Roberts says,
“Tonak and Savran survey all the modern theories of crisis and trenchantly demolish them to show the superiority of Marxist theory, based on the law of the tendency of the rate of profit to fall”.
Marx, also, deals with these causes of crisis, in Capital II, on various reasons that the circuit of industrial capital can be broken that have nothing to do with the tendential law. It also demonstrates the difference in his analysis of an overproduction of commodities, as against an overproduction of capital, not to mention his distinction between these economic crises, as against financial crises. As I have set out, elsewhere, Marx, in elaborating the actual basis of the tendential law, distinguishes it from the bases set out by Adam Smith, and, later by Ricardo. For Smith, profit exists because labour is plentiful, and is sold below its value, whereas capital, is scarce and is sold above its value. For him, capital expands faster than labour supply, thereby, causing wages to rise, and profits to fall, until they disappear, or a crisis arises. In effect, this is the conclusion that Roberts arrives at, with his statement about, some “historic decline of capitalism”, which, if we apply the logic of his argument, in relation to the tendential law, means that it should be in permanent crisis.
But, Marx, as well as Ricardo, shows that Smith's argument was false. There are, certainly, periods when capital expands faster than labour supply (extensive accumulation), and so where relative wages rise and relative profits fall, i.e. the rate of surplus value falls, and it is this, not the tendential law, which, then, explains the fall in the rate of profit. But, as Ricardo and Marx explain, its precisely under those conditions that capital, then, responds, by introducing machines and fixed capital. The shortage of labour is ended, a relative surplus population is created, wages fall, and profits, and the rate of profit rise. As Marx puts it, in Theories of Surplus Value, Chapter 17,
“A distinction must he made here. When Adam Smith explains the fall in the rate of profit from an over-abundance of capital, an accumulation of capital, he is speaking of a permanent effect and this is wrong. As against this, the transitory over-abundance of capital, over-production and crises are something different. Permanent crises do not exist.”
As I have set out on previous occasions, Roberts says that he is explaining crises on the basis of Marx's tendential law, but, repeatedly, ends up presenting a period of falling profits not arising from the conditions set out by Marx for the operation of that law, but the opposite, the conditions that lead to a falling rate of profit on the Smithian or Ricardian basis, of a squeeze on profits arising from a reduction in the rate of surplus value. Others, like Steve Dobbs, and Bruce Wallace, that have tried to defend that same position have done the same thing of conflating the Smithian and Ricardian theories of the tendential law, based on a falling rate of surplus value, with the Marxian theory, which demolished those arguments, and depends, not on a falling rate and mass of surplus value, but a rising rate and mass of surplus-value, arising from higher productivity flowing from the introduction of labour-saving technologies.
If we take Ricardo's theory, he rejected Smith's argument, but on the basis of his acceptance of Malthus population theory, and his own theory of rent, based on diminishing returns, he concluded that as this labour supply increased, the demands on agriculture would lead to rising food prices, which would push up wages, and squeeze profits, and would, also, push up raw material prices, causing a rise in the value composition of capital, which would cause a fall in the rate of profit. Marx demolished both arguments. Agricultural/primary product productivity may not rise as fast as manufacturing productivity, but it still rises, and so those values fall, not rise. Ricardo assumed diminishing returns, on the basis that the most fertile land was being used. That was wrong, too. More fertile lands were opened to increase supply, as set out in Theories of Surplus Value, Chapter 9, including vast swathes of North America. Technology, also meant that the existing lands were made more fertile, as capital was applied to them more intensively.
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