Why Capitalism Will Always Fail (Capitalism's In-Built Self-Destruct; The Falling Rate of Profit)

Twitter: @YaBoiHakim
One of my favorite contradictions of Capitalism, here's a quick run down of the falling rate of profit. Sources and further reading in the pinned comment.

00:00 Introduction
00:27 Definitions: Constant Capital, Variable Capital, Surplus Value
01:11 What is The Tendency For The Rate of Profit To Fall? Definitions, Absolute/Relative Surplus Value, Logic.
03:34 Political Consequences of The TftRPF (UBI, Crises, Imperialism)
05:59 Counter-Tendencies
07:02 Empirical Evidence
07:35 Rebuttals and Answers (Okishio)
09:05 Conclusion

[YaBoiHakim]

Twitter: @YaBoiHakim
One of my favorite contradictions of Capitalism, here's a quick run-down of the falling rate of profit. Lemme know what you think!

*Sources and Further Reading:*
Testing Marx: Some new results from UK data, Cockshott
The historical transience of capital - The downward trend in the rate of profit since XIX century, Esteban Ezequiel Maito
Is There a Tendency for the Rate of Profit to Fall? Econometric Evidence for the U.S. Economy, 1948-2007, Basu
Is the Theory of a Falling Profit Rate Valid?, Cockshott

[jaredharmer]

Your first empirical reference happens to be authored by my macroeconomics professor (Minqi Li).
I’ll be sharing this with him, I think he’ll be ecstatic to see his work being shared with the masses!

[splooie]

"Machines don't strike, they don't get sick, and they don't unionize"

....yet

[pipersolanas]

You somehow manage to be precise and clear without dumbing anything down!

[MrTaxiRob]

I think the hardest thing to understand is rate of profit vs. amount. We always hear about the record amount of profits that capitalists are enjoying, not how much smaller the rate is over previous generations.

[theleftistvortex]

Thanks Hakim you really got me to stand firm in my Marxist ideals. Before this I was a Soc Dem who couldn’t commit to this ideology. Because of years of going to private school and getting Capitalist ideals drilled into my head. You have helped a lot. Thanks! You’ve really grown the movement.

[devinfaux]

I like to think of it as similar to the Second Law of Thermodynamics; that is, the net entropy of a system will always increase. It's the same reason that perpetual motion machines are impossible; you either need to bring in some source of fuel or energy from outside, or keep cycling the same energy without losing any -- and there are *always* losses, to things like friction, waste heat, etc.

Any given capitalist system always needs to be bringing in some sort of "fuel" from outside -- the whole "infinite growth on a finite planet" thing -- to sustain itself. You can imagine this on a smaller scale: a single capitalist company, corporation, organization, etc. *cannot* sustain itself with only its own employees as a customer base. It cannot pay its employees the full value of the work they are doing if it wants to make a profit (and the greater capitalist system means it *must* make a profit), therefore when they turn around and pay their wages back to the company as its customers, they won't be able to bring in enough revenue to pay the employees again and repeat the cycle. The amount of value that is being extracted from the workers is akin to the loss of energy in the perpetual motion machine: if there is any value extracted the system will slowly wind down, and there *must* be value extracted for the capitalist enterprise to survive.

Now scale this up to the whole planet.

Capitalism has colonized the whole world; there are no more sources of untapped, external wealth it can rely upon to fuel itself. It can now only cycle the same amount of wealth around endlessly, and the act of making a profit is continuously concentrating that wealth into fewer and fewer hands. As the wealth becomes concentrated, there is less and less for the wealthy to extract from the rest of the populace. Left to run long enough this will result in one omni-wealthy person owning everything and the rest of humanity impoverished, there will be no reason for the owner to provide anyone a job or sell them anything, because the owner already owns everything -- any transaction is net loss.

In practice, though, the system will rip itself apart long before it gets to that end state.

[bugsephbunnin]

"I told ya. I fucking told all of you."
- Karl Marx, Capital Volume I & III.

[oathboundsecrets]

When will it all end? We are trapped in a boom and bust cycle.

[Pierre-ljsq]

Beautifully explained as always, thank you for your great contribution to the left community.

