Falling rate of profit official thread

I'm guessing you're using "innovate" as a metaphor for boosting revenue. This is the classic zero-sum argument used by socialists that is mostly founded on naive assumptions. Socialists see central planning as an idealized economic system, then project their own need for control onto Big Bad Capitalism, which they assume to be a more bigger, more powerful, more collected, more purposeful entity than muh humble commune.

Why?

Capitalist's with greater productivity than average are able to produce a greater amount of commodities per capital inputs. Given that market prices are determined by socially average firms, they capture greater than average profits that then allow for accumulation of capital for more extensive or intensified production during later cycles, further increasing productivity. They also have the ability to respond to market fluctuations affecting prices better then the average firm and can depress prices while maintaining profit to eliminate competitive firms.

Increasing productivity is an economic necessity for survival given non-abnormal market conditions (I.e. No extreme isolation of industry from foreign competition, maintenance of state or private monopoly, etc.).

I assumed since we were talking about capitalist A and B by themselves that this was the case, and that there wouldn't be a reason to cut costs or increase productivity if neither A nor B were doing it.

The argument is that fundamentally, in a 'normally' functioning market, an oligopoly is at any time vulnerable to the entrance of a third party competitive capitalist who, with the aim of personal profit can disrupt the temporary stability of a cartel, if it cannot adequately protect the means of it's dominance.

A good contemporary example of this is rocketry, for a number of decades a state supported oligopoly of a few large aerospace firms settled into an agreeable steady state. As it was explicitly a state orchestrated cartel, it was vulnerable to changes in law and policy undermining the conditions of its perpetuation.

Everyone thinks Musk is some kind of a goddamn genius, but he was simply was the first capitalist to take advantage of changes in legislation encouraging new entrants to the 'market' and simply undercut the stable profit rate previously 'agreed upon' by the stagnant firms, while taking advantage of preexisting, essentially state-funded technology. The rockets themselves are literally almost identical to the icmb designs of say, Northrop Grumman, mostly just priced far nearer to the actual cost of production.

Interestingly, one other critical manner SpaceX was able to compensate for this price cut while retaining profit was by offering far less and asking far more of the engineers in the company than typical in other aerospace firms or NASA. This is most evident in the notoriously high burnout and turnover of employees. Should another company manage to enter the expanded market they would likely need to further the proletarianization of the engineer profession.

And so it goes…

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Ah, so if I understand correctly, the point is that it's assumed that innovation has a profit cost? If innovation was free, the result would just be status quo, except with lower production cost per unit.
Meaning the actual argument is:
Innovate at cost of regular profit in search of super-profit.
So everybody must innovate to not lose profit, which would end up as the superprofit of another capitalist who did innovate if you didn't innovate yourself.
So all capitalists spend some of their profit to innovate, and competition requires that all capitalists meet the capitalists who spend the most on innovation. Resulting in a slowly decreasing rate of profit.
But does this mean that an decreasing rate of profit due to innovation competition also results in an increasing rate of profit spent on innovation?

Unfortunately not. Research is a cost just like labor or materials, and so when the rate of profit falls it gets slashed just like anything else.

undsci.berkeley.edu/article/0_0_0/who_pays

most research is done at the public expense

Economics is not that simple. Fraud, industrial espionage, subcontracting and strategic partnerships happen all the time.
If Sega decides to stop making video game hardware they can buy development kits from other hardware makers. They may not be making absolutely every component of a gaming system but nonetheless they are making games. Interchangeability is the kind of so-called "capitalist" innovation which no socialist ever dreamed up. Socialists have screamed in fury ever since.

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So, the ideal form of the free market advocated must now include deceit (is this in the form of false advertising or some kind of inter-industry sabotage?), theft of private intellectual property (NAP!!!) and "strategic partnerships (oligopolistic rent seeking) to remain stable. Well, thanks for putting yours card on the table I guess.

Ok…..

So, Saga is incapable of competing in console market. Leaves market. In desperation - uses remaining capital to obtain development kits from their former competitors and transition themselves to game developer

Enters new but different market possessing same fundamental competitive spiral as the last.

Only now it is mostly concerned with making a good game as quickly as possible for the least amount of money.

In order to win financing when making a pitch to one of the console companies for funding, SEGA must rationally attempt to undercut the projections of cost of other comparable competing developers proposals, (and have a compelling idea for a game).

In order to retrieve the maximum marginal profit once financing has been set - you must exploit innovate as much productivity as possible from the employees while also reducing their wages as low as possible, all before before the property slips out of your hands and becomes the publishers'.

