Letter: The Rate of Profit (1977)

Letter to the Editors from the December 1977 issue of the Socialist Standard

The Rate of Profit

Did Marx hold that the rate of exploitation of workers increased inevitably? This appears to contradict his theory of the falling rate of profit, though I am aware he adduced counteracting tendencies that could increase the rate of profit?

Robin Cox

Haslemere

Reply:

The outstanding feature of what Marx wrote on this subject is his insistence that he was dealing only with tendencies, some working in one direction and some in the opposite direction. So at the beginning of Chapter XIV in Capital Vol 3 he wrote: “For this reason we have referred to the fall of the average rate of profit as a tendency to fall.”

The chief factor leading to a fall in the rate of profit arises from the tendency of the composition of capital to change in the direction that of every £1,000,000 capital invested a larger part takes the form of constant capital and a smaller part variable capital (wages). He illustrated this (see Chapter XIII) by showing how, with the same rate of exploitation and the same amount of surplus-value, the rate of profit on a capital of low composition would be 50 per cent. and on a capital of higher composition 20 per cent.

In Chapter XIV he listed some counter-acting tendencies, the first of which was increasing the intensity of exploitation, i.e. extracting more surplus-value from the workers.

But the capitalist cannot increase the intensity of exploitation simply because he wants to. He has to take account of the degree of resistance the workers can put up. Marx dealt with this in Chapter XIV of Value, Price and Profit. He showed that the actual rate of profit “is only settled by the continuous struggle between capitalist and labourer, the capitalist constantly tending to reduce wages to their physical minimum and to extend the working day to its physical maximum, while the working man constantly presses in the opposite direction. The matter resolves itself into a question of the respective powers of the combatants.”

That this is not just an academic question is shown by Engels in his 1892 Preface to The Condition of the Working Class in 1844, where he points out that in the fifty years since 1848 the factory workers “are undoubtedly better off” and that the condition of the workers organized in trade unions “has remarkably improved since 1848".

On the other hand a glance at Chapter XIV of Capital Vol. 3 will show that some of the factors listed by Marx as tending to raise the rate of profit are still operating.

It should also be borne in mind that in dealing with the rate of profit Marx was concerned with the workers in the productive sphere where alone value is created. This should not be confused with the different question of the proportion of annual national income received by the whole working class. In Chapter II of Value, Price and Profit Marx accepted the possibility that at that time 86 per cent. of the population received only 33 per cent, of the national income. Even if that figure exaggerated the actual degree of inequality, it is undoubtedly true that 86 per cent. of the population in this country now receive a larger proportion of national income than when Marx wrote.

Editors.