A
KEY,
NEGLECTED
PASSAGE
by Marx
on the,
critical,
Profit-Rate
Formula.
Dear Reader,
In volume three of Marx’s treatise Capital:
A Critique of Political Economy, in its part three, “The Law
of the Tendency of the Rate of Profit to Fall”, in its Chapter XIII, “THE
LAW AS SUCH”, near the end of that chapter [p. 229 in the 1967 New World edition],
resides a key paragraph whose opening sentence marks a major ‘de-abstraction’ –
a major advance in the realism and ‘thought-concreteness’ – of Marx’s model of
the rate of profit return on industrial capital invested. To our knowledge, this crucial passage
has been completely neglected in the Marxian literature on Marx’s “The Law
of the Tendency of the Rate of Profit to Fall” to-date.
That opening sentence – which opens up, for us, a new,
trans-algebraic understanding of the mechanism of the “Law
of the Tendency of the Rate of Profit to Fall” – is as follows:
“The rate of profit must be calculated by measuring the mass of produced and realized surplus-value not only in relation to the consumed portion of capital, reappearing in the commodities
[M.D.: (c + v)], but also to this part plus that portion of unconsumed but applied capital which continues to operate in production [M.D.: i.e., “fixed capital” machinery, plant and equipment, not yet depreciated by “wear and tear”; f].”
Thus, Marx’s profit-rate formula, in this latest step
towards “the surface of society”, in its deepening of the ‘thought-concreteness’
and realism; in its further ‘de-abstraction’/‘de-simplification’, in the flow
of Marx’s subtle systematic-dialectical method of presentation, becomes –
s’t /
(ft + ct + vt)
– wherein, for annual production “cycle”/whorl
number t –
s’t =
net surplus-value, net of interest payments, rent payments,
etc.;
ft = fixed capital unconsumed value applied in annual production period
t;
ct = constant capital value invested in annual production period
t;
= (cd,t + cr,t + ca,t);
vt = variable capital value [wages] invested in year t;
cd,t = depreciation by “wear-and-tear” consumption of fixed capital,
during
annual production year period t;
cr,t = raw materials capital-value invested during period t;
ca,t =
auxiliary materials
capital-value invested during period t.
Note: Putting
this profit-rate formula on the annual production period “cycle”/whorl [“whorl”
because capitalist production is a non-repeating iteration; not
a circle or cycle, in detail, but a ‘qualo-quantitative’, helical spiral, with
both quantitative changes/-expansions and qualitative/ontic changes/expansions
encompassed within each annual production period] basis averts problems of
combining value-“stocks” with value-“flows”.
All value components invested/applied in each year’s “productive
capital” must count equally as portions of the capital invested to produce the
year’s commodity-capital-value output.
Marx’s profit-rate ratio is a kind of “input-output ratio” or ‘capital-value amplification factor”.
It is, as s/(c + v), a gross Output over [‘/’] Input ratio: O/I.
As s’/(c + v), it is a net output over input
ratio:
(O – I)/I.
It is based upon the causal relation
between the input and the output. That
is, the capital-value invested, now (f + c +
v), measures, in value-terms, the cause
of the net-profit effect, s’,
measuring the effect relative to its cause
– measuring the profits-producing power of that input/cause;
its ‘profits-productivity’.
This value-cause includes the
value of the fixed-capital machinery/-plant and equipment “applied”
[Marx] in, to and during the time-period, t, of the value-effect’s
production, i.e., including all of the not-yet-consumed,
not-yet-“wear-and-tear”-depreciated portion of the
value of that, applied, fixed-capital
machinery/plant and equipment, because it too, ft, is part of the cause of the s’t effect.
Implicitly, the ‘de-abstractive’, ‘de-over-simplifying’ progression from –
s’t /
(ct + vt)
to
s’t / (ft + ct + vt)
– opens the way to consider the effect of what Marx
called the ongoing “moral depreciation”
of fixed capital – technological obsolescence depreciation of fixed capital, or
‘techno-depreciation’ for short – which is caused, not by
the, “wear-and-tear”, partial consumption of that fixed capital
in each production period, but by the growth of the social forces of
production, enforced when that growth is embodied in
productivity-improved plant and equipment/-machinery, and applied, in their
production, by other, competing individual capitals.
To remain competitive/viable, the individual capitals
still employing the ‘obsoleted’ fixed capital must partially or wholly scrap that
obsoleted fixed capital – the loans by which that ‘obsoleted’ fixed capital was
originally purchased usually not yet being fully paid-off
at the time of their enforced obsolescence/-scrapping – and take out new loans
to purchase the more technologically-advanced, fixed capital to replace the scrapped
fixed capital, so as to render their individual industrial capitals once again
competent/competitive.
This means that the capital-value loss on the ‘obsoleted’
fixed capital must be subtracted from both the numerator and the denominator of
the, now further enhanced, profit-rate ratio, and the old annual sum of debt
service [interest + principal] payments on the old and the new fixed-capital loans
subtracted from the numerator of this, enhanced, net-profit-rate ratio.
That more-realistic, even-more ‘thought-concrete’ profit-rate ratio thus becomes –
(s’t - fo,t - Lf,t - DLf,t)/ (ft + ct + vt - fo,t)
– wherein –
fo,t = remaining, undepreciated value of period t obsoleted fixed capital;
Lf,t = period t Loan debt-service still due on obsoleted fixed capital;
DLf,t = period t new Loan-service due on replacement fixed capital.
But Marx himself did not fully
take this next step, leaving the explanation for the profit-rate fall, “algebraically”,
to the relative fall of v –
relative to c, albeit both
increasing in absolute terms – resulting in a relative
fall of s, without locating where the resulting relative
dearth of s registers and
manifests empirically. It manifests –
the growth of the social forces of production, the growth of ‘use-value
productivity’ manifests – in losses and
write-offs to the capital-value of productivity-growth-‘obsoleted’ fixed
capital.
For more
information regarding these
Seldonian insights, and to read and/or download, free
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¡ENJOY!
Regards,
Miguel
Detonacciones,
Voting Member, Foundation Encyclopedia Dialectica [F.E.D.];
Elected Member, F.E.D. General Council;
Participant, F.E.D. Special Council for Public Liaison;
Officer, F.E.D. Office of Public Liaison.
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