[tkdyo]

Whats funny about this, is that I was taught this same thing, but from a different angle in an MBA course. So on the one hand, Capitalist defenders will argue against such things, but on the other hand, Capitalists know full well it's the reality. They just spin it from being a flaw in the system to a game of trying to maximize your profit by finding where your "marginal profit" is 0. For you see, once you start producing beyond where your marginal profit is 0 and becomes negative, you are now making less profit with each additional unit you produce. And thats bad for business, so don't do that. No, don't think about the further implications that has for society, especially in industries which are monopolistic in nature.

[scotteagles]

"Kapitalism sucks. It's time to go beyond." There it is, folks. It really is that simple.

Likely sooner than later, Kapitalism is going to be dust-binned like every other political economy which preceded it. I find I take more and more pleasure watching the futile thrashings of the defenders of Kapitalism as the rotted system they champion (ironically, amongst many in the propagandized working class -- don't worry, we're gonna help you see the light) slips into accelerating decay. The future is Red.

[vadimk]

It's nice to know that capitalism is bound to end one day. The bad thing is that there's a good chance that when it goes, it's going to take us all with it.
Also, I think that the title is a bit misleading - yeah, the falling rate of profit dooms capitalism to stagnation of basically all aspects of civilization, but it doesn't mean that capitalism will just disappear automatically when it hits the threshold - even if RoP is microscopic, there's still a way for the bourgeoisie to keep the system afloat by increasing exploitation and inequality even further, and keeping the plebs busy with BS jobs that have no real value.

[pimpollito]

Ojalá el sistema capitalista se caiga. (Not literal translation: May capitalism crash and burn)
Fun unrelated fact: Ojalá comes from the word inshallah.

[afasdfasafd]

crazy how almost every single sucessfull country is capitalist (USA, almost all europe, canada, england, rusia, etc.), crazy how china only started to become a potency when it started to introduce capitalism into his economy, crazy how almost every single communist country has failed over and over again every single it tried to be implemented acroos different times, places, cultures and moments of history.
crazy how most socialist today come from sucesfull capitalist countries, crazy how most of say socialist are midlle class or upper class, almost like socialist its always wore by those that never taste it.

[SolarEmbrace]

Micheal Roberts book, "World in Crisis: A Global Analysis of Marx's Law of Profitability" is an excellent collection of research papers summarized by him. It explores different countries and their specific issues they have. It also has a long list of references at the end of each chapter if you want to delve deeper into it. I highly recommend it.

[LetsGoGetThem]

Great video. I highly recommend Michael Roberts' blog in regards to this topic, he is a Marxist economist thats been covering this topic for up to a decade on there now and show a lot of evidence for how the rate of profit has fallen globally : "A world rate of profit: important new evidence
" for the post on this.

[Frizzleman]

Boss makes a dollar, I make a dime. Thats why I listen to comrade hakims socialist propaganda on company time. Thansk comrade, you make the world a better place by educating one pleb at a time lol

[aesthetic]

Very good video, i love how you explain complex marxist concepts very simply and straightforward, you are very talented.

[proximaism]

You're in dire need of an introductory economics course. Ive already told you this so many times over but you're a slow learner.

i really dont know where to begin because you understand economics like a flat earther understands physics. your marxian math couldnt even qualify for highschool mathematical economics.

you said profit rate is surplus/capital investment.

if you use this basic production function derivation

y=[aP/w]^1/a-1

y is quantity output and the otherside is price output. you'll come up with a supply function. but supply function alone doesnt determine surplus/profit because supply is exogenous to demand. you cant supply more than what is demanded, hence more labor doesnt always mean more surplus. take water with very high utility and supply for instance. if marx was right that labor is value then water should be very expensive due to an over abundance of labor supplied for it. but the opposite is true. water is very cheap not merely because there's an abundance of supply for it. but rather because water is very easy to harvest hence there's ample of labor supply for it making it very cheap. the same case applies for monopoly and perfect market pricing. both have very different production and employment elasticities but nonetheless can sell products at very similar prices yet different quantities. perfect markets where cost is almost profit and monopolies with inelastic employment yet can sell cheaper products is a decisive proof that Labor only chases value(profit) and not yhe other way around.

we put labor on STUFF WE VALUE. we don't value STUFF because there's labor exhausted on it.