Profitability and the Roots of the Global Crisis: Marx’s ‘Law of the Tendency of the Rate of Profit to Fall’ and the US Economy, 1950–2007

in Historical Materialism
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The relevance of Marx’s theory of value and his ‘law of the tendency of the rate of profit to fall’ to the analysis of the financial crisis of 2007–8 and the ensuing global slump is affirmed. The hypertrophic growth of unproductive constant capital, including the wages of ‘socially necessary’ unproductive labour and tax revenues, is identified as an important manifestation of an historical-structural crisis of capitalism, alongside the increasing weight of fictitious capital and the proliferation of fictitious profits in the lead-up to the financial crisis. These phenomena have obscured the deepest roots of the global slump in the long-term profitability problems of productive capital – that is, in a crisis of surplus-value production. With these considerations taken into account, a better empirical assessment of trends in the composition of capital becomes possible, and with it a more accurate understanding of the impact of the ongoing displacement of living labour from production on the average rate of profit and the future of US and global capitalism.

Profitability and the Roots of the Global Crisis: Marx’s ‘Law of the Tendency of the Rate of Profit to Fall’ and the US Economy, 1950–2007

in Historical Materialism



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  • 2.

    See among others Smith 2010Carchedi 2011 Freeman 2009 Shaikh 2010 and Harman 2009a.

  • 5.

    Marx 1973p. 748.

  • 10.

    Marx 1859; Smith 2010.

  • 11.

    Reuten and Williams 1989p. 118 Addenda a.

  • 13.

    Marx 1981Chapter 14.

  • 14.

    Marx 1981p. 343.

  • 16.

    Cf. Albo Gindin and Panitch 2010p. 39.

  • 18.

    Mage 1963p. 72.

  • 19.

    See Leontieff 1982Shaikh and Tonak 1994 and Webber and Rigby 1996.

  • 20.

    Mage 1963p. 159.

  • 23.

    Okishio 1961.

  • 24.

    Shaikh 1978p. 242.

  • 25.

    Shaikh 1978p. 245.

  • 26.

    Marx 1973pp. 776–7.

  • 27.

    Shaikh 1978pp. 242–3.

  • 28.

    Shaikh 1978p. 244. For insightful critiques of the ‘choice of technique’ argument that are complementary but not identical to Shaikh’s see Freeman 1998 and Reuten and Williams 1989 p. 117 who argue that ‘Once the theory is cast in dynamic terms conditions of existence (or appropriate “microeconomic foundations”) for the TRPF can indeed be provided and the analysis of the Okishians reduced to a special case’. Reuten and Williams seek to provide such microfoundations inter alia by emphasising the issue of ‘capital stratification’ and centralisation as contributing to a rising composition of capital. They write: ‘. . . whilst the average rate of profit decreases profit is “redistributed” from the bottom to the top of the stratification’ (Reuten and Williams 1989 p. 134).

  • 29.

    Moseley 1991p. 30.

  • 33.

    Smith 2010p. x. The discussion on the next few pages borrows from Smith 2011.

  • 34.

    Smith 2010p. 6.

  • 35.

    Smith 2010p. 90.

  • 36.

    Smith 1994p. 181.

  • 38.

    See Smith 199319942010 and Smith and Taylor 1996.

  • 39.

    See for example Laibman 1992.

  • 40.

    See Moseley 1991Shaikh and Tonak 1994 Shaikh 1999 and Mohun 1996. It should be noted that some Marxists view unproductive wage-labour as a phenomenon largely confined to the capitalist state. See for example Reuten and Williams who write: ‘The state . . . constitutes a drain on value produced since it employs labour the productivity of which cannot be regulated on mono-dimensional value criteria . . .’ (Reuten and Williams 1989 p. 272).

  • 41.

    Smith 2010p. 89; see also Smith 1984. It should be noted that massive amounts of constant capital understood as PEV are also stored up in physical assets whose value is not represented in annually measured gross output.

  • 42.

    See Brenner 1998Duménil and Lévy 2004 and Freeman 2009.

  • 43.

    Freeman 2009p. 8.

  • 44.

    Smith and Taylor 1996.

  • 48.

    Moseley 2009.

  • 49.

    Shaikh 2010.

  • 50.

    Shaikh 2010p. 46.

  • 51.

    Shaikh 2010p. 48. We note that Shaikh does not attempt to justify his implicit notion that the before-tax rate of profit rather than the after-tax rate ‘drives active investment’.

  • 52.

    Shaikh 2010p. 50.

  • 53.

    Shaikh 2010p. 49.

  • 54.

    Bakir and Campbell 2010p. 324.

  • 55.

    Bakir and Campbell 2010p. 325.

  • 56.

    Mohun 2009.

  • 57.

    Mohun 2009p. 1025.

  • 58.

    Mohun 2009p. 1041.

  • 61.

    Kliman 2010a2010b.

  • 62.

    Kliman 2010bp. 9.

  • 63.

    Duménil and Lévy 2004.

  • 64.

    Husson 2010p. 2.

  • 65.

    Husson 2010p. 6.

  • 66.

    Saez and Piketty 2011.

  • 67.

    See Shaikh and Tonak 1994 and Mohun 2005.

  • 72.

    See Bakir and Campbell 2010.

  • 73.

    See McIntyre and Nguyen 2004.


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