Michael Roberts Gets Overexcited By The Rate of Profit - Part 8 of 10

In his WW article, Roberts compares his opponents to climate deniers, but its clear, on this basis, that Roberts would have to put Marx in that same camp! He and his associates have gone to a lot of trouble to prove that the rate of profit has been falling over time, and he has got overexcited about convincing himself about it, because, for him, it is this tendency that explains crises. But, for those of us who, like Marx, do not see that tendency as being the cause of crises there is no reason for excitement at all. If we look at Roberts' conclusion, taken from Basu's data,

“The country-aggregated world profit rate series displays a strong negative linear trend for the period 1960-1980 and a weaker negative linear trend from 1980 to 2019”,

there are a number of things that clearly stand out. Firstly, it suggests that even after 1980, when most economists, and most of the information we have indicates that the rate of profit was rising, Roberts wants to still claim that it was falling, just not at the same rate as earlier. He doesn't seem to consider the possibility that given that his and his associates' estimate of the rate of profit is so at variance with that of everyone else, and with observed reality – for example the secular decline in interest rates over that period, which was the concomitant of a sharply rising rate of profit – it might be due to his methodology in calculating that rate being wrong!

Secondly, he fails to distinguish whether the cause of the rate of profit falling, during these different periods, is a result of a change in the value composition of capital, or a change in the technical/organic composition, and the reason this is important has been stated, that whilst the former can be identified with crises of overproduction of capital, the latter results from the actions taken by capital to resolve such crises. But, it is only the rise in the technical/organic composition that is the basis of Marx's Law of the Tendency for the Rate of Profit to Fall. The data on the fall in the rate of profit in the period between 1960 – 1980 is fairly extensive, and conclusive. As Glyn and Sutcliffe and others demonstrated, it fell as a result of a change in the value composition of capital, and particularly, a rise in wage share that squeezed profits, not as a result of a change in the technical/organic composition of capital. I have set out that in my previous posts, for example -

Its Not Inflation Driving Interest Rates Higher (9/10) - Rising Wage Share and Rising Profits.

If we look at what we know about that period, it is fairly obvious. Following the period of crises of overproduction of capital in the 1910's, and 20's, capital engaged in a new round of technological development. It developed the assembly line as a basis of continuous production, and other elements of Fordism and Taylorism; it replaced steam-power with electric power in the workplace, and the internal combustion engine on the land and on the highways; it developed petrochemicals and other synthetic products that replaced natural fertilisers and raw materials and so on.

The peak of this innovation came around 1935, and in the period after that, these new technologies began to replace the existing fixed capital. But, in the period after the war, basically these same technologies, with only minor improvements, to them were simply rolled out on a more extensive scale. Even with the introduction of married women into the workforce, the bringing in of large numbers of migrant workers, and the effects of the baby boom in raising population, by the 1960's, the labour force was not growing as fast as the demand for labour was rising. In Britain, the unemployment rate fell to just 1%. It was this that led to rising wages and a squeeze on profits, not The Law of the Tendency for the Rate of Profit to Fall.

The period between 1960-1980 was not a period of a vast increase in new technologies being introduced to production – though the new technologies did form the basis of a new range of consumer products that became available in the 1950's and after – yet that is a basic requirement for The Law of the Tendency for the Rate of Profit to Fall to operate. The period when new technologies were developed, and introduced, was precisely in the late 1970's, and into the 1980's, when capital again responded to the rise in wages and squeeze on profits, by developing new labour saving equipment, so as to create a relative surplus population, and, thereby, reduce wages, and the value of labour-power. The peak of that Innovation Cycle came in 1985. It is in the 1980's that we see the development of the microchip, and its introduction into a wide range of applications in production, as well as the development of everything else that went with it, in terms of development of telecommunications and so on, that became increasingly important, as service industry rose in importance as against the old manufacturing industries.

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