So, now let me turn briefly to his arguments about AI and The Law of the Tendency for the Rate of Profit to Fall, and so on. Firstly, as I've set out before, Roberts interpretation of the law, and focus on the ratio of fixed capital to labour, as the basis of the organic composition is wrong. The basis of the law is the rising quantity of circulating constant capital, i.e. raw material to labour, resulting from increased productivity. Only in that sense is the role of fixed capital crucial, because the fixed capital is the cause of the higher productivity. But, in Theories of Surplus Value, Chapter 23, and in Capital III, Chapter 6, Marx sets out why, the value of fixed capital falls relative to output value.
It may be that this fall in the value of fixed capital, relative to output, is itself relative, or it may be absolute. For example, a spinning wheel costing £100, that produces 100 kilos of yarn per year (£1 per kilo), is cheaper absolutely, but more costly, relatively, than a spinning machine that costs £500, but produces 1,000 kilos of yarn per year (£0.50 per kilo). But, the same technological development that results in the spinning machine, may also revolutionise the production of the components of the spinning machine, reducing their costs, and of the production process of the machine itself. So, there is no reason why the spinning machine itself, may not cost only, say, £80, and so not only be relatively (£0.08 per kilo), but also absolutely cheaper than the spinning machine.
What the spinning machine does do, is require 10 times as much material to process, and what Marx says, in setting out the law, in Theories of Surplus Value, Chapter 23, is that, although this material might also be produced cheaper, the increase in the quantity of it processed, is proportionately greater than the fall in its unit value. So, for example, if 100 kilos of cotton costing £1 per kilo is processed by the spinning machine, whilst 1,000 kilos of cotton costing £0.80 per kilo is processed by the spinning machine, then despite this fall in the unit value of cotton, the total amount of its value rises from £100 to £800, and its this that is the basis for a) the rise in the technical composition of capital, and consequently b) the rise in the organic composition, and fall in the rate of profit.
But, this assumes that the unit value of material falls less than the proportionate rise in the quantity processed, which Marx only assumed on the basis that this material, at that time, was largely organic, and subject to the laws of nature not manufacturing.
Even then, Marx noted that, after taking into consideration the effect of rising productivity on cheapening fixed capital, and of reducing the value of labour-power, by reducing the value of wage goods, all of which raise the rate of profit, the relative rise in the value of consumed materials only acted to offset this rise in the rate of profit.
“The cheapening of raw materials, and of auxiliary materials; etc., checks but does not cancel the growth in the value of this part of capital. It checks it to the degree that it brings about a fall in profit.”
(Theories of Surplus Value, Chapter 23)
In other words, the technical composition of capital rises proportionately more than the value composition, falls, so that unit prices of materials fall by less than the increase in the quantity of materials consumed. That would result in a higher organic composition of capital, and fall in the rate of profit. In fact, not only is that not necessarily true, as science has been applied to that production, but also, large quantities of commodities are produced using synthetic, i.e. manufactured materials. Those materials are also more effective, and so on, so that, not only are they absolutely cheaper, but frequently, less of them is required. Take something used in Marx's day, coal to power steam engines.
The development of more efficient boilers and engines, meant that much less coal was required for any given level of power output by the steam engine. More efficient steam engines used in mining to pump air and water, to drive machinery and so on, meant lower costs of production for coal, and so a lower value of the coal also used in steam engines. I have given lots of these examples in the past, to illustrate this point, such as the fact that a modern PC is not only much more powerful than an old mainframe computer, and so relatively cheaper compared to output, but also many, many times cheaper, in absolute terms than a mainframe computer.
In an era where 80% of labour is employed in service industry, rather than manufacturing industry, and so where the processing of material is no longer the dominant factor in the labour process, this law of the tendency for the rate of profit to fall, as social productivity rises, no longer applies. That doesn't mean that crises of overproduction of capital no longer occur, i.e. that profits are squeezed by rising wages, because the function of the long wave cycle means that, existing technologies get rolled out, and more labour is employed, so that, over time, the relative surplus population is used up, wages rise, and profits are squeezed, until eventually that means that capital is overproduced, i.e. it cannot function as capital to produce a greater volume of surplus value, because the employment of additional labour causes wages to rise, reducing the rate and mass of surplus value.
Nor does it mean that the Law of the Tendency for the Rate of Profit to Fall no longer functions in its main role in allocating capital. It still remains the case that those spheres with a higher organic composition of capital – assuming the same rate of turnover – have a lower annual rate of profit, and vice versa, so that capital is allocated away from the former and towards the latter, thereby also establishing prices of production accordingly.
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