“The relevant bit of the quote precedes the bit you have snatched out of context. It says,
"The reconversion of money into capital. A definite level of production or reproduction is assumed. Fixed capital can be regarded here as given, as remaining unchanged and not entering into the process of the creation of value. Since the reproduction of raw material is not dependent solely on the labour employed on it, but on the productivity of this labour which is bound up with natural conditions, it is possible for the volume, the amount of the product of the same quantity of labour, to fall (as a result of bad harvests). The value of the raw material therefore rises; its volume decreases, in other words the proportions in which the money has to be reconverted into the various component parts of capital in order to continue production on the former scale, are upset. More must be expended on raw material, less remains for labour, and it is not possible to absorb the same quantity of labour as before. Firstly this is physically impossible, because of the deficiency in raw material. Secondly, it is impossible because a greater portion of the value of the product has to be converted into raw material, thus leaving less for conversion into variable capital. Reproduction cannot be repeated on the same scale. "
In other words, it is talking not about the law of falling profits but a rise in the price of materials such as cotton due to a bad harvest!!! Rather than there being a rise in the organic composition of capital based on increasing productivity and due to technological improvement and rising levels of output, what we have here is a rise in the price of cotton, which results in CURTAILMNENT of output, because increased capital has to be spent on buying these materials.)
Wallace and Dobbs could not even understand these differences even when they were staring them in the face, as shown by the fact that they even quoted the example of Ricardo's argument about rising agricultural prices causing wages to rise/rate of surplus value to fall, in support of the claim about the role of the tendential law, despite the fact that Marx rejects that Ricardian theory! They cited Marx's comment, in Theories of Surplus Value, Chapter 17,
“According to Ricardo’s theory of rent, the rate of profit has a tendency to fall, as a result of the accumulation of capital and the growth of the population, because the necessary means of subsistence rise in value, or agriculture becomes less productive. Consequently accumulation has the tendency to check accumulation, and the law of the falling rate of profit—since agriculture becomes relatively less productive as industry develops—hangs ominously over bourgeois production.”
In other words, not Marx's tendential law based on rising social productivity, and a rising technical composition of capital, alongside a rising rate and mass of surplus value, but the opposite, falling social productivity, causing rising relative wages, and a fall in the rate of surplus value! As I pointed out to them, its also, what Marx sets out in Capital III, Chapter 13,
"But if the same causes which make the rate of profit fall, entail the accumulation, i.e., the formation, of additional capital, and if each additional capital employs additional labour and produces additional surplus-value; if, on the other hand, the mere fall in the rate of profit implies that the constant capital, and with it the total old capital, have increased, then this process ceases to be mysterious. We shall see later [K. Marx, Theorien über den Mehrwert. K. Marx/F. Engels, Werke, Band 26, Teil 2,. S. 435-66, 541- 43. — Ed] to what deliberate falsifications some people resort in their calculations to spirit away the possibility of an increase in the mass of profit simultaneous with a decrease in the rate of profit."
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