Capitalism's declining rate of profit
If the whole capitalist system seems more predatory and unsustainable than ever, it's because it is. The destruction of the middle class in the U.S. is the capitalist system eating its seed-corn.
There seems to be a mad scramble to grab whatever you can before the ship turns turtle. The clock is approaching closing time for the drunken party, and now the guests have gone from drinking all the booze to stealing the silverware. No one intends to clean up the mess, much less wait for the cops to show up.
The corporate media reflects this increasing insanity. News coverage continues to get further and further from reality. As issues become more important, they get talked about less and less. Meanwhile the trivial, and sometimes imaginary, becomes the obsession of the news media.
Surely everyone other than Free Market Fundamentalists can see this. So why doesn't the ruling elite stop this?
It's because systems are more powerful than individuals. Just like honest people getting elected to Congress usually wind up corrupt and cynical, a wealthy person may want the world to improve, but he/she will still get swept up in a tsunami of greed and pillaging.
That's why I think the surge in unsustainable theft, fraud, and greed is happening because the capitalist system has no other choice. The feature is built into the system. Karl Marx described it as such:
“The progressive tendency of the general rate of profit to fall is, therefore, just an expression peculiar to the capitalist mode of production of the progressive development of the social productivity of labour. This does not mean to say that the rate of profit may not fall temporarily for other reasons. But proceeding from the nature of the capitalist mode of production, it is thereby proved a logical necessity that in its development the general average rate of surplus-value must express itself in a falling general rate of profit. Since the mass of the employed living labour is continually on the decline as compared to the mass of materialised labour set in motion by it, i.e., to the productively consumed means of production, it follows that the portion of living labour, unpaid and congealed in surplus-value, must also be continually on the decrease compared to the amount of value represented by the invested total capital. Since the ratio of the mass of surplus-value to the value of the invested total capital forms the rate of profit, this rate must constantly fall.”
Because Karl Marx said it, and because a falling rate of profit has a negative/fatal impact on the capitalist system, it instantly became controversial. Many an economist have been richly rewarded in "disproving" Marx's Law.
But there are two problems for those distinguished economists:
a) it wasn't Marx that discovered this flaw in capitalism. Adam Smith did.
b) this tendency for the rate of profits to fall is measurable.
"THE rise and fall in the profits of stock depend upon the same causes with the rise and fall in the wages of labour, the increasing or declining state of the wealth of the society; but those causes affect the one and the other very differently.
The increase of stock, which raises wages, tends to lower profit. When the stocks of many rich merchants are turned into the same trade, their mutual competition naturally tends to lower its profit; and when there is a like increase of stock in all the different trades carried on in the same society, the same competition must produce the same effect in them all."
- Adam Smith, Wealth of Nation, 1776
Adam Smith wasn't even the first to notice that the rate of profits tended to fall. Merchants had already accepted the fact. Smith was just the first to give a reason for it.
Almost on the same scale as Smith was economist David Ricardo. A few decades after Wealth Of Nations, Ricardo wrote this:
“The natural tendency of profits then is to fall; for in the progress of society and wealth, the additional quantity of food required is obtained by the sacrifice of more and more labour. This tendency, this gravitation as it were of profits, is happily checked at repeated intervals by the improvements in machinery, connected with the
production of necessaries, as well as by discoveries in the science of agriculture which enable us to relinquish a portion of labour before required, and therefore to lower the price of the prime necessary of the labourer”
You may have noticed that Smith and Ricardo gave different reasons why the capitalist rate of profits decline. Neither of them were 100% correct at explaining what causes this phenomenon.
So a few decades later, in 1848, another giant of economics, John Stuart Mill in his Principles of Political Economy (1848), wrote:
“The tendency of profits to fall as society advances, which has been brought to notice in the preceding chapter, was early recognised by writers on industry and commerce…“On a limited extent of land, only a limited quantity of capital can find employment at a profit. As the quantity of capital approaches this limit, profit falls; when the limit is attained, profit is annihilated; and can only be restored through an extension of the field of employment, either by the acquisition of fertile land, or by opening new markets in foreign countries…”
Mill's explanation is both easiest to understand, and the most accurate analysis until Marx's explanation roughly 20 years later.