This state of affairs continues bid after bid. All other developers when making their proposals are driving down the rate of profit. and raising the rate of exploitation.

it's more like;

Capitalist cuts labour needed to produce a good.

capitlist responds to this by firing staff

this reduces demand for the good and so reduces the profit.

due to falling profits the capitalist lowers wages

this further lowers demand and so further lowers the profit.

Capitalism will always result in a race for the bottom.

In that case I don't understand why the rate of profit falls, according to the explanation by OP.

Investment can increase the rate of profit in the short term for a company, but in the long term the market forces caused by this increased ROP will cause diminished RsOP for other companies or sectors of the industry.

At any given time there is a finite amount of wealth to be captured in the economy. Profitability is the rate at which that wealth is captured.

Theoretically the wealth in the economy is replenished by novel wealth creation in the form of investment, wages, speculation, etc. People need to have money to buy these products, new industry needs capital to buy equipment, that kind of thing.

So ideally, the rate of profit doesn't outstrip this rate of replenishment, so to speak. However, with an increased ROP caused by innovation or market consolidation (mergers, monopolies, etc), that's drawing wealth away from other sectors of the economy that it could be spent on, which leads to a declining ROP (ideally speaking of course).

For example, if we were to consider the iPhone an innovation by Apple, this innovation drastically increased their ROP. However, it severely cut into the ROP for traditional photography companies like Kodak. When everyone has a high-quality digital camera in their pocket, they have less need for traditional cameras, film, development chemicals, etc.

For every company in capitalism the goal is to achieve as high a ROP as possible. Companies (in the US at least) are legally required to do this or else the shareholders can hold their CEOs, etc, legally responsible. The CEO of Kodak therefore has to begin "cutting costs" in order to maximize whatever revenue they're still able to manage due to their declining income. Typically this takes the form of job cuts, quality cuts, lowered safety standards, greater employee exploitation, and so on.

These actions by Kodak in turn lead to diminished wealth replacement in the broader economy. All those workers that could have afforded iphones when they worked at Kodak now cannot. Their ability to purchase is eliminated, which means all those things they were buying before are going unbought, effecting the companies that made them. The capitalist ideal would be that Apples success would encourage them to expand in some way or another, mitigating the broader economic effects of this unemployment; Apple wants to maximize that ROP, so they'll build more factories, hire more workers to run them, and so forth.

However, what we see instead is that technology has obviated the need for so much labor-intensive investment. Apple can afford to double the size of their factory and require only a few people to run it. They are then able to produce more phones, increase their rate of profit, and put only a minuscule fraction of the wealth they captured back into the economy. Subsequently, if Apple captures more of the market, this negatively effects the ROP of their competitors, who either have to start cutting costs as well or expand into new markets.

Eventually, though, the ROP is doomed to fall. Fads fade, markets become saturated, and so on. The huge wave of people that migrated to smart phones might be unable or unwilling to buy a new $700 phone every year. Decreased demand, when uncompensated for, leads to decreased ROP, leads to job cuts, research cuts, and so on in a downward spiral of profitability. The majority of available capital in a market has been captured and concentrated at the top, and a depression ensues.

I hope this helped somewhat.

So the falling rate of profit is simply caused by capitalists undercutting each other?

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If by undercutting you mean a firm attempting to increase market share through competitive pricing. The competitive market its a major factor that drives the dynamic.

More has been said in the thread about the one-way drive of investment in productivity that can allow greater market share (through price reduction) and higher profit simultaneously for one firm at the expense of others, at least temporarily.

That's not what the tendency of the tendency of the rate of profit to fall is at all.

It's a logically derived proposition that has a very ambiguous validity when referencing empirical information. TRPF is essentially a result of a smaller amount of surplus value production, with total social surplus value being the absolute limit to profit distribution.

Yes, though competing against each other in a manner that transforms the socially average organic composition of capital (ratio of constant capital to variable capital) to increase productivity.

People talking about non-competitive relations among capitals are right in a sense. Individual capitalists do have the ability to engage in cooperative practices. But either market pressures or the state enforcement of the legal structure of generalize commodity-exchange will break up such alliances.

Capitalists are antagonistic to one another, though socialized in peculiar ways. That all capitalists together produce total social surplus value but compete for their own portions in the form of profits, rent, and interests in such a manner that threatens their collective existence is what the TRPF is qualitatively set out to show.

Keynesianism is not capitalism.

lol tell me another one

bumping because pol shit shouldn't be on the fp

bumping due to stormnigger invasion

Thank you papa marxo luv U

Quit shit posting rebel

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Damn, Xexizy got swole.

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Post the source?

