Fundamentals of Marx: Falling Profit Rates (LTRPF)

In this episode of the Fundamentals of Marx series we explore the Law of the Tendency of the Rate of Profit to Fall. We look at the theory behind the argument and consider one of the more famous criticisms within Marxist circles.

[cristiangerardinobilityhou]

When Karl Marx does analysis it is for the survival of society. When an economist does analysis it is for the survival of businesses.

[kafka]

Fantastic video. No other videos have taught me so much as this fundamentals of marx series has. And im including crash course in this. Fascinating. I love it. I cant wait to learn even more about marx. This is such a fantastic concise way that really explains new things even to those of us who are "marx adjacent" aka surrounded by marxists but who may not have read him ourselves

[gustavomartins]

Commenting for the good of communism... I-i mean, algorithm

[patbyrneme]

I think the way that Marxists explain this very important tendency in capitalism really sucks! Forget the equations and explain it more simply. Competition drives capitalists to reduce prices and improve functionality by means of increased capital equipment. While this may increase the absolute amount of profits for a time it reduces the rate of profit which is profit measured against investment. This tendency becomes manifested in each sector which tends to go from an early stage when the required investment is relatively small and profits and profit rates are high to an older more mature stage when the required investment is much greater and profit rates are much lower.
Why is this important? The rate of profit is an important factor in the considerations of investors in general. And investment will tend to flow away from those older mature sectors with a low rate of profit to newer sectors where profits and profit rates are more plentiful. The problem comes because the newer sectors become a smaller proortion of the economy as a whole. Thus we see older sectors such as iron and steel, vehicle production, transport and so forth sinking into declne and unable to attract the massive long term investment they need. Eventually, the older less profitable sectors drag down the rest of the economy with them.
Of course, that is where capitalism no longer offers a solution and public ownership is needed.
Another simple example of the Tendency of the Rate of Profit to Fall can be seen in the life cycle of products which go from early adoption as expensive highly profitable products for the first company producing them through to a mature phase when competition comes into market, prices fall and profits become very low.00
We need much simpler explanations like this to popularise these concepts and turn them into weapons of hundreds of millions. or we will just end up talking to ourselves. Let's never forget Marx's famous expression "Philosophers merely interpret the world. Our job is to change it!"

[CostasCTS]

Hey! Great content on the channel, very informative without dumbing anything down.

Jumping off the LTRPF, I want to draw your attention to software piracy and of digital goods in general (movies, music, books etc.). Replication of digital media is at or near zero marginal cost, meaning less labor overall corresponds to each unit. So artificial scarcity in these cases is the only method to maintain profits high.

Am I correct? Is post scarcity already achieved in the digital realm, making profits plummet? Can we actually observe falling rates of profit in the software sector? I would very much like to know what you think.

Congrats again for the amazing work you've put in so far!

[DecisiveRecourse]

Absolutely fantastic style. I love all of the clear graphics, the succinct explanations and your small introduction to the contemporary discussion surrounding the theory. Keep it up!

[blitzz]

I believe that I'm struggling a little with the concept of technologization and how the implementation of automation affects surplus (mostly according to the graph)
If machines are introduced that can replicate the labor-power of a worker (as we see today in various manufacturing industries) wouldn't there be not only a lack of need to pay wages but also a slight increase in the constant capital (upkeep of automation machines) which would result in significantly more surplus value (unless the upkeep is similar to the wages that would have to be paid for such a task)?
I'm sorry if my terminology isn't entirely correct but I hope that I can get my question across

[therealGLAD]

So basically,


As production becomes more efficient across the board, socially necessary labour time shrinks and even though you are creating more products, they sell for the same price as fewer products before?


So you produce more but your ratio of profit to commodities produced falls? E.g. A factory in 1950 producing 10 TVs makes the same money as a company producing 1, 000 TVs in 2020, because the profit margin of each TV has shrunk, the factory just produces more of them?


Did I get this right?

[pressftopayrespects]

So competition causes the falling rate of profit? Since prices may go down through automation, it lowers the price? Or am I thinking about this wrong?

