Falling Rate of Profit

[S Chatterjee <schatterjee2001@xxxxxxxxx>]

I do not know if this reply from Rakesh to my earlier post has already
appeared on the list but it may be of some interest. There are tumultuous
occurrances happening in the world today and it is proper that the main
focus of the list at this time should be Afghanistan/Central Asia. So my
apologies to any one if this subject seems to be a mere distraction from
the main events. But analysis of the trajectory of the CMP has to
continue.

--- Rakesh Bhandari <rakeshb@xxxxxxxxxxxx> wrote:
>

> Fred argues that in spite of these tendencies, profit rate did recover
> though only partially.  I don't see why a failure to make a *full* >
>recovery
> indicates the weakness of American capitalism. A lower rate of profit on
> an even more  enomrous mass of capital implies an ever larger mass of
>surplus value; that enlarged mass of surplus value may well suffice for
>the needs of further accumulation and rising capitalist consumption. Fred
>does not indicate why the profit rate will not fall at such a rate that
>capitalism will reach its limit only some time before the sun burns out.

>

What you seem to be implying that from the point of view of the capitalist
class as a whole,  ROP*(C + V) = S (mass of profits) can equal a constant.
So even if ROP declines, capital (C + V), especially C, will be increased
so that the total mass of profits do not decline. This is possible. But
with increasing C (and increasing mechanization and automation), less and
less living labor (V) will be employed. But it is living labor V which
actually generates S, and a point will come when S (total mass of profits)
will decline absolutely also. For example, in a completely mechanised and
automated factory employing no living labor (V), S = 0. At this point, the
capital accumulation process will come to an halt. Please note, this is
from point of view of system as a whole and it is a long-term tendency. If
capital cannot find living labour to exploit, it cannot accumulate. In
reality, the first warning signs will be in individual sectors (with low
individual ROPs) from which it will spread like a conflagration to other
sectors and develop into a general crisis. But all of this deals with the
actions of conscious human beings and numerous interlocking factors and so
we should not use formulas mechanically. There is in-built tendency for
crisis but when the final one will happen, we cannot say with certainty.

> Like Freeman and Kliman, Fred does not show that the US rate of profit
> has  fallen to the point where the *mass of surplus value* is not >
>adequate for the stability of US capitalism.

You are perhaps correct in this.
>
> More importantly in your last post you suggest that the FRP will be
> compounded by energy crises.
>
> Are you suggesting a quasi neo Ricardian theory of rising raw material
> costs  due to resort ever less productive oil fields? Didn't Marx reject
> just such an escape to organic chemistry to explain the contradictions
>of capitalism?

Energy/environmental crises will pose a barrier to capital accumulation.
If the basic raw material (petroleum) is in short supply, how can
capitalist production occur? But capital is already preparing for the
coming oil shortage. The next big frontier is energy and chemicals from
celluose (trees). Shell Oil has bought millions of acres of forests in
Latin America. By breaking the cellulose polymer chain into individual
glucose units by chemical treatment, one can prepare levulinic acid which
is being presently touted as the basic bulding block from which, by
synthesis, fuels and new chemicals can be manufactured. Research is going
on and some pilot plant work has already been done. Biorefinery will
replace the petroleum refinery. The key question is one of time. Whether
they will have enough time (before oil declines) to begin this new
production on the massive scale required to satisfy the demand which oil
currently serves.

But you are right to emphasize that the key contradiction in capitalism is
to be sought in production. Capital/labor is the main contradiction.

> It would seem to me that since Fred rejects the
> Ernst-Freeman-Carchedi-Kliman theory of temporal value he has to resort
>such common bourgeois ideas as Ricardian diminishing returns in regards
>to oil fields or the capital stock to put the FRP on firm foundation.
>Even if this foundation proves to be a solid one, it should be admitted
>that it is antithetical to Marx's theory.

In the papers of Fred Moseley that I have read, I do not recall him
suggesting any Ricardian diminishing law of returns. About the TSS value
concept of Freeman et al., I have changed my mind. I now think that it is
a scientifically unsound and faulty concept. Some time ago, I had painted
a positive picture of TSS on this list without much reflection and
analysis, and Xxxx Xxxxxx was correct to point out my errors. I will
provide the list with a more detailed criticism of TSS later; but for now:


(1) TSS posits a temporal concept of value even for an unchanging economy
(i.e., simple reproduction). It is physically not possible. For an
unchanging economy, in their value calculation, they are bascially doing a
fixed-point iteration instead of a simultaneous calculation. In their
iterations, the 'temporal value' gradually converges to the 'simultaneous'
value. They invoke the authority of Marx on this (i.e, non-equilibrium
Marx) but they do not explain what they precisely mean by equilibrium and
non-equilibrium. Non-equilibrium is not absolute, it exists in relation to
equilibrium. Any non-equilibrium calculation must make reference to an
equilibrium situation. This is immediately evident to anyone who has done
any dynamical (non-equilibrium) calculations. Freeman et al. seem to
consider non-equilibrium as absolute (there is no reference point),
everything is changing for them. But if everything changes, then how can
one make any analysis at all? Non-equilibrium has to be a departure from
some kind of equilibrium.

(2) TSS school basically says that prices and values are same. They mix up
appearance with essence similar to bourgeois school. See the recent paper
by Ramos titled "Value and Price of Production: New Evidence of Marx's
Transformation Procedure". In this paper, Ramos tries to justify TSS
concept of value by citing Marx from the newly released MEGA Capital
manuscripts by quoting a passage (in German) omitted by Engels in Capital
III. Baically, according to Ramos, Marx's view is that

   New value of commodity = price of production + surplus value

Please note above: value and price appears in same equation. This is
another great error in TSS, they mix up dependent and independent
variables. Value is the essence, price of production (POP) is its outer
reflection, but not according to TSS. Note that POP only appears in Vol
III after Marx has exhaustively analyzed value in the first two volumes. I
have read the cited passages from Marx several times in Ramos' paper but
cannot find the twisted/convoluted meaning which Ramos is giving them. One
of the passages from Marx which Ramos cites as 'proof' is in German (he
does not provide a English translation) but actually this passage is also
there in Capital III in the transformation problem chapter.

Anwar Shaikh is correct; the logical procedure (which reflects reality)
should be

   Value ----> Price of Production ------> Market Price

POP is center of gravity of market price. Value is the inner essence that
determines the POP. Marx only provided the first iteration of the
transformation of values to POPs which was subsequently completed by later
workers. One has to penetrate from market price (appearance) to value
(essence) in order to really understand what is going on.

TSS has a great potential to confuse, especially the newcomer and unwary.
That is the tragedy. Regards.

Sid










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