should be endangered by the development of production itself. And here the quantitative proportion means everything. There is, indeed, something deeper behind it, of which he is only vaguely aware. It comes to the surface here in a purely economic way —i.e., from the bourgeois point of view, within the limitations of capitalist understanding, from the standpoint of capitalist production itself — that it has its barrier, that it is relative, that it is not an absolute, but only a historical mode of production corresponding to a definite limited epoch in the development of the material requirements of production.” (p 259)

Later, Marx analyses the way the development of socialised capital in the form of the joint stock company, and co-operative - both forms of the kind of larger capital for whom the rise in the mass of profit compensates for the fall in the rate of profit – achieve this partially. But, these forms, he says, can only represent transitional forms on the road to the associated mode of production, and the co-operative commonwealth.

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