Date: Sun, 25 Aug 1996 12:51:04 -0400 (EDT)
From: Siddharth Chatterjee <siddhart-AT-mailbox.syr.edu>
Subject: 1. Rate of Profit 



Dear comrades,

I was away for a while but it looks like this list is as vital as before.
I have a few questions on Marxian economics which has been troubling me
for some time. These questions concern the rate of profit, exploitation and
value flows, and the meaning of the concept of 'value'. Along the way,
the issue of the labor aristocracy will also be raised. For ease of compre-
hension, I will split the discussion into 3 separate posts.

1. RATE OF PROFIT

Recently, Doug Henwood and others made a series of postings about the
falling US profit rate or at least its tendency to fall. Doug's figures
are more recent than those presented by Shaikh (A. Shaikh, "The Falling
Rate of Profit and the Economic Crisis in the US" in R Cherry et al, The
Imperiled Economy, URPE, 1987) who presented a graph of the US rate of
profit for the years 1947-1986 which clearly showed the decline in the
rate of profit (12% in 1947 versus 6% in 1985 - the 1985 value does not
match Doug's figure).

Now the capitalist measurement of the rate of profit is the net profit
divided by the total capital investment. The Marxian definition is:


  Rate of Profit =         Surplus value  
                    ____________________________________
                    Constant capital + Variable capital

I have assumed in the above that values are proportional to prices so
as not to get into the debate of the "transformation" problem. Let us also
assume that the time over which profit is calculated is 1 year. Marx
defines constant capital as the capital investment *consumed* during the
production process (this includes part of the machinery by wear and tear
raw materials, and energy, among others). Variable capital is the yearly
wages paid to the workers. Surplus value is that amount of extra value
produced by the workers above what they require to survive and reproduce
themselves. Note that the Marxian definition is consistent in that all
terms on the right-hand side of the equation are measured *per year*.

However, the capitalist and Marxian definitions of the rate of profit
are different since the capitalist divides the profit by the *total*
capital investment not by the capital investment consumed during a year
(one measure of which is depreciation and the annual costs of raw
materials, utilities, etc.). So when we talk about the "falling
rate of profit", which definition is implied? Also, how are the two
definitions related?

A related issue is the rate of growth of the GDP. Monthly Review in 1992,
in one of its issues, presented a table of the GDP growth rate in the
advanced capitalist countries for a period of years which showed that
this rate of growth has decreased substantially in these countries. This
is another indication of the general stagnation in the core countries
which has lead to a massive export and investment of capital in the
Third World. This has made Lenin's tract "Imperialism -Highest
Stage of Capitalism" again relevant (a new version of this work has
been published by Pluto Press with a introduction by Norman Lewis and
James Malone). Lenin's views and defines imperialism from this economic
angle - that resulting from stagnation. 

Again what is the relation between the decline in the rate of growth in
the GDP and the tendency of the rate of profit to fall?


----- To be continuied ----

SC 



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