First, intensification of production due to technological improvement that
increases the productive power of labor reduces the rate of surplus value
( or profit ?) , doesn't it ? Isn't this part of the logic of the
tendency of the rate of profit to fall due to the increase in organic
composition of capital ?
But perhaps the more complete answer is : assume the intensification you
describe. Soon all capitalists will so intensify. Then , with all the
potential proletarians over in some other country or geographical area,
some one of the capitalists is going to break out and try to get the lead
among all the intensified capitalists by combining intensification with
extensification ( geographically). The only limit on extensification is
the globe.
The New Economy is largely the reextensification of world capitalism into
geographical areas that had been foreclosed to it by socialism and to some
extent formerly non-aligned countries which had some barriers to entry to
capital based on their relationships with and the promise of the European
socialist system.
Because the bourgeoisie constantly revolutionize the instruments of
production, it seems to me your intensification scenario has in fact been
continuously part of the history of actual capitalism. In other words, we
don't have to think of what you pose as hypothetical , do we ?