The Falling Rate of Profit and the Great Recession of 2007-2009

A New Approach to Applying Marx’s Value Theory and Its Implications for Socialist Strategy


In The Falling Rate of Profit and the Great Recession of 2007-2009, Peter H. Jones develops a new non-equilibrium interpretation of the labour theory of value Karl Marx builds in Capital. Applying this to US national accounting data, Jones shows that when measured correctly the profit rate falls in the lead up to the Great Recession, and for the main reason Marx identifies: the rising organic composition of capital.
Jones also details a new theory of finance, which shows how cycles in the profit rate relate to stock market booms and slumps, and movements in the interest rate. He discusses the implications of the analysis and Marx and Engels’ work generally for a democratic socialist strategy.

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Peter H. Jones is an independent scholar based in Canberra. He completed his Ph.D. in 2014 at the Australian National University, and has been active in many political campaigns, including for refugee rights and against cuts to health care and universities.
List of Tables and Figures
Advice to Readers

1 Marx’s Value Theory and the Law of the Tendential Fall in the Rate of Profit
 1 The Development of the LTFRP and Its Significance
 2 Criticisms of the Law
 3 Summary

2 Devaluation
 1 Formalisms, Models and Method
 2 Devaluation and Value
 3 Historical Cost, Input Cost and Output Cost
 4 Measuring Devaluation
 5 The MELT and Revaluation
 6 The Rate of Profit, the Rate of Accumulation and the Rate of Growth
 7 Conclusion
 8 Appendix: A Counter-example to the Okishio Theorem Using Current Cost Measures of the Rate of Profit

3 Turnover Time and the Organic Composition of Capital
 1 Decomposing the Rate of Profit: Existing Approaches
 2 The Stock of Variable Capital
 3 The OCC
 4 Conclusion
 5 Appendix: Decomposing Changes in the Rate of Profit

4 Surplus Value, Profit and Output
 1 The Forms of Appearance of Surplus Value
 2 Unproductive Labour
 3 Measuring Surplus Value after Unproductive Expenditures
 4 The Value of Labour Power
 5 Measuring Output
 6 Differences between the Total Price and Total Value of Output
 7 Surplus Value after Unproductive Expenditures
 8 Profits from Production
 9 Conclusion
 10 Appendix A: Accounting Definitions
 11 Appendix B: Decomposing Changes in the Rate of Profit from Production
 12 Appendix C: Decomposing Rates of Profit When the Value of Labour Power Is Not Equal to Its Price

5 Marx on Finance
 1 Money Dealing and Interest-Bearing Capital
 2 Currency
 3 Social Relations and Interest
 4 Dynamics of the Interest Rate (I)
 5 Money Capital and Fictitious Capital
 6 Fictitious Capital and the Dynamics of the Interest Rate (II)
 7 Conclusions

6 The Rate of Profit and Financial Rates of Return
 1 The Separation between Financial Profits and Profits from Production
 2 Fictitious and Non-fictitious Profits
 3 The Non-fictitious Financial Rate of Return and the Interest Rate
 4 Conclusion
 5 Appendix: Accounting Definitions for Financial Rates of Return

7 Results
 1 Output and Surplus Value
 2 Measures of the Rate of Profit
 3 Why the Rate of Profit Fell
 4 The Rate of Profit and Financial Rates of Return
 5 The Rate of Profit and the Interest Rate over the Long Term

8 Conclusions
 1 The Rate of Profit and the Great Recession
 2 Capital and Marx’s Value Theory

Those interested in Marxism, socialism, heterodox economics, theories of financial and economic crisis, history of economic thought, political philosophy, business cycle theory, Kondratieff waves, national accounts and interest rate theory.
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