Marx also sets out the mechanism, by which this squeeze on profits caused by a rise in wages, then leads to a response by capital to reverse it. He says, again in Chapter 15,
“Given the necessary means of production, i.e. , a sufficient accumulation of capital, the creation of surplus-value is only limited by the labouring population if the rate of surplus-value, i.e. , the intensity of exploitation, is given; and no other limit but the intensity of exploitation if the labouring population is given.”
So, when the rate of surplus value falls, because wages rise, capital responds accordingly by introducing new technologies to increase productivity. That increases the rate of surplus value and rate of profit, but also, these new technologies, bring about a huge moral depreciation of existing fixed capital, which, in itself, brings about a rise in the rate of profit, as well as causing a release of capital now available for additional accumulation.
A perfect example of this process is the 1980's and 90's, when the crises of overproduction of capital of the 1970's caused capital to engage in the technological revolution that produced the microchip, and everything that has flowed from it. It created a large relative surplus population, causing unemployment and falls in wages, as well as falls in the value of labour-power, which increased the rate of surplus value and rate of profit. But, it also massively depreciated the fixed capital stock – a huge fact that Roberts and those who calculate the rate of profit based upon historic prices rather current reproduction costs ignore – which itself raised the rate of profit, and caused a huge release of capital. That increased the supply of loanable-capital, relative to the demand for it, which caused interest rates to fall, which then led to the start of the huge rise in asset prices, and of speculation in asset markets, which created the serial bubbles that ultimately resulted in the global financial crash of 2008.
In contrast to these falls in profit and rate of profit caused by changes in the value composition of capital, Marx says the basis of The Law of the Tendency for the Rate of Profit to Fall is not a fall in the rate of surplus value, but a rise, resulting precisely from rises in social productivity brought about by this new technology. In other words, the relation between crises of overproduction of capital, and The Law of the Tendency for the Rate of Profit to Fall is in the opposite direction to that proposed by Roberts.
Roberts not only fails to distinguish between a fall in the rate of profit caused by changes in the value composition of capital, as against changes in the technical/organic composition, but he also, fails to distinguish between different types of capital accumulation, at different time periods within the long wave cycle. He fails to distinguish between extensive accumulation, and intensive accumulation. Yet, Marx also sets out in Chapter 15, the role these different types of accumulation have in bringing about changes in the value composition, as against changes in the technical/organic composition.
Marx notes,
“Growth of capital, hence accumulation of capital, does not imply a fall in the rate of profit, unless it is accompanied by the aforementioned changes in the proportion of the organic constituents of capital. Now it so happens that in spite of the constant daily revolutions in the mode of production, now this and now that larger or smaller portion of the total capital continues to accumulate for certain periods on the basis of a given average proportion of those constituents, so that there is no organic change with its growth, and consequently no cause for a fall in the rate of profit. This constant expansion of capital, hence also an expansion of production, on the basis of the old method of production which goes quietly on while new methods are already being introduced at its side, is another reason, why the rate of profit does not decline as much as the total capital of society grows.”
But, in the 1980's, for example, there was such rapid technological change, bringing about the required rise in the technical/organic composition of capital. Yet, rather than the rate of profit declining during this period, as The Law of the Tendency for the Rate of Profit to Fall would predict, it rose, as even Roberts accepts. The reason quite clearly is because the fall in the value composition was greater than the rise in the technical composition, in addition to the fact that wages fell, causing the rate of surplus value to rise. And, this is seen in all periods of intensive technological change and accumulation.
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