Michael Roberts' Fundamental Errors, V - The Tendency For The Rate of Profit To Fall Is Not The Cause of Crises - Part 3 of 8

Marx does refer to the tendency, however, in Theories of Surplus Value, Chapter 23, and does so in a way, not at all helpful or supportive of Roberts' statement. Marx, rather, denies that it has any significant role in causing crises, as against his explanation of its role in the resolution of crises of overproduction of capital. He says, on the question of whether this rise in the proportion of total output going to the reproduction of constant capital, relative to variable-capital, explains the tendency for the rate of profit to fall.

“For us, however, the main thing is: does this fact explain the decline in the rate of profit? (A decline, incidentally, which is far smaller than it is said to be.) Here it is not simply a question of the quantitative ratio but of the value ratio.”

So, first of all, we see, here, that Marx describes the tendency for the rate of profit to fall, to be “far smaller than it is said to be”. In fact, as he goes on to say, here, because its not just a question of the quantitative ratio, i.e. the technical composition of capital, but also, the value composition of capital, this tendency basically disappears to nothing, because, although the mass of material processed rises, disproportionately, as productivity rises, this same rise in productivity reduces the unit value of that consumed material sufficiently to offset it.

He shows that, for example, the use of a spinning machine rather than a spinning wheel, will result in a given amount of labour spinning much more cotton. However, if similar technological developments, such as the introduction of the cotton gin, mean that a given amount of labour, also, now produces the same proportionately greater quantity of cotton, the total value of the cotton consumed would not change, even though much more of it is now processed. The technical composition would have risen, but the value composition fallen by an equal amount, meaning no change in the organic composition.

Its true, Marx notes, that the value of the spinning machine, in absolute terms, is greater than that of the spinning wheel, but, it is invariably less in relative terms, as he also sets out in Capital III, Chapter 6. In other words, if the value of a spinning wheel is £10, and spins 100 kilos of yarn, it transfers as wear and tear, £0.10 per kilo to the value of the yarn. A spinning machine, however, may cost £100, but produces 10,000 kilos of cotton, so that it transfers only £0.01 per kilo. In fact, as I have set out, elsewhere, its not even the case that this more productive machinery, required for this rise in the technical composition, is, necessarily, more valuable absolutely, rather than just relatively. The same rise in productivity, acts to cheapen machines too, just as with the cheapening of materials. As I have described, a £500 personal computer, in 1985, had the same processing power as a £2 million mainframe computer in the 1970's, for example. There were far more personal computers bought as fixed capital by businesses than there were mainframe computers!

Marx notes that if

“one worker produces a spinning-machine whereas previously he produced only a spindle, then the ratio of value remains the same...”

(ibid)

Marx argues that, in the case of raw materials, because they depend on nature, this ability to reduce their value, is less than it is for machines, or manufactured materials, so that, its in this sphere that the rise in the technical composition is not fully offset by a fall in the unit value, and consequently value composition of the capital. However, even here, Marx notes, after having taken into consideration a range of those other factors, including the fact that, the value of labour-power is reduced, as productivity rises, so that the rate of surplus-value rises, the tendency for the rate of profit to fall, as a result, is near zero.

“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.”

(ibid)

But, a large part of raw materials, nowadays, are themselves industrially produced, so that this no longer applies. Synthetic materials have replaced natural fibres and so on, but even in primary production, today, a vast amount of fixed capital is used, just as in other industrial production. Moreover, Marx's argument is based upon this rise in the technical composition, a proportionally greater rise in the quantity of material processed relative to the fall in its unit value. That is only relevant in economies where the greatest proportion of output is of such production. In economies where 80% of new value, and of surplus value is created in service industry, where no such relation to the processing of raw material is involved, that is no longer relevant.

As I have set out elsewhere, that does not change the importance of Marx's analysis of the tendency of the rate of profit to fall, in those spheres where the organic composition of capital is higher than the average, because the importance of that analysis is precisely its role in the distribution of capital throughout the economy, i.e. away from lower than average profit areas, into higher than average profit areas, and, thereby, the formation of an average rate of profit, vital for the analysis of rent, and the rate of interest, as well as of prices of production. But, that has nothing whatsoever to do with Marx's explanation of the cause of crises, whether crises of the overproduction of commodities, or the overproduction of capital. As Marx points out, in Capital III, Chapter 13, the bourgeoisie, did see it as an important law, because, on the basis of its Ricardian interpretation, it spelled catastrophe. Its that interpretation that modern catastrophists and Malthusians have adopted, and not the Marxian interpretation, even though they, frequently claim to be defending it.

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