Capitalism's Economic Foundations (Part I)

Part IPart IIPart IIIPart IV

The Economic Basis of Modern Imperialism

The article we are re-printing here is the first part of the first pamphlet ever produced by the CWO. It was initially published as a separate article in 1975, entitled The Economic Foundations of Capitalist Decadence, by the small collective of Revolutionary Perspectives which preceded the formation of the CWO. It has long been out of print(1), yet its uncomplicated explanation of key concepts of Marxist economics lays the groundwork for revolutionary militants today to understand that the same underlying material forces are at work in today’s global capitalism as in Marx’s day.

It was no accident that it was written in the 1970s when it was clear that the post-war boom had come to an end. This not only produced emerging revolutionaries of the Communist Left who were re-discovering Marxism, but also galvanised us to understand why and how the post-war period of prosperity we had grown up in had morphed into an inflationary crisis. The message that Keynesianism had solved the problem of capitalism’s recurring economic crisis was now demonstrably untrue and vindicated what Paul Mattick had argued throughout the 1950s and 1960s, that the cycle of accumulation of capital would end in another crisis. His work Marx and Keynes inspired us to further study Marx’s own analysis of the economic forces underpinning capitalism. From the increasing consumerism that seemed to have been lulling the working class into becoming a “class for capital” during the post-war boom, workers found themselves fighting for their livelihoods. The class struggle was back and, with it, a renewed interest in Marxism: not the pseudo ‘Marxism’ which defines Russia as a ’deformed workers’ state’ or which views nationalisation and state control of the economy as steps towards socialism, but Marxism which rests on the ineradicable principle that capitalist growth rests on the profit derived from the unpaid labour expended by the working class. From this ‘rediscovery’ of the law of value the analysis naturally took us to central concepts of Marxist economics: the rising organic composition of capital and the consequent tendency for the rate of profit to fall. They remain the basis for understanding the economic crisis global capitalism is facing today.

We have had many calls over the years for us to reprint the whole of the original pamphlet but we have always faced two problems. The first was that anything written in the 1970s does not explain how the crisis developed subsequently, and secondly our own theoretical development has led us to a better understanding of the links between this first part and the later development of capitalism in its imperialist or decadent period. We have thus decided to reprint unchanged the first theoretical part whilst in subsequent issues we will deal with the development of capitalism since Marx’s death. Naturally, over the last four decades we and our comrades in the Internationalist Communist Party have had cause to write about these developments so now our intention is to draw all these together in a new series based on Marx’s original theoretical framework.

On the way we will also take issue with the host of more or less academic Marxists who today espouse the falling rate of profit as the key to capitalism’s dynamic … and can even produce charts showing the inevitable self-destruction of that dynamic. Yet for the most part they have no conception of the magnitude or urgency of the current crisis which is driving imperialism today, threatening world imperialist war, untold misery for the global working class and the very existence of the planet. Indeed the downward trajectory of their graphs and charts can be taken to imply the gradual disappearance of capitalism itself without the need for a conscious revolutionary movement to overthrow it.(2) Ironically, this was the kind of thinking which held sway amongst the reformists of German Social Democracy way back in the early twentieth century, before the first world war: the kind of thinking which led Rosa Luxemburg to question the falling rate of profit as the motor force of capitalism’s existential crisis. (A process which she remarked could last “until the sun burned out”.) Back in the day, part of the raison d’etre of the Economic Foundations was to reaffirm the vital role of the labour theory of value, as against theories about saturated markets, to understand the capitalist crisis. Today there are more dangerous illusions to combat in the shape of identity politics and 21st century cross-class reformism such as climate activism, which not only foster illusions in reformism but serve to obstruct the collective fight back against capitalism by all those whose lives depend on wage work, regardless of gender, ethnicity, skin colour, nationality or whatever other aspect of identity capitalism uses to divide us as a class.

At the present time of war, falling living standards and mounting starvation, this overview of Marx’s explanation of the economic driving force behind capitalism’s inbuilt tendency to recurring crisis and eventual collapse is especially pertinent. By the same token, it should act as a reminder that the class whose unpaid labour is the basis of all capitalist profit, the working class, is still the key to capitalism’s revolutionary overthrow. Never has it been more important to grasp this message.

Capitalism’s Economic Foundations

The basic requirement of all societies is the production and reproduction of the material necessities of life (food, shelter, clothing) for the members of society. The recognition of this fundamental fact is the foundation of the materialist view of history. As Marx said, must be in a position to live in order to be able to ‘make history’. But life involves before everything else eating and drinking, a habitation, clothing and many other things. The first historical act is, therefore, the production of material life itself.(3)

In every society then, a certain amount of labour time must be devoted to the production of goods which satisfy humankind’s material needs. Workers and tools/machinery and raw materials (means of production) are a basic feature of all societies. However,

For production to go on at all they must unite. The specific manner in which this union is accomplished distinguishes the different economic epochs of the structure of society from one another.(4)

Thus the way in which human beings produce their basic material needs (i.e. the mode of production) is the fundamental determinant of the nