The Declining Rate Of Profits

The Declining Rate Of Profits

Although surplus value is inherent in capitalism and increases as a portion of the total product of industry, and although the reserve army of workers and its effects on wages under capitalism increase still further the misery of the workers, nevertheless the rate of profits tends to decline as capitalist production develops and capital accumulates.

Marx's line of reasoning on this point is concise. As capital accumulates in a capitalist society, proportionately more of the total will consist of machinery and tools, and proportionately less of it will go into the payment of current wages. Only the latter can yield surplus value, however, since only labor creates value. Thus, since a smaller portion of the total outlay of capital goes into uses in which surplus value is created, the surplus value realized will tend to be smaller and smaller percentage of the total capital as that total increases.

Resistance to the Decline

The only practicable way whereby the capitalist employer can try to resist this tendency is to increase the degree of his explotation of labor so that a given expenditure of variable capital yields in itself a sufficiently higher percentage of surplus value to cause the rate of profit on the total capital to remain constant or to increase. The theory of the declining rate of profit is merely another slant on the contradictions and antogonisms Marx holds to be inherent in the capitalist system. The tendency for the misery of the workers to increase and the tendency for the rate of profits to fall bear an inverse relationship to each other. If workers can successfully resist the attempts of capitalist employers to increase the degree of exploitation, the rate of profits must decline, if they cannot, the rate of profits may remain constant or even decrease.