Then, about 70 years after Marx's Das Kapital Volume III, the last true giant of economics, John Maynard Keynes wrote:
“The demand for capital is strictly limited in the sense that it would not be difficult to increase the stock of capital up to a point where its marginal efficiency had fallen to a very low figure… The return from [new means of production] would have to cover little more than their exhaustion by wastage and obsolescence together with some margin to cover risk and the exercise of skill and judgment”.
So essentially everyone that ever knew anything about capitalism all came to the same conclusion - that capitalism has a built-in flaw.
A lot of ink has been spilled in attempts to disprove Marx's explanation for the falling rate of profits, while no one has convincingly proven that the rate of profits isn't falling (although plenty have tried).
That's like attacking Newton's theory of gravity, while ignoring the fact that apples are still falling toward the Earth.
If you look at the charts above, they all show that the rate of profits declined to roughly 1990 and then stabilized.
Does that mean the problem of falling profits was solved?
No. It means 2 billion consumers, not burdened by debts, were suddenly exposed to the capitalist markets.
While it stabilized the rate of profits, it should have in theory caused them to spike higher. It didn't.
Now the markets in China, Russia, and Vietnam are mature. Which means that their rate of profits should be falling now as well.
I can't prove that the falling rate of profits is the reason for the wholesale pillaging of the globe by the ruling elite. The reason may be different, or there may be several reasons.
But if the falling rate of profits is the reason then we can expect the pillaging to get worse and worse, and it will only end with a collapse of the global economy. Or a socialist revolution.
Comments
Why should the rich pay ANY taxes?
Trump Administration Mulls a Unilateral Tax Cut for the Rich
Hell, just cut it to zero.
What Economists Still Don’t Get About the 2008 Crisis
Oops! MFA saves money
libertarians agree
LibertAryan$ don't give a shit about the truth.
Modern education is little more than toeing the line for the capitalist pigs.
Guerrilla Liberalism won't liberate the US or the world from the iron fist of capital.
The point is that Libertarians
wanted to prove that universal health care is too expensive, but still ended up showing we would save money.
They even admit Single Payer is inevitable.
Modern education is little more than toeing the line for the capitalist pigs.
Guerrilla Liberalism won't liberate the US or the world from the iron fist of capital.
Yeah, u right.
A truth of the nuclear age/climate change: we can no longer have endless war and survive on this planet. Oh sh*t.
Of All The Trump Atrocities
and there are lots of them, the worst ones to me are:
1) sellings off public lands to the oil-gas drillers and miners.
2) gutting environmental regulations that protect clean air and water.
Jesus loved the Poor. Trump loves the Stupid.
Donnie The #ShitHole Douchebag. Fake Friend to the Working Class. Real Asshole.
In Theory, Everyone Claims to Have a Political Ideology
In practice, however...
A riddle wrapped in a mystery inside an enigma
Wish I could
+less gov't
=more freedom
The stupid burns hot sometimes.
Ya got to be a Spirit, cain't be no Ghost. . .
Explain Bldg #7. . . still waiting. . .
If you’ve ever wondered whether you would have complied in 1930’s Germany,
Now you know. . .
sign at protest march
I Couldn't Find That Teabagger Image, But
... hope you like these two editorial cartoons reflecting hypocrisy by Teabaggers, a part of the electorate that not only relies on but also benefits from government programs.
A riddle wrapped in a mystery inside an enigma
The Washington State
SMDH when I first saw it.
Love all the cartoons you put up, btw. Every one accurate, and sad.
Ya got to be a Spirit, cain't be no Ghost. . .
Explain Bldg #7. . . still waiting. . .
If you’ve ever wondered whether you would have complied in 1930’s Germany,
Now you know. . .
sign at protest march
Useless eaters r us according to them.
A truth of the nuclear age/climate change: we can no longer have endless war and survive on this planet. Oh sh*t.
gjohnsit, you're so old fashoined!
Digging up those old economists. Evey one knows that when the capitalists own everything, they'll loan us the money to buy stuff. 0% down for the first 6 months! You can't beat that! And it's on sale, the more you spend the more you save!
Jamie Dimon worried about QE unwinding
Saw this article today.
