Can you give me a tl;dr on the declining rate of profit in Marxist theory? Why does it happen?
Declining rate of profit
Leo Bailey
David Martin
Cost of new technology ramps up, wages are driven down, people can't afford to buy shit anymore. That's the way this particular brainlet understands it.
Liam Harris
Capitalists use profits to invest in new production methods which are more efficient allowing them to produce more and sell their products at lower prices to undercut their competitors and thus garner a larger share of the market and profit more overall.
The capitalists who survive are the ones who adapt and also invest in the new technology bringing them up to the same level but now the lower price is the average price.
This happens over and over again but with each cycle the rate of profit (return on investment) is lower. Profits are of course rising but each investment yields less as new methods of production are more expensive while prices fall.
To maintain a high rate of profit capitalists have to make savings in one way or another. The obvious is cutting wages or otherwise cutting back on employment which can be achieved through layoffs, mergers, outsourcing, union suppression etc. This helps create crises of overproduction whereby goods are being produced but there is no consumption as wages are too low and without consumption there is no manifestation of profit for capitalists driving the economy to a standstill as supply chains and distribution collapses.
Another way of keeping up the rate of profit is through imperialism and opening new markets both for more consumption and for for cheaper resources and labour to cut costs, thus enhance the rate of profit.
The state cutting taxes or implementing austerity and siphoning tax revenue into lucrative contracts for the private sector is another way to indirectly leech from wages more than they do while driving consumption.
Destructive wars which eliminate huge quantities of capital also mean more demand and consumption.
Nonetheless the rate of profit continues to dwindle fairly consistently making more devastating crises of overproduction likely.
someone else can probably explain this better or link some easy text explaining this
Cameron Thomas
Technology makes production easier and thereby more efficient. Products that were difficult to produce, become easy to produce. Factories can produce more commodities for the same amount of production costs because they are easier to produce. This means they can sell their products at a cheaper price while still making a profit. [In the long run, this is bad for a capitalist because he could have sold it at the same price, while still having to spend less on production, making an even greater profit. However, by selling at a lower price more people can buy your products, while also being able to sell for cheaper than your competition, thereby getting a greater market share]. Once everyone in the market has caught up in technology the process starts anew until prices slowly are driven down.
Cameron Edwards
Tl;dr: Capitalists keep undercutting each other until there is nothing left
Blake Johnson
Wouldn't this result in Capitalists creating artificial scarcity at some point?
Liam Roberts
artificial scarcity already exists under capitalism.
Jonathan Thompson
You mean private property?
Tyler Hill
I understand that it already exists for certain goods like diamonds (and probably many others).
It was a genuine question - it seems to imply that at some point they will run out of the option to undercut at which point it is only logical that companies will collude to withhold certain items, even basic goods from the populace.
Does the idea of 'trend' or 'fashion' exist to combat the decline in the rate of profit?
Sebastian Richardson
Yes, as do things like planned obsolescence in ensuring that consumption keeps up with growth.
Aiden Collins
what i'm trying to say is that artificial scarcity is literally always in place. the very idea of saying that the means of production belong to any single person is, in itself, artificial scarcity. You removed something from the common wealth.
And yes, it happens even if you don't consider this. Diamonds are the most obvious example, but think of things like brand clothing. You literally, arbitrarily decided that something is more rare because you printed a logo on it.
Jose King
The EU subsidises farming and also implement quotas which you cant produce above. They destroy food if its price falls below a certain threshold in order to make sure that "the prices stay competitive and farmers can make money".
Artificial scarcity already exists, you just have to look behind the curtain.
Nolan Ortiz
A source on the destruction of food? Not questioning - genuinely curious
Brandon Stewart
Overaccumulation. Rate of profit is declining because the rich already have all the money. What follows are bubbles as the rich overinvest, and a consumption crash.
Luis Fisher
A friend of my parents is a farmer and he told me that is what happens. It seems that it is not exclusively a choice of the government to destroy food when it doesn't meet a price, but also from the auction house, because selling too low would hurt overall profits. It is mostly auction houses who do this (they have a monopoly on the supply chain) but in some cases (such as with embargos) the government does the same thing. All farms still pretty much perform suboptimal due to artificial constrains and produce less than they can.
If you speak Dutch you should look up "doordraaien".
nl.wikipedia.org
scientanova.com
Here some other sources in Dutch about Brussel buying and then destroying food if it doesnt meet a minimum price. The idea and problem it tries to solve is that people physically dont consume infinitely, unlike what neolibs think, so an oversupply of food on the market destroys the demand and can bankrupt companies. Since yields and exports can fluctuate, this rule is there to protect the agriculture industry from these fluctuations. But we destroy perfectly good food, instead of giving it away, purely for the sake of the market and private industries, with tax payer money.
