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Dear editor,

While discussing the concept of the falling rate of profit with a friend, he asked me if I had evidence or proof that the rule of profit is indeed falling. I replied that I did not but would seek to obtain it….

A reader,

Brooklyn, N.Y.




Dear reader,

Your question is a very difficult one to answer for two reasons. First, the “proof” you ask for is a statistical problem that is extremely difficult to demonstrate.

The reason for this is perhaps illustrated by the fact that Marx’s analysis is based on a multitude of partial explanations of each separate component of a total proof. But that proof is not based on what he called a historical or quantitative analysis, but primarily on a logical or qualitative analysis.

That is, he starts from the simplest elements such as what is a commodity and how it evolves from a simple use value into the various forms of value or exchange value-that is, the elementary, the relative, the equivalent and the money forms of value.

And from there he traces it through to its evolution into the different forms of its existence as capital.

That’s why, aside from the many volumes he wrote on the evolution of capitalist economy and his commentary on the contributions by bourgeois economists of various theoretical persuasions who came before him, which are contained in scores of books and pamphlets; and which are summed up into one logical synthesis in his three volumes of “Capital,” I am not aware of his producing the kind of “proof” you are looking for.

That’s why in the articles I, and most of us who attempt to popularize Marxist economics, deal mainly with his logical qualitative analysis, and how it is manifested in its consequent social and economic impact on the working class and other interested persons. That is, I for one attempt to show how the economy works, its consequences, where it is headed, and how it affects society as a whole.

The other “proof” which you seek would take the form of a statistical search through the quantitative world of prices, costs of production, and a literal history of the evolution of values, prices, and profits and finally the development of the general average rate of profit.

But that is an extremely difficult process since there are a vast multiple of variables which are all highly contradictory and thus difficult to determine at any given moment in the complex process called the “tendency of the rate of profit to fall.”

But there is another kind of proof that comes a little closer to what you would like to have.

That can be boiled down to what I have tried to do-that is, to show how the falling rate of profit is proved by the periodic crises of overproduction that are made manifest by a sudden drastic collapses in the prices of commodities, which is the result of the unending process of the falling value of commodities.

In other words, the general tendency for the expansion of smaller to ever larger productive enterprises and along with that the greater employment of science and technology tends to create a greater mass of commodities at a reduced cost of production for each individual unit. And that amounts to a steady general process of replacing living labor (human labor power) with dead labor (machines and greater masses of raw materials).

Even that is an over-simplification since the values of commodities do not gradually fall and in fact fluctuate higher and lower. It’s only over a period time that the tendency of falling values is registered in a generalized fall in prices.

And because when such a crisis breaks out, a large sector of the productive forces suddenly becomes greatly reduced in value-that is, those capitalists whose costs of production are above the average, and thus produce a smaller surplus value (rate of profit) relative to their more efficient competitor. That is, those least efficient capitalists are ultimately driven from the marketplace and out of business.

And finally their manufacturing enterprises are reduced to the value of the scrap metal in their machines and the value of their factory buildings-which are also reduced to a fraction of their former value, and thus price-because new capital must be invested to make them useful for other purposes than for what they were designed to do.

In other words, a crisis of overproduction is registered in a qualititative fall in prices, and consequently the rate of profit in the entire industry tends to suddenly drop.

This is because the rate of profit in the given sphere of production is determined by the average cost of production by the most and least efficient sectors.

Thus, when the least efficient enterprises are eliminated, there is a sudden fall in average price of commodities and thus a fall in the average rate of profit for the remaining more-efficient enterprises.

I am not aware of any book that effectively and coherently offers the kind of proof you are looking for except in the three volumes of “Capital.”

Socialist Action News

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