[cristiangerardinobilityhou]

This is overproduction in an elastic market. In an inelastic company, the business leadership could simply slow production and still pay workers. The majority of the market is elastic anyway.

[presidentfist]

This video doesn't really address innovation and the creation of new markets. Just because one company no longer requires as many workers, doesn't mean that the workers will no longer have jobs. It actually facilitates the creation of new industries. Also, bringing down costs will mean that people are able to have more resources. This video would be impossible to make if automation had drastically improved the efficiency, lowered the cost and reduced the need for workers in agriculture.

[georgesoap]

the nature of competition leads every capitalist to exploit his/her workers more ( giving them bad wages to increase the amount of capital to invest in machinery ) so there is no freedom under capitalism for the workers to refuse this wage slavery conditions as capitalists tell us describing capitalism system 😂😂😂
In the end, competition results are not for the benefits of all humans but for specific ones ( the capitalists ) .
competition leads to economic crises where we workers pay for that by our taxes when the governments give them loans from our taxes to get basic needs we pay for something we are the reason for .
competition under capitalism is portrayed in the capitalists arguments to be good as commodities get cheaper but that leads to the destruction of commodities and chaos of production and the need to wage wars to save capitalist system by dinding new markets for the excess commodities no one can buy because of the competition nature the capitalists admire .
in contrast capitalism is a sucky system full of contradictions, here comes the definition of socialism :
the public ownership of the means of production ( no exploitation and no inequality), planning between production units so there will be no chaos of production and so no wars, no economic crises as there is no exploitation leads people not to buy the commodities .
this shows us that the problem of poverty is caused by the distribution of production not the amount of resources as capitalists liars tell us .

[dadoof]

There's more TVs and the TVs are easier and cheaper to produce. Workers can afford them for less and assuming everything else follows this trend the workers can buy more for less pay and the companies need less profit to function. All that's really going on is that money or wealth is deflating which isn't a problem at all and natural as long as the population is growing

[rafraf]

This idea, or at least the example, would seem to only hold true in a closed system, where (using the video's example) TV's are the only thing that have been or ever will be invented. Even if diminishing, as long as there are no material or technological hard ceilings, there can be the potential for profit as new industries are created. Lastly, a theoretical model (especially in soft sciences) suggesting something approaches zero does not mean it practically can and will, especially when catained within a larger system, any physicist/engineer can tell you that.

[RextheRebel]

So does this explain outsourcing and the global market expansion away from national self sufficiency?

[ivan]

This theory may be more relevant than ever with the introduction of AI. AI is a "renewable resource" in that it mostly take jobs and not give. The recent layoffs should tell you all about it.

[numbersix]

The Tendential Fall in the Rate of Profit -- thank you!

[whatabouttheearth]

3:00 what? The machine is simply a slave (that you can extract surplus value from with minimum reproduction inputs of capital for maintenance etc) that replaces multiple workers. There is no need to assume that a machine diminishes the equivalent of surplus value, the surplus value taken from the worker is simply transferred to a higher level of surplus value extraction from the machine.

The falling rate of profits comes when the workers, who by necessity of capitalism need to be consumers, are put into new jobs and production overall increases, therefore causes a surplus and profits to fall OVERALL. This is why UBI is important, because rates of profits will fall if you don't add UBI with automation, but when you add UBI you are bo longer in the definition of "capitalism" technically because there is no surplus value extraction from the people, you replaced each ten people with one machine and gain the "surplus value" from that machine.

Get this metaphysical shit out of your head, it's the act of production that is creating the value, it doesn't matter if that if from a biological entity or a machine. The worker as a human doesn't magically create the value.

[whatabouttheearth]

The equivalent of surplus value is taken from the producers that are the machines. You don't need human producers labor power to produce the value. You just need ANY laborers, including literally machines. Why do you think surplus value extraction diminishes because it's machines?

The part you need to be looking at is what happers to human labir when they are replaced with machines because they are needed to be consumers, purchasers of the commodities

[socialistlynx]

Great Video Comrade!

Thank you for educating the people onto the profit and the value onto capitalism that exploits the proletariat. You make very great videos. Keep up the good work my friend.