DAVID HARVEY: CRISIS THEORY AND THE FALLING RATE OF PROFIT (This is a draft of an essay to be published in 2015 in: The Great Meltdown of 2008: Systemic, Conjunctural or Policy-created?)

DAVID HARVEY:
CRISIS THEORY AND THE FALLING RATE OF PROFIT 

Read more @ thenextrecession

This is a draft of an essay to be published in 2015 in:

The Great Meltdown of 2008: Systemic, Conjunctural or Policy-created? 
Editors: Turan Subasat (Izmir University of Economics) and John Weeks (SOAS, University of London); Publisher: Edward Elgar Publishing Limited


In the midst of crises, Marxists frequently appeal to the theory of the tendency of the rate of profit to fall as an underlying explanation.1 In a recent presentation, for example, Michael Roberts attributes the current long depression to this tendency.2 
The tendency/law operates as follows:
1) Competition forces capitalist producers to invest in labour-saving technologies in order to preserve market share.
2) The value of the means of production consumed (c, the constant capital) tends to outstrip the value of labour power (v, the variable capital) employed.
3) The ratio of constant to variable capital employed (the productivity or value composition of capital, c/v) rises. If the rate of exploitation (s/v, the ratio of surplus value produced to variable capital employed) is unchanged, then the rate of profit, (s/c+v) will fall.
4) There are, however, counteracting tendencies. The rate of exploitation of labour power can rise. Constant capital can become cheaper with increased productivity in the sectors supplying machinery, raw materials and intermediate products. But these counteracting tendencies are insufficient, it is held, to offset the downward trend in the profit rate in the long run. “Thus,” Roberts concludes, “profitability tends to fall and capitalism tends towards crises, a movement interrupted only by short periods of growth.”  (...)

(Read more @The Next Recession blog)

Notes

1. 1  Among others see Carchedi, G., Behind the Crisis: Marx’s Dialectics of Value and Knowledge, Brill, Leiden, 2011; Kliman, A., The Failure of Capitalist Production: Underlying Causes of the Great Recession, London, Pluto Press, 2011; Shaikh, A., “The First Great Depression of the 21st century,” (see http://homepage.newschool.edu/~AShaikh/); Moseley, F., The Falling Rate of Profit in the Postwar United States Economy. New York: St. Martin’s Press, 1990; Maito, Esteban Ezequiel, “The Historical Transience of Capital: The Downward Trend in the Rate of Profit since XIX Century,” unpublished paper, University of Buenos Aires, Argentina, n.d.
   
   
2. 2  Power point presentation: Michael Roberts, “The Nature of Current Long Depression,” Marxism 2014; 11 July 2014