Rising rate of profit

Posted: 11 July 2014 in Uncategorized
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rate of profit

Some Marxists put a great deal of stock in inexorable laws of capitalism, such as the tendency of the rate of profit to fall. I don’t. I don’t look at capitalism with the presumption of any kind of laws of motion nor do I look for them as the outcome of an analysis. For me, it’s all conjunctural.

And, in the current conjuncture, the tendency is for the rate of profit to rise. Not inexorably (there are lots of conjunctural causes). And not evenly (precisely because of changing configurations of those conjunctural causes). But, if you look at the data (such as the rate of profit calculated in the graph above*), we can see the capitalist rate of profit—an index of capitalist success if there ever was one—rising. It’s been rising on average (through a series of upturns and downturns) since 1990 or so, and it’s been rising (even more dramatically) since the onset of the Great Recession.

That, in my mind, is what matters. Right now, what we’re witnessing—precisely because of the measures taken to solve the crisis the capitalists themselves made (starting with the bailout of Wall Street and then continuing through various rounds of quantitative easing, high unemployment, the stagnation of wages, and so on)—is a tendency of the rate of profit to rise.

 

*I understand that “my” rate of profit (based on total corporate profits, flows of investment, and labor compensation) doesn’t exactly correspond to what others calculate as the Marxian rate of profit (which generally includes the stock of capital). I can defend my proxy (for r=s/[c+v]) theoretically. It also tracks other estimates (such as those by Fred Moseley) pretty well.

Comments
  1. Bruce says:

    This is an interesting measure, but, as we have discussed offline, I would prefer not to think of this as any sort of measure of a “rate” of profit.” It has all the basic characteristics of the income share ratio (profits divided by wages), to which it is algebraically very close. As such, it of course tells us a good deal about relative profitability, both the cyclical sense (the “sawtooth” pattern between recessions noted by Boddy & Crotty way back when) and the secular sense — the rise in the profit share and the parallel fall in the wage share since the late 1970s are clearly visible. But even aside from questions of productive vs unproductive activities, the absence of any measure of capital as a stock (and thus the absence of all the various revaluations that are involved in capital gains and losses) make this measure a less-than-satisfactory guide to profit as a *rate* (as distinct from profit as a *share*).

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