Old law [2004] (similar ones exist to this day):
>wetten.overheid.nl
I dunno, try to use google translate or ask if you dont understand some of the wonky translations.
Jonathan Smith
Check em.
also ill translate the short wiki article for you to english, just a moment.
Adam Jackson
(checked)
Also going to post this for similar effect.
en.wikipedia.org
Lincoln Hughes
Doordraaien
"Doordraaien" (lit: "keep turning") is a term used in the Dutch vegetable and flower cultivation industry, which relates to the auctioning of the products. It means that the auction clock has kept turning.
The type of auction is a Dutch auction. If a certain minimum price, set by the seller, is not met, the batch of goods is not sold and is taken out of circulation (and often destroyed). The batch has been "doorgedraaid". The term doordraaien thus doesn't mean the destruction of goods, but the outcome of the auction. The term is, however, often used to describe the destruction of goods.
Doordraaien occurs in periods where there has been overproduction. This can be due to weather or sudden export changes. If this was not to occur, more could be sold, but for a much lower price, resulting in a lower total profit.
The minimum price isn't made public in order to prevent buyers from using this information to change their purchasing behaviour, which would result in a lower profit for the seller.
Owen Martinez
Damn thats unreadable, lets try that again
"Doordraaien" (lit: "keep turning") is a term used in the Dutch vegetable and flower cultivation industry, which relates to the auctioning of the products. It means that the auction clock has kept turning.
The type of auction is a Dutch auction. If a certain minimum price, set by the seller, is not met, the batch of goods is not sold and is taken out of circulation (and often destroyed). The batch has been "doorgedraaid". The term doordraaien thus doesn't mean the destruction of goods, but the outcome of the auction. The term is, however, often used to describe the destruction of goods.
Doordraaien occurs in periods where there has been overproduction. This can be due to weather or sudden export changes. If this was not to occur, more could be sold, but for a much lower price, resulting in a lower total profit.
The minimum price isn't made public in order to prevent buyers from using this information to change their purchasing behaviour, which would result in a lower profit for the seller.
Hunter Morales
Added a translated wiki page on Doordraaien
en.wikipedia.org
Remember to translate wikipages like this to english whenever you find them missing, you are exposing the particular capitalist problems of your country to the world to see.
Benjamin Martinez
Marx calls it the 'rising organic composition of capital'. The more advanced technology in production methods and the more efficient labor becomes the more capital inputs and the fewer labor inputs go into production. Maybe before a factory automated each widget would be the result of 1 person working for half an hour. Now its the result of one person working for ten minutes, but using an expensive robot.
If we've been paying attention to the rest of Capital, there's a problem here. The profits are all coming from the labor inputs. The robot makers aren't giving the widget makers robots for charity; they need to make a profit too. Otherwise they'd just use their robots to make widgets themselves.
Everyone pays workers to make money needs to have the workers making commodities that they can sell for more than they are paying the workers. The more producers for profit rely on commodities that they have to buy from other capitalists, who also need profits, the less room there is for anyone to extract value.
John Martinez
Artificial scarcity is here, my dude.
Samuel Gomez
It's what the US did during the great depression, so I'm not surprised at all.
Liam Miller
thanks famalam
By the way OP, read Wage labor and capital. It's not long and explains in simple terms how the rate of profit has a tendency to fall, even though these exact words are never used in it.
Jose Hall
Marxists believe that in the aggregate profit comes from freshly applied human work (profit as in monetary profit only, not in the modern colloquial meaning of anything that benefits a person in some way). So, according to them, producing something with less human work can increase the profit of a particular producer, and indeed they are under economic pressure to try doing that, but the aggregate profit will decrease that way.
We had a thread about the logic behind this last year called Micro Econ Quiz. It is very simple: Suppose you provide some product, and 1. you have a pretty good idea about how much people would buy at this or that price, and 2. you can't fine-tune your produced quantity as it strongly depends on factors outside your control (like the weather with food), 3. you have to set on ONE price and keep it for a while. The result is that the price at which you can sell it all is usually not the one with maximum profit.
Having to pay a fine for destroying an over-supply instead of selling it can have all sorts of effects: It can scare away people from producing much, so decrease output and increase per-unit price (that's the possible effect an econ101 twat would expect and nothing else) OR (if output level is strongly based on luck) it can lead to more stuff sold instead of destroyed, and the price being lower as well.
Nathaniel Fisher
Still a thread about this.