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Bump for best thread

It's hard to see a reason for a general falling profit rate if one thinks of production as a physical system. Sure, building a little machine that keeps moving forever is impossible. Entropy is a thing, we are using up some natural resources that can't get replaced. But the sun is sending us tremendous energy, so with some engineering I think we can go on and on until our friend the yellow ball devours the earth.

If one doesn't think of profit as a bunch of things produced in excess of what is needed for survival or a surplus of human time after doing tasks necessary for survival, then the judgment might be different.

Profit is counted in terms of money. And you can use money to buy stuff, does this mean money profit is basically the same as thinking of profit as a surplus of a pile of physical things? Just a slight simplification, an abstraction, a lossy compression, for basically the same concept?

Consider this: There are two factories in two different countries, pretty much producing the same stuff with the same quality of equipment (btw. that equipment is some heavy shit, forget about moving it) and employees with the same skills, both factories facing a very similar market situation for the produced stuff. Then there is an unexpected change in one country, the workers of the factory there have now more rights to influence decision-making about running that factory. What happens to the market value of the equipment in both countries and why?

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Good thread op. Top notch theory going on here.

That sounds rather Keynesian. Can the state counter falling profits by increasing public spending as a permanent strategy?

Good post.

Although, Apple outsourced its production to Foxconn in China, which intensified the rate of exploitation of its workforce to the point where mass suicides were threatened, and IIRC they had to install anti-suicide nets around roofs and windows to prevent the odd employee losing their mind and just going for it. Probably because, back then, you couldn't produce the things fast enough. They weren't meeting effective demand. And that affected the price.

Now that iPhones aren't selling as well, I'd bet a lot of those Foxconn workers are being laid off, while those who remain are experiencing hell on earth. I haven't kept track of how much iPhones cost, but perhaps we can expect prices to fall, at least after Samsung stops shitting its pants. China in general should be facing some serious shit in the coming years because the continued crisis is throwing millions of people into unemployment and thus destitution.

Permanently? No. The state faces pressures to keep its costs down while subsidizing and managing the nefarious activity of the bourgs, who don't even bother paying most taxes once they figure out how to use tax havens, shell companies, etc. This is why the focus is always on welfare "parasites" while it's apparently impossible to police people with money.

I might add that institutions like the IMF are calling for governments to jump-start investment through public works on things like infrastructure, but don't seem to know where they're supposed to get the money from…

bumping a useful thread

If you spend resources to innovate, you will make less profit due to that.

A and B both make 4

A innovates at a cost of 1, B does not

A makes 5, B makes 2

Both A and B innovate at the cost of 1

Both A and B make 3

I don't think the conception of the falling rate of profit presented in this thread is quite that of Marx.

I thought the version by Marx was that aggregate profit comes from living labor (the human effort put into stuff right now), not dead labor (already made stuff that is also used in production). Development of technology bring a rising organic composition of capital or something like that (weirdo jargon meaning more and more machinery is used in production), so the profit rate falls.

Not perpetually, no. The capital recaptured by the state for redistribution will always be less than that which is accrued by the so-called private sector, so it does nothing to solve the problem of capital accumulation and consolidation. Eventually the private sector will grow to the point that the government's ability to regulate evaporates and the problems that Keynesian economics attempted to solve will reemerge.

You might be able to institute policies that ameliorate the deleterious effects of capital in the short term, but unless you solve the underlying contradictions of the economic system you're simply delaying the inevitable .

The organic composition of capital is the ratio between constant and variable capital – fixed assets like machinery and workers – in capitalist production. It rises as further investment is used to increase production, but constant capital tends to increase over variable capital – which is to say that further automation is pursued while wages and employment are suppressed.

There's a problem here for the capitalist, however. There's no effective limit to the rising organic composition of capital while there is a very real limit to the surplus value rate. Surplus value comes from labor – variable capital – since its the workers who produce things, as you said. The only way to offset the lowering profit rate from the rising organic composition of capital is to increase the exploitation of the workers – the surplus value rate.

Automation makes work easier, eliminates hard jobs, increases production etc. It eats away at the labor necessary for production. But for profit to exist a worker must reproduce the value of their wage and then work beyond that to produce the surplus. Workers working harder doesn't offset automation on a macro scale – profits still fall relative to what they were decades ago, even as production is quicker and distribution easier.

This is one of the famous contradictions of capitalism. It develops the forces of production but at the expense of its own viability as a mode of production.

Today, people are working harder and longer despite production going through the roof. Investment in the organic composition of capital is at an all-time low. Porky is sweating, even as trillions of profit slosh around in the global market. The pig knows that if investment picks up then automation will march forward, and his profit rate will continue to fall, intensifying this contradiction.Pic related.

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Thanks for bumping my thread Lefty pol
It's better than low effort bait posting

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