Michael Roberts' Fundamental Errors, V - The Tendency For The Rate of Profit To Fall Is Not The Cause of Crises - Part 5 of 8

How could it be that a tendency for the rate of profit to fall that is both so small, and visible, if at all, only over long periods, measurable only against the average in one cycle as against another, and which is, by definition, thereby, gradual be the cause of periodic crises of overproduction, either of commodities or of capital? It is inconceivable. The law explains why, at any one time, and as part, itself, of a process, capital migrates from low profit spheres to high profit spheres, but not that it migrates out of production in aggregate.

Even the process of migration between spheres, Marx explains, is usually not a question of it being physically reduced in the one sphere, and moving to another, but simply of it accumulating faster in one sphere rather than another, so that as the economy, and capital accumulation increases, a greater proportion is accumulated in the high profit spheres, and and a smaller proportion in the low profit spheres. By this means, supply of commodities in the former rises relative to the increased demand in that sphere, whereas, in the latter, supply falls relative to the rise in demand, so that prices and the rate of profit, in the former, fall, whilst, in the latter, they rise.

In Theories of Surplus Value, Chapter 17, Marx does not equate a crisis of overproduction of commodities with a crisis of overproduction of capital. Although the latter necessitates the former, he sets out why the former does not necessarily require the latter. As already noted, a crisis of overproduction of commodities is inherently possible in all commodity production and exchange, whether based on capital or not. Indeed, independent commodity producers, frequently, throughout history, overproduced commodities, and went out of business. They became debt slaves, serfs or paupers.

It was precisely the fact that such overproduction could arise, that enabled capitalist production to, eventually, take hold, because, once markets were of a sufficient size, in the towns of the Middle Ages, so that larger-scale production becomes efficient, it means that these failed producers can be employed by their more successful neighbours, or by merchant capitalists, who become industrial capitalists. The means of production become capital, and the failed producers become wage-labourers, employed by it.

Its for that reason, as Engels sets out in his Supplement to Capital III, on The Law of Value, that it is actually in those spheres of production where the organic composition of capital is high – and so the rate of profit is low – that capitalist production first occurs. It is in those spheres, where the commodity producer must be able to sell, and, thereby, reproduce the value of the constant capital that any failure to sell all of their output at its value, most obviously leads to failure. At a time when most such producers, still had access to a small plot of land to meet their need for food, they could always reproduce their own labour-power, but that was not the case with expensive materials and so on. So, any such failure, means that they would become prey to the merchant capitalist, or to a more efficient neighbour, able to provide those means of production, on condition of them becoming a wage-labourer, and providing an amount of free labour.

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