Here is an article about declining profits in the corporate world. It fits with how Karl Marx explained the contradictions of capitalism. (Note: These are tendencies, not something that happens absolutely in all times and places. We should see them like we see the tendency for rivers to flow towards the sea. If there is a mountain in the way, the river might turn and flow away from the sea for some distance. But eventually, it will turn again and flow towards the sea. Same with these contradictions):
- Tendency for the rate of profit to fall: This seems contradictory in the era of massive accumulation of wealth, but it’s really not. It refers mainly to the profitability for companies that actually produce something, not profitability from pure speculation. It works like this: The capitalist has two types of investment or capital – “constant” capital and “variable” capital. The former is their investment in machinery, a building, etc. The latter is their investment in wages. But it’s only the investment in wages that really leads to profits. That sounds crazy, but the reality is that the machinery wears out over time. As it does so, it simply imparts part of its value to the product it produces; it doesn’t actually add value. But we are different. What happens is that the worker is more or less paid for what she or he requires to live and produce the next generation of little wage slaves. The rest goes to profits. So, the more workers that are replaced by machinery (automation), the greater percentage of the capitalist’s investment goes to “constant” capital, which doesn’t produce profits. It’s an ever decreasing percentage of his or her investment that can produce profits – which is exactly why the capitalist has to squeeze us all the harder.
Note: We might think that investing in automation could increase their profits, and so it might for a time. But then the competition also invests in the same or even better automation and they all have to cut their prices because there’s less labor going into their product.
- Tendency towards overproduction: What this means is simply that workers cannot buy back all they produce, because if they could, there would be nothing left for the profits of the capitalists. During the post WW II economic boom, they tried to get around this by deficit spending – pumping more money into the economy. This increased the amount of dollars in circulation in relation to the amount of goods being produced (the GDP) and as a result inflation started to take off.
This tendency works hand-in-hand with the tendency for the rate of profit to fall. If wages are cut to boost profits, that also cuts into the markets for the capitalists. On the other side, if wages go up, then this cuts profits even further. In fact, the attached article explains that the recent boost in wages has had exactly that effect.
(Note: Michael Roberts, the economist who wrote this article, doesn’t believe there is such a tendency, and some other Marxist economists don’t either. I do.)
- The existence of the nation-states in the era of world production and world politics: The history of capitalism is the history of the rise of the nation-states. They cannot escape that. They need the nation states to keep workers thinking of themselves as “Americans” or “French” or “Iranians” rather than as workers. They also need strong national governments to keep workers in line. But the nation states are in sharp conflict with the fact of a global economy. For example, when a capitalist wants to invest in a foreign country, they have to keep in mind the relative values of the different currencies. A currency swing could turn a profit into a loss. Same when he or she enters into a contract to import or export a product. There is also the competing interests of the different national capitalists. It’s these interests that sent the world into two devastating world wars, for example. In Europe, the capitalists tried to get around this by forming the European Union. Now, it is exactly the crisis of global capitalism that is tending to lead the EU to collapse.
So, overall, the crisis of capitalism involves more than just the tendency for the rate of profit to fall, but that is an extremely important part of it all. Here’s Michael Roberts on that aspect. Workers beware: The job at stake may be your own!