falling rate of profit

jones-bhandari djones at uclink.berkeley.edu
Tue Oct 18 23:57:53 MDT 1994

I just read Stephen Cullenberg's The Falling Rate of Profit: Recasting the
Marxian Debate (London: Pluto Press, 1994).  Praised by Bertell Ollman and
MC Howard, the book raises several criticisms about orthodox analyses which
I have found persuasive (Grossmann, Mattick, Rosdolsky, Yaffe, Cogoy, Fine,
Weeks, Shaikh). Here is a very partial response--and not on behalf of these
thinkers whom I may have misunderstood.

C. takes such orthodox analyses as examples of "holistic social theory"
which he then subjects to critique.  This is how he defines such theory
(which he also calls the hegelian totality): "The whole is understood to be
a structured totality or a unity which is organized by an inner essence.
The inner essence imparts on the totality a purpose and/or logical
cohesion.  The parts of the totality have meaning only as they are
considered in and through their place or function in the totality.  The
parts of the totality are sometimes referred to as the surface
manifestations, or appearance, of the inner essence of the totality."(21)

According to C such an understanding of totality underlies both the
ontological premises and methodological procedures of orthodox analysts,
thusly recapitulated: "The capitalist mode of production is conceived to
exist prior to and independent from its consituent parts.  The relevant
part for the debate of TRFP is the capitalist enterprise, which is
variously referred to as the capitalist, capitalist firm, or simply
'capital'.  Accumulation is capital's inner law of motion and it is
capital's role to express this essence.  Accumulation is contradictory
process which is manifested in part by the law of the TRPF." [31]

Drawing as usual upon those much more advanced than I, I would like to make
two objections to this characterization of orthodoxy: the first in its own
terms, the second based on a different conception of the relationship
between parts and the whole.

Drawing upon Althusser, C. casts ontological doubt upon orthodoxy since
these theorists themselves supposedly reduce the realm of many capitals to
but the manifestation of the putative essence of capital in general--which
they then posit as accumulation through upward pressure on the organic
composition of capital. That posited, the falling profit rate can only
follow logically. Here  C brings into play many of the fundamentals  of the
postmodernist theory of knowledge: anti-essentialism and -reductionism, as
well as ontological parsimoniousness.  The reality of any essence of
Capital is called into question, and the attempt to reduce all firms to
that essence is resisted.

Julius Sensat, Jr. has argued that the hypostatization which C is calling
into question is not to be attributed to orthodox Marxist social theorists
but to the capitalist production of commodities, which itself is a process
of mystical hypostatization. To quote Sensat at length:

...when (Marx) says that individual capitalists should be viewed as capital
personified, he is not abdicating his materialism in favor of the
ontological view that the individual capitalist, rather being an actual
human being capable of existing and acting apart from his status as a
capitalist, is simply capital in a personal mode of existence.  Rather, he
is pointing to the determining role of capitalist relations of production.
His view is that embodiments of capitalist relational structures tend to
have a certain dynamic (though transitory) stability--that is, they tend to
undergo preservation and modification of structure in accordance with
certain laws of production and development.  These laws do not deny genuine
agency to individuals who are the relata of the structure.  Rather, when
laws are in effect (in virtue of appropriate boundary conditions), they
constrain the determinants of that agency and channel its effects in such a
manner that the indicated dynamic stability is exemplified.  Events
transpire as if capital, in order to realize itself, takes on the personal
form as the individual capitalist, much as the God of Christianity is said
to have assumed a human form in Christ.  Thus though the said laws require
individuals to hypostatize capital, they themselves do not hypostatize

As John Weeks explains, crisis-induced devaluations of capital transpire or
seem to be brought on by accumulation itself in order to allow it to be
reestablished. But contrary to C, there is no religion or functionalism
involved in  such an understanding of capital accumulation. This is a feat
of analysis. If accumulation implies upward pressure on the organic
composition (and this is an eminently empirical, as well as theoretical,
claim as I suggest below), capitalist society must have some mechanism by
which to check that upward pressure as it has in fact  reproduced itself.
It is the task of analysis to determine the means by which that
reproduction is achieved in practice. (See Grossmann, 1929, pp131-134)Or as
Mario Cogoy has put it: "the central task of modern Marxist political
economy is to analyze how, up to a point, the social system of production
provisionally organizes itself with a view to maintaining certain variables
at the required levels in conditions of rapid technological development
with strong capital intensity."

 But C may not take Sensat's passage  as an example of the hegelian
totality, as capitals are not  seen here not as the expressive causality
(or the Spivakian subject-effect) of any essentialism or Spirit:
accumulation is not The Spirit (or  Moses and the prophets) which takes the
personal form of many and every capitalist. Sensat understands accumulation
in the context of  determinants and channels of "appropriate boundary
conditions", i.e., capitalist competition.  So as even the early Marx did
not understand alienation in terms of a Feurbachian philosophical
anthropology, accumulation is also understood as the necessary result of a
specific ensemble of social relations.

But C. points out that the orthodox theorists do not explain accumulation
as the result of competition but rather competition as the result of
accumulation. And Cullenberg quotes Marx from the Grundrisse: "Competition
can permanently depress the rate of profit, if...and insofar as a general
and permanent fall of the rate of profit, having the force of a law is
conceivable prior to competition and regardless of it.  To try to explain
the inner laws of capital simply as the results of competition means to
concede that one does not understand them." (751-2)But then C simply
dismisses this passage because it comes from Marx's most Hegelian mature

So what obviously needs elaboration here is the Marxian concept of
competition.  But what needs to be brought into play first is the simple
concept of extra surplus value, for that can be most effectively
appropriated through economies of scale and technical change--that these
methods are superior to, say, simply a supervisor-enforced increase in the
intensity of exploitation  is a very well-established empirical claim, not
a Truth, a priorism or essence. Because of competition (and because firms
better withstand uncertainity with an excess of surplus value), firms are
indeed forced to reach for  extra surplus value.   But then as social
values are then competed down to the values of the innovating capitalists
(another empirical claim), the reduced rate of profit will limit the
magnitude of the mass of surplus value, even as greater productivity may
yield a sufficiently greater mass of use values that surplus value can
still grow absolutely.

