A low rate of profit, caused by a squeeze on profits, due to a relative scarcity of labour, and high wages, leads to increased capital accumulation – intensive accumulation – in labour-saving technologies that create a relative surplus population, thereby reducing wages and removing the squeeze on profits. A squeeze on profits, caused by high market prices for raw materials, can also result in such accumulation, so as to access cheaper raw materials, or enable more efficient use of materials.
Marx says,
“Where the rate of profit is high (apart from cases where, as in North America, there is capitalist production on the one hand and, on the other hand, the value of all agricultural produce is low) it is generally due to the fact that capital consists mainly of variable capital, that is, direct labour predominates.” (p 417-8)
As I have set out elsewhere, that is the case in modern economies where 80% of new value, and surplus value production is from labour-intensive services industry. They may be labour intensive, because they use a lot of simple labour, or because they use a smaller quantity of highly complex labour.
Marx quotes Jones statement setting out the error of the belief that the rate of accumulation is determined by the rate of profit.
““Error of the doctrine, that whenever, in the progress of nations, the rate of profit declines, the means of providing subsistence for an increasing population must be becoming less. Foundations of this error: 1st. A mistaken notion, that accumulation from profits must be slow where the rate of profits is low, and rapid where it is high. 2d. A mistaken belief that profits are the only source of accumulation. 3d. A mistaken belief that all the labourers of the earth subsist on accumulations and savings from revenue, and never on revenue itself” (p. 51).” (p 418)
In the first instance, a high rate of profit may, as Marx sets out, in Capital III, result in increased unproductive consumption, or in a build up of savings, which results in lower interest rates, rising asset prices, and an encouragement of speculation. As described, a high rate of profit, resulting from low wages, and a high rate of surplus value, may discourage investment in labour-saving/productivity raising equipment, and vice versa.
In relation to the second instance, Marx has shown earlier that where the value of capital (either constant or variable) falls, this results in a release of capital, and this released capital is then available for accumulation. But, capital accumulation may also be financed out of credit rather than profits.
In the third instance, Jones is stating the fact, set out by Marx, in Capital III, and elsewhere, that the value of output resolves into capital and revenue. The capital is the constant capital that must be replaced on a like for like basis, and whose value is merely transferred to, and thereby reproduced in current production. The revenues consist of the new value created by labour, and which is physically represented by the consumption fund. That fund divides into variable-capital, required to reproduce wages, and the surplus value. The workers do not subsist on savings from revenue undertaken by capitalists, but on the necessary product created by the workers themselves, and appropriated by capital.
“Richard Jones sums up correctly in the following passage:
“The amount of capital devoted to the maintenance of labour may vary, independently of any changes in the whole amount of capital.” (This proposition is important.) “Great fluctuations in the amount of employment and great suffering […] may sometimes be observed to become more frequent as capital itself becomes more plentiful” (p. 52).” (p 418)
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