The Trend of a Falling Rate of Profit

The current mode of production, based on private ownership of the means of production and the aim to seize for private gain the added-value workers produce, holds within it the trend of a falling rate of profit arising from the application of science to methods of work and production called productivity.

The ratio between the total investment and the number of workers necessary during production determines in broad measure the rate of profit. The rate of profit under the current mode of production is constantly depressed by ever-increasing amounts of invested value necessary to activate workers.

As the number of workers in production falls with the development of the productive forces, such as with the use of robots and Artificial Intelligence (AI), the rate of profit from the total investment declines. This growth in productivity is a double-edged sword for the oligarchs. It allows them to compete and possibly wipe out their competitors but it brings with it a falling rate of profit.

The rate of profit is expressed as a ratio in social product between the old value to new value or more specifically between the added-value the current workers produce and the sum of their reproduced-value (wages, benefits and social programs) and the transferred-value from fixed value (buildings and machinery etc) and circulating value (consumed energy and material etc). Profit is derived from the new value workers produce, specifically the added-value. Profit does not come from the fixed and circulating value transferred into production from already produced value.

Phenomenal amounts of investment are needed to set in motion the workers who produce the new value the oligarchs crave. The rich have long sought ways to overcome this trend of a falling rate of profit. Instead of investing in the productive economy, they have gone increasingly into the parasitism and decay of selling and reselling already produced value, into stock markets and commodity markets, and into Ponzi-type schemes to bilk small investors of the wealth they hold.

The other dominant way is to have governments pay the rich through public investments in their enterprises or through contracts for social product at inflated prices. No major investment in the economy of any type occurs without governments participating through handouts, tax exemptions, the use of public infrastructure for the big enterprises at preferred rates and other pay-the-rich schemes, such as public-private partnerships, buyouts similar to the Trudeau government purchase of the Trans Mountain pipeline from the monopoly Kinder Morgan or other schemes.

The concentration of wealth and power in fewer hands and their control of governments, coupled with the trend of a falling rate of profit, have meant that the mode of production has become one of paying the rich. All major investments include payments to the rich from the collective wealth held by the state. No investment of any size proceeds without government guarantees of state payments to the rich. No decision in politics or economic affairs is made without the consideration of the rich oligarchs in control.

Objectively, this situation indicates that the rich oligarchs have become superfluous and have no reason to be involved in the economy. The economy is socialized. The actual producers, the working class, must become the owners and directors of the already socialized and interrelated economy so that the power of its productive forces can be organized and unleashed to build the nation and serve the people and society without interruption, crises and war.

The current mode of production based on private property has run its course and must give way to the New where the actual producers, the working class and its allies who produce the wealth, are in control and set their own aim for the economy and society in conformity with the already socialized economy and its needs and those of the people.

This article was published in

Volume 50 Number 34 - September 12, 2020

Article Link:
The Trend of a Falling Rate of Profit


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