 As Mattick Jr has explained: "Marx's concept of organic composition refers
not so much to a different numerical ratio as to a property of the value
composition: namely, its relation to changes in the the technical
composition. To speak of the organic composition as having a tendency to
rise, therefore, is really to say that in each period of capitalist
prosperity within the trade cycle, and in the history of capitalism as a
whole, the increasing productivity of labor resulting from capitalists'
ceaseless attempts to extract surpluys value from labor implies upward
pressure on the value composition of capital."

 Let us leave aside here Okishio's challenge that competition, insofar as
it "uncovers"  the declining unit values of commodities that are both the
outputs of and inputs to  basic industries, will actually enhance the
general rate of profit.  The effect on the general rate of profit by the
accumulation of many capitals is not the question here.

  As I understand them, orthodox theorists are  not explaining the falling
rate of profit via competition for two reasons: first, competition merely
enforces the law of value upon producers--it is increased productivity
resulting from a higher ratio of dead to living labor which has brought
down the  *rate* of profit  (similarly for the Okishians the increased rate
of profit would find its efficient cause in greater productivity, while
competition would only bring this unintended effect out); secondly,
competition only tendentially equalizes the  rate of profit but competition
in no way determines what the depressed (or enhanced) rate of profit
averages out to be (for this task we need 1. an understanding of the
relationship between the parts and whole which C does not develop but see
Fred Moseley in Marx's Method in Capital and 2. an explication of the
concept of tendency, especially tendential equalization--see Guglielmo

 Moreover, it is the depression of the average rate of profit that then
motivates even more frantic attempts to accumulate via rationalization
within the firm, foreward planning to avoid bottlenecks in the supply of
raw materials or the establishment of new branches with a lower organic
composition of capital, which due to their labor intensity create the
potential for more value to be produced, thereby unintentionally raising
rate of profit for capital as a whole--even if, contra the neo-Ricardians,
these new branches are not the sort of basic industries which can directly
counteract general upward pressure on the value composition of capital
(e.g., as would cheap foodstuffs from  neo-colonies). Of course the flip
side of this is that increases in the organic composition of luxury
industries will depress the average rate of profit.(This has been explained
by Carchedi in his last book).

The Revival of Fundamentalism (Accumulate! Accumulate! That is  Moses and
the prophets)  can only be understood in the context of a crisis of capital
as a whole; it cannot be attributed for example to the Weberian Puritan
callings or the Schumpeterian biological instincts  of  entrepreneurs. The
crisis of capital as a whole calls for nothing less than a resubmission to
idols--to Schumpeter's Cult of the Entreprenuer, Gilder's Spirit of
Enterprise,the economists' new fetishes of Dynamics and Technical Change,
even the Marxist hypostatization of  Technological Determinism as the
omnipotent force of History.  These are but different names for the
hypostatization which capitalist production itself requires.

They are the  Gods, seemingly standing outside  of space and time, of which
entire nations, much less simply all capitals, must be an expression.
*Capitalist enterprises can in fact only appear, i.e., survive, as  surface
manifestations or appearances of a hypostatization, viz., the inner essence
of capitalism.* One is either a fundamentalist Christian, or one is damned.

As Marx put it in Vol III

"If the rate of profit falls, there follows on the one hand, an exertion of
capital in order that the individual capitalists, through improved methods,
etc., may depress the value of their individual commodity below the social
average and thereby realise an extra profit at the prevailing market price.
On the other other hand, there appears swindling and a general promotion of
swindling by recourse to frenzied ventures with new methods of
production,new investments of capital, new adventures, all for the sake of
securing a shred of extra profit which is independent of the general
average and rises above it."

So 1. the essence of capital--accumulation via technical change in the form
of either new capital-intensive methods and new products--is that of which
all capitals must in fact endeavor, on pains of extinction, to be a causal
expression, especially in times of systemic crises of profitability. 2.
this essence is not  posited but rather is both the cause and effect of the
competitive search for extra surplus value, which (the search) in itself
cannot  explain the falling profit rate. Indeed that search may have the
unintended consquence of so increasing relative surplus value that overall
surplus value may rise sufficiently for a faster rate of accumulation, but
this is another argument and one to which I will return in a later post
when I attempt to defend a dialectical social theory both in terms of a
different understanding  of  (a)relationship between parts and the whole
and of (b)the interconnection of all parts. I disagree with C on his
understanding of both these aspects of totality.

Some citations

Julius Sensat, 1988. "Methodological Individualism and Marxism." Economics
and Philosophy 4

G. Carchedi. 1991. Frontiers of Political Economy

Paul Mattick, Jr. 1987. Value Accumulation and Crisis. International
Journal of Political Economy, vol 17, no 2 (see his introductory comments
to Cogoy's essays)

John Weeks, 1981. Capital and Exploitation

for a different understanding of what Stephen C is calling the hegelian
totality, see

Rosdolosky's chapter on capital in general in The Making of Marx's Capital
Paul Mattick, Jr. "Some Aspects of the Value-Price Problem", International
Journal of Political Economy, vol 21, no 4. Winter 1991-1992
Fred Moseley, ed. 1992. Marx's Method (especially the first part of Fred's

for an excellent critique of Althusser's theory of ideology (which Stephen
makes use of), see Christopher L.  Pines, 1993. Ideology and False
Consciousness: Marx and his Historical Progenitors


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