It falls over time, that’s bad for porkies
In the quest to make as much money as possible, capitalists actually create the conditions that produce less profit. They create conditions that pay workers less over time which means workers can’t afford to buy the goods they produce which means a smaller market for the piggies. They can get around this by expanding into new markets (international business) but that only works for so long. Eventually they can’t keep growing and in order for investors to keep making money they have to start cutting costs internally which ultimately hurts the business/economy as a whole.
That’s actually a separate issue, crises of overproduction are unique to capitalism because of “anarchistic” production.
Decreasing rate of profit is what happens with “innovation”. As you develop the means of production, you increase the productivity of a working hour at the expense of a larger capital outlay in means of production. This creates the conditions for monopoly as the only capitals able to front the money for a profitable enterprise are existing large ones.
Small firms are pushed out because the profitability of a working hour is set by the output of the large manufacturers, so as those small holders fail, their workforces go to work for the large capital for less pay even though their productive output is higher because they’re paying for the cost of the initial capital outlay with their surplus value.
Capitalist A is in competition in the same market with Capitalist B. Capitalist B takes advantage of (new technology, child labor, wage theft, offshoring, slave labor, etc) to extract more surplus value from their workers. This allows them to undercut Capitalist A’s prices. Capitalist A is forced to lower their prices to stay competitive and seek out their own cost cutting measures. This cycle repeats ad nauseum , requiring the Capitalists to seek out more markets to expand their sales numbers to make up for the lower profits on each individual item so they can still show overall profits.
I think.
As I understand it the TRPF is more about fixed vs variable capital (technology vs labour) and the other factors you mentioned (child labour etc) are ways of mitigating the TRPF by increasing the rate of exploitation
For sure. We’re talking about dialectics over the totality of the capitalist sphere of production, all these things are interrelated.
Ooft, how can I put this succinctly…
Essentially it boils down to the ever increasing proportion of fixed capital versus variable capital. Capitalist competition forces producers to invest more and more capital in technology to produce things more quickly, more cheaply, etc. Basically think of an autoplant that originally had a bunch of guys on an assembly line but now has a bunch of robots doing it.
Since human labour power is the only method of creating new value, and value is (obviously) the source of surplus value, this causes (over the entire capitalist economy over the long term, individual capitalists and businesses can still increase profits, e.g. by increasing the rate of exploitation) the TRPF.
Let’s say capitalist A inputs $1000 of raw materials and pays his workers $1000, during which time they create products he can sell for $10,000. A nice 400% profit!
Now capitalist B has a tonne of robots and automation to make his products - let’s say $10,000 worth of robots. He still pays his workers $1000 and inputs $1000 of raw material. If his robots means his workers are four times as efficient as capitalist A’s workers, they can make 4 times as many products in the same time.
This is where the labour theory of value kicks in. Fixed capital transfers its value to the product but DOES NOT CREATE NEW VALUE. Over the life of those robots, they will slowly but surely drip feed their $10,000 of value into the products they make, the same way a lump of raw iron transfers its value into a finished product. But it is only the human labour power that creates new value in the finished product.
All this means that although capitalist B is making 4 times as many products in the same timeframe, each product has 4 times less socially necessary labour time (aka value) imbued into it. Since value is (rather obviously) the source of surplus value, the capitalists have a problem.
While he may be able to make out like a bandit initially, selling his product (which has a quarter of the value of capitalist A’s product) for the same price or slightly cheaper than capitalist A, even if he sells them for the same price - $40,000 worth of products - his input was $12,000 (labour plus robots plus raw materials). Here we can see his RATE OF PROFIT HAS FALLEN.
As the general scramble of capitalist production continues, competing capitalists will ALSO invest in technology to increase their efficiency of production, or be defeated in the constant anarchic war between competing capitalists. This means eventually the surviving capitalists will ALL be using $10,000 worth of robots, and everyone’s rate of profit will have fallen, due to the larger ratio of fixed capital to variable capital.
And then… capitalist C figures out there’s a new robot which can make things 8 times faster, so he starts using $20,000 worth of robots, while still paying for $1,000 of labour and $1,000 of raw materials…
Hopefully that sort of explains it. I’m sure there are some videos on YouTube or something that can do a better job than me though!
The rate of profits stops falling when competition has been driven out and you have oligopolies/monopolies and they make super-profits. This is shit and is one of the key times those assets should be appropriated and prices brought down to “the socially necessary amount of labour”, even in a liberal democracy.
A common general example is manufacturing consumer goods, but because of competition, the wages of the workers making them decrease (for short term profit by the bosses)
However, because the population has less and less discretionary income, they can’t afford the goods they produce! Which in turn creates surplus, depresses the market price and makes the goods ultimately unprofitable to sell.
