Marx and the tendency of the rate of profit to fall

A critical day

by Michael Roberts

I’ve just got back from presenting a paper jointly with G Carchedi at a seminar on “Imperialism and war” organised by the Critique journal.  Critique is a long-standing theoretical journal of Marxism (http://www.critiquejournal.net/) and it recently published a joint paper by Carchedi and I called “Marx’s law: answering old and new misconceptions” (http://www.tandfonline.com/doi/full/10.1080/03017605.2013.876811#.U0k3frQXJGU). 

Much of the arguments in that paper concerned answering the critique of Marx’s law of the tendency of the rate of profit to fall recently renewed by Michael Heinrich, a prominent Marxist scholar, in the US journal, Monthly Review.  You can get the gist of that debate here (http://gesd.free.fr/mrhtprof.pdf).

The Critique editorial board kindly invited us to speak on how Marx’s law related to the cause of capitalist crisis at their seminar in London, among other speakers.  The first speaker was Bob Brenner, Distinguished Professor of of History at the University of California Los Angeles (UCLA) and director of the Center for Social Theory and Comparative History at UCLA, editor of the socialist journal Against the Current, and editorial committee member of New Left Review.  Brenner authored the highly influential book, The Economics of Global Turbulence in 2006, one of the first to argue that the source of crises in capitalism could be found in falling profitability and moreover providing empirical evidence of this.  Also, see his article of 2009, What is good for Goldman Sachs is good for America (http://escholarship.org/uc/item/0sg0782h).

Brenner delivered a paper similar to the article above that provided compelling empirical evidence that the root cause of the Great Recession lay in the secular decline of the US rate of profit and the attempt to overcome that with a series of ‘asset price’ credit-fuelled bubbles in stock markets (1990s) and residential property (2000s).

Carchedi and I presented two separate papers in our session.  Carchedi’s was called “The law of the tendential fall in the rate of profit as a theory of crises: twelve reasons to stick to it”.  In it, Carchedi carefully examines the 12 major arguments against Marx’s law of profitability and provides clear refutations of each, using both theoretical points and empirical evidence.  In summary, Carchedi concludes: “it is better to stick to the original Law. It works and it works well.”

My paper was called: “Marx’s law of the tendency of the rate of profit to fall and the theory of crises: does it fit the facts?”.  In it, I set out to show that there is plenty of empirical evidence to support Marx’s view that the rate of profit in a capitalist economy will tend to fall as the accumulation of capital takes place because the organic composition of capital will rise, as a rule.  The rate of profit will only rise if counteracting factors, like a faster rising rate of surplus value, come into play, to delay or curb the law for a while.  Moreover, the movement in the rate and mass of profit is a good leading indicator of whether a crisis or slump in production is about to happen.  I used empirical evidence from the US and UK economies to show this, as well as evidence provided by other scholars.

Although Critique has published our paper on the law and invited us to speak on it in the healthy spirit of debate, the editor of Critique, Hillel Ticktin, disagreed with both Bob Brenner and Carchedi and I on the relevance of Marx’s law of profitability to crises.  Ticktin’s arguments boiled down to the view of Michael Heinrich and the Monthly Review: namely Marx’s law was not a law in the proper sense, indeed there was no such thing as a ‘law of a tendency’, it was either one or the other, but not both.  

Anyway, the law of the tendency really included the counter-tendencies and thus made the law ‘indeterminate’ and thus impossible to use in a coherent way.  Moreover, it cannot be empirically verified, at least in statistical terms, because the data from official sources are inadequate and/or not collected to provide clear information on Marxist categories.  So what Brenner, Carchedi and I were doing was a waste of time.  Crises under capitalism clearly reoccur with regularity, but this is more to do with the momentum of the class struggle than with any movement in the rate of profit, which after all did not appear much on any analysis of crises by the great Marxist leaders after Marx.

Readers of this blog will know that all these criticisms of Marx’s law and its relevance to crises under capitalism are not new.  And they have been taken up in a myriad of posts here and in papers by others elsewhere.  Suffice it to say, that we ‘fundamentalists’ and ‘mono-causalists’ that support Marx’s law of profitability as the best explanation of crises under capitalism and specifically, the Great Recession, will continue to plough on in the belief that what we are doing does help to explain the contradiction in capitalist economies better than alternatives.

Critique plans to publish all the papers on its website, but you can find Carchedi’s paper here Carchedi London 11-12 april 2014 and mine Presentation to Critique conference 11 April 2014 here.