The Fall in the Value of Labor-power as a Contributor to the Tendency of the Rate of Profit to Decline

[Louis Proyect <lnp3@xxxxxxxxx>]

This is an introduction to an article by John A. Imani that can be read
in its entirety at http://www.marxmail.org/Imani.htm

The Fall in the Value of Labor-power as a Contributor to the Tendency of
the Rate of Profit to Decline

1:  THE RATE OF PROFIT AND THE VALUE OF LABOR-POWER

The Tendency of the Rate of Profit to Decline

The tendency of the system-wide average or general rate of profit (P')
to decline has been attributed (esp. by Marx) to, on the one hand, the
growth of the organic composition (that is the relative growth of
constant (c) capital (materials, machinery, buildings; or, 'dead' labor;
or, value-transferring) to its variable (v) capital (workers; 'living'
labor; or, value-adding) complement.  This, the organic composition (OC)
of capital, is often written as (c + v).

On the other hand, the competition between capitals, backed by trade and
monetary policies of national states, has also been cited (esp. by
Robert Brenner[i]) as being the invisible hand driving down rates of
return.  Brenner's position has been summed as ".capitalism, innovation
and competition enjoy a symbiotic relationship. Competition not only
explains the global economic crisis of 1998, it also serves as a sine
qua non for capitalism origins."[ii]  These first two, Marx' and
Brenner's, are essentially complementary as it is the drive for the
larger market-share resulting from prices lower than one's competitors
that is the motive force for the development, acquisition and employment
of machinery capable of raising the productivity (output per unit per
unit of time) of the labor-power employed and thus lowering output
costs, widening the spread between such costs and the existing
market-prices and thereby raising one's rate of profit, if only
temporarily as the enjoyed technological advantage dissipates as the
innovation spreads and becomes the new standard returning the prime
innovator's margin to the sector average.

It should also be mentioned, as regards the former purported cause, that
the relative growth of the constant capital ratio to variable is further
augmented by, and somewhat obscured by, the tendency of the variable
capital to become diluted by the growth of the segment of the work-force
that is engaged in non-value-adding tasks (e.g. security guards,
accounting, advertising, etc).  This enlargement of the potion of the
variable capital 'v' allocated towards non-productive labor, or what
might be called '~v', tilts the scales of the organic composition even
more heavily in favor of the constant.  Effectively the composition of
such capitals may be expressed as (c + (~v)) + v wherein the term (c +
(~v)) denotes the value-transferring portion while v stands alone as the
value-adding portion.   This observation (esp. by Fred Mosely[iii]) is
not, however, the subject at hand.  Neither is Brenner's competition
save in its role as complement to that which is, namely the tendency of
the enlargement of the ratio of the constant capital to the variable and
a little discussed associated consequence arriving there-from.

Neither, for that matter, away from the universe of Marxian economists,
is J M Keynes' assertion that it is savings that is the culprit.
Keynes' argument, if only for the sake of an argument not to be debated
here, along this vein, might be interpreted as follows:  as a nation's
economy matures (i.e. grows richer) savings pour at a faster and faster
rate into its money-marketplace seeking to be turned into means and
materials of production, competing amongst themselves for the 'right' to
align themselves with labor.[iv]  These lower the rate of profit as the
rate of increase of investment outstrips the rate of increase of the
labor force lowering what Keynes termed the "marginal efficiency of
capital."[v]  Keynes' argument, taking place in the sphere of the
circulation of money-capital, as Brenner's foray into the circuit of
commodity-capital, seems again an analogous parallel of Marx' analysis
of productive-capital in the sphere of production.

However, as with Brenner and Moseley, this is again but a side-track, a
'feeder line', a trunk rail loading its cargo onto the runaway train
that is a capitalism choking on its own regurgitations of bellows of
smoke and sliding backwards down hill in spite of the earthshaking roar
of its mighty engines.  There is another problem contributing to the
double-double toils and troubles of the system's locomotive and that is
the fuel its machinations gobble up in this vain quest to rise up an
ever steepening mountain of the rate of profit.  That fuel, of course,
is human labor; and, the problem with that fuel is the tendency of its
value to decline.

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[i]Although Brenner's emphasis of competition as fundamental seems
countered by this observation from Marx:  ".a fall in the rate of profit
connected with accumulation necessarily calls forth a competitive
struggle. Compensation of a fall in the rate of profit by a rise in the
mass of profit applies only to the total social capital and to the big,
firmly placed capitalists. The new additional capital operating
independently does not enjoy any such compensating conditions. It must
still win them, and so it is that a fall in the rate of profit calls
forth a competitive struggle among capitalists, not vice versa."
Capital.   Vol 3.  Chap XV.  P256.  (All page number references are to
the International Publishers' 1967 paperback editions.  Subsequent
references to these are given only by volume and chapter numbers.)

http://www.marxists.org/archive/marx/works/1894-c3/ch15.htm

[ii] Louis Proyect.  "Testing the Brenner Thesis against Colonial Spain
and Modern South Africa."
http://www.columbia.edu/~lnp3/mydocs/origins/testing_the_brenner_thesis.htm.


Or, "For Brenner the transition from post-war boom to the long downturn
that began in the early 1970s is the result of the decline of the
aggregate rate of profit in the United States in the late 1960s.  He
sees the decline in profitability as the result of the intensified
intercapitalist competition between the U.S., Germany and Japan that led
to overcapacity and overproduction, particularly in the manufacturing
sector."   Mary C. Malloy and Charlie Post.  "A Reply to Robert
Brenner." http://www.solidarity-us.org/node/888/printBy admin

Created 02/28/1999 - 8:00pm

[iii] Fred Moseley.  "The Decline in the Rate of Profit in the Postwar
US Economy:  A Comment on Brenner".  www.mtholyoke.edu/~fmoseley/HM.html

[iv] Consider this from it's mirror-perspective:  "In America, the euro
area and Japan, total wages have fallen to their lowest share of
national income in decades, whereas the share of profits has surged.
This is exactly what would have been expected, given that the
integration into the world economy of the emerging economies has sharply
increased the ratio of global labour to capital."  The Economist.  "On
the Hiking Trail."  Sept 2, 2006 P66.
http://economist.com/finance/PrinterFriendly.cfm?story_id=7854815

Or, this:  "the IMF estimates that global labour supply has in effect
risen fourfold since 1980 as China, India and once-communist countries
have opened up.With this surge of competition, you might expect labour's
share of the pie to shrink."   The Economist.  "Smaller shares, bigger
slices."  April 7th, 2007.  P76.

http://economist.com/finance/PrinterFriendly.cfm?story_id=8959966

[v] "If there is increased investment in any given type of capital
during any period of time, the marginal efficiency of that type of
capital will diminish as the investment in it is increased." Keynes.
"The General Theory of Employment, Interest and Money".  Prometheus
Books.  Amherst, NY.  1997.  P.136.