I don't know how many trillions are locked up in QE, but I'm sure it is a ton. Hold on to your 401Ks. This will make for 'interesting' times ahead.
Donnie The #ShitHole Douchebag. Fake Friend to the Working Class. Real Asshole.
I don't even have retirement of any kind
Modern education is little more than toeing the line for the capitalist pigs.
Guerrilla Liberalism won't liberate the US or the world from the iron fist of capital.
WMD's coming to us at the speed of light
quad, at the speed of light, the end must be near
hat tip to The Pre Beakerite
“Cliff Edge” Brexit Threatens $34 Trillion of Derivative Contracts: UK Regulator
wolfstreet.com
from the comments we have...
"Joan of Arc
Jul 24, 2018 at 11:38 am
$34 trillion seems like a big number until you realize that the total derivative universe world wide has an estimated notional value of over $1 quadrillion. That’s $1,000,000,000,000,000.
The only other human creation that outdoes that on the planet earth is the 5 gyres swirling in the 5 oceans composed mostly of discarded plastic each the size of the State of Texas with an average depth of 300 feet."
I never knew that the term "Never Again" only pertained to
those born Jewish
"Antisemite used to be someone who didn't like Jews
now it's someone who Jews don't like"
Heard from Margaret Kimberley
A Cool Quadrillion - That is one big wad for taxpayers
to swallow. They will have to distract us with something while we are force fed that debt via bailouts. When we see the mega-rich moving their belongings to their bug-out shelters in Paraquay, we'll know that time is up.
Donnie The #ShitHole Douchebag. Fake Friend to the Working Class. Real Asshole.
Of Flying Cars and the Declining Rate of Profit...
I had to go back and read this piece by David Graber:
The disruption of creative ideas is required during the busts of the business cycle, I think, and we've lost that ability. All we're getting is promises and simulation of human beneficial tech while in reality totalitarian tools are the disruptive and creative ideas that make it to market.
Thanks for another thought provoking piece, and thanks for sending me back to that amazing Graber piece.
“Tactics without strategy is the noise before defeat.” ~ Sun Tzu
The nerd’s lament
We can’t save the world by playing by the rules, because the rules have to be changed.
- Greta Thunberg
It is no longer about profits
for the oligarchs. This is why we do not make things any more. For those at the top of the pyramid, it is all about the pie and how much of that pie they can grab before it all falls apart.
Do I hear the sound of guillotines being constructed?
“Those who make peaceful revolution impossible will make violent revolution inevitable." ~ President John F. Kennedy
The stupid thing is
They rarely ask what the pie is made of. Most of them think it’s made of money - although some are worrying about that too:
We can’t save the world by playing by the rules, because the rules have to be changed.
- Greta Thunberg
Oooops. n/t
the little things you can do are more valuable than the giant things you can't! - @thanatokephaloides. On Twitter @wink1radio. (-2.1) All about building progressive media.
yep.
Besides...
manufacturing helps the poor. And gawd forbid we do that!!
They might catch up!
the little things you can do are more valuable than the giant things you can't! - @thanatokephaloides. On Twitter @wink1radio. (-2.1) All about building progressive media.
Depopulation
We are descending into a slave state and most people are clueless about it. They know that if we ever wake up and come together, it is all over for them.
Do I hear the sound of guillotines being constructed?
“Those who make peaceful revolution impossible will make violent revolution inevitable." ~ President John F. Kennedy
Pretty hard to ignore
what's right under
our nose. Yet people ignore it, or would rather not believe their own eyes.
I feel like I'm in Nazi Germany watching the Jews get trotted off.
Am I (and we, of course) the only one seeing this??
Hey, Joe, are you seeing this?!
See what?
the little things you can do are more valuable than the giant things you can't! - @thanatokephaloides. On Twitter @wink1radio. (-2.1) All about building progressive media.
Might also explain our
"Market Expansion" via perpetual war(s).
And Britain's in the 18th and 19th centuries.
Running out of land?? No problem! Just go forth and conquer new ones.
the little things you can do are more valuable than the giant things you can't! - @thanatokephaloides. On Twitter @wink1radio. (-2.1) All about building progressive media.