Falling rate of profit

The tendency of the rate of profit to fall was discovered by Marx as the conclusion to Das Kapital, Volume I.

Summary

Value is the socially-necessary labor (measured by time and duration) to reproduce a commodity.

When physical means of production are used in producing a commodity, their value as dead labor gets added on to the value of the living labor incorporated in the commodity.

But how does capital make a profit? Because it does not pay for the full value of the living labor, but for the value of the labor-power, i.e. the worker's capacity to do labor. To reproduce the commodity that is labor-power, all you need is to reproduce a worker: Therefore, the value of the labor-power is the cost of the worker's expected standard of living. Basically, once the worker surpasses a certain number of hours, they are creating more than they need to live, and therefore generating a profit called surplus value. The longer capital makes its workers toil, the more surplus they generate. (Though this is limited because if you work them too long, the quality of their labor-power declines: their health declines, their motivation declines, they produce less, and it's no longer worth it. This is one motivation for the bourgeois to concede the 8-hour working day.)

However, this surplus is only extracted from living labor, not dead labor. Over time, the proportion of dead labor to living labor grows, as we start using tools, machines, robots, etc. Therefore, the rate of profit falls.

(Living labor vs dead labor is also referred to as variable capital (labor-power) vs constant capital (non-human means of production).)

From the streams

From the DEBATE BLOODSPORTS stream:

> "Capital's production aims not for use values but for exchange value expanding... Production for exchange value runs into contradictions — one being the tendency for the rate of profit to fall. These tendencies reveal a contradiction between the use value necessary for society and the exchange value... Society is at a fork: production at the level of what's necessary for society as society sees fit, versus what's necessary for the valorization of capital.

> The tendency of the rate of profit to fall is a consequence of overproduction. Marx regarded that contradiction as incredibly ironic: overproduction — creating more abundance, more wealth — yet at the level of the commodity form and exchange value, it's actually the depletion of wealth... Marx regards that as the foundation of a new mode of production based on use value."

The significance

Capital's success producing abundance registers as failure in value terms — hence crisis, hence the forced choice between use-value production (socialism) and value-destruction (barbarism). It grounds We already live in socialism: socialized production has outgrown the value-form; only command by the value-form keeps abundance from being social (Capitalist Socialism).

The tendency is an outgrowth of the dialectical contradiction between use-value and value within the commodity.

See also

• Economic Calculation Problem
• Crisis of Marxism