Doubly Wrong and Then Wrong Again
If Michael is measuring the rate of profit on the basis, of Marx's rate of profit/profit margin, s (d + c +v), therefore, not only is it wrong from the start, because it omits the value of c, the value of means of production used in the production of means of production, as Marx describes it in Capital II, and III, but, it certainly is not an indication of the operation of Marx's law of a falling rate of profit, because it is rather an indication of a falling rather than rising rate of surplus value, and of a rising rather than falling value composition of capital. Michael then adds in the value of the fixed capital stock, which makes it wrong yet again, because in Marx's calculation of the rate of profit/profit margin, it is only the value of wear and tear of fixed capital (d) that is included in the calculation, not the value of the total stock.
There are other problems with Michael's calculation of the rate of profit, concerning the use of Historic Pricing to value that fixed capital stock, and the fact that he excludes profits from a vast section of the economy, for example in financial and commercial sectors, which is contrary to Marx's developed calculation of the general annual rate of profit as set out in Capital III, Chapter 17. I will come to those later. On the basis, however, of Michael's use of the fixed capital stock in the calculation of the rate of profit, I assume that what he is actually attempting to measure is not the rate of profit/profit margin, but the annual rate of profit, which is the basis for the general annual rate of profit.
If Michael means a la Marx in relation to the average annual rate of profit, then it is again not calculable from the published data, because, although its possible to get figures for fixed capital stock, it still omits the figure for circulating constant capital, i.e. the consumed raw materials component of the means of production used in the production of means of production, which forms a revenue for no one. Moreover, Marx's calculation of the annual rate of profit, from which he calculates the average annual rate of profit for the total social capital, is based upon the advanced capital, not the laid-out capital, i.e. on the capital value advanced for one turnover period, not the cost of production for the year's output.
So, although its possible to get a figure for the advanced fixed capital for a turnover period, because its basically the total value of the fixed capital stock itself (as Marx says, it all has to be present for production to occur, even though only a part of it enters the cost of production) – but it's necessary to calculate this on the basis of its current reproduction cost, rather than its historic price, or even the historic price less depreciation – not only is the value of raw materials consumed in production not available, but even if it were, it's impossible to know how much of that value is advanced rather than laid out, because that depends upon the rate of turnover of this circulating capital. Again, the total figure for wages is known (though it should also be supplemented by the social wage), but that is only relevant for a calculation of the rate of profit/profit margin, i.e. s/(d + c + v), not of the average annual rate of profit, which is s x n/C, where C is the total capital advanced for one turnover period, and n is the number of turnovers of the circulating capital in a year. In order to know these figures, it's necessary to know a) the total value of c (means of production used in the production of means of production) (Department I (c)), which is not available because National Income GDP figures are only figures for the consumption fund i.e. the value of Department II output, and National Income data as its name suggests, is likewise only data for revenues (wages, profits, rent, interest and taxes), i.e. v + s (Department I and II v + s = Department II c + v + s), i.e. it is only a figure for value added by labour during the year, and not including the value of consumed materials, directly replaced out of current production, on a like for like basis, which represent a revenue for no one. But, also, the data relates to laid out capital, i.e. costs of production, not the capital advanced, for which it would be necessary to know how many times the circulating capital turned over during the year, which the data does not provide.
So, a la Marx, the data actually do not tell us anything accurate about either the rate of profit/profit margin, or the average annual rate of profit. It tells us about changes in the rate of surplus value, and that shows the rate of surplus value is getting squeezed, which is precisely what would be expected at this stage of the long wave cycle, and is the same as happened, at this stage, in the early 1960's, and through into the 1970's, before a new wave of labour-saving technologies were introduced that replaced labour, increased productivity, and thereby set in place the actual conditions for the operation of Marx's law of the falling rate of profit, to resolve that squeeze on profits, by reducing wages, and raising the rate and mass of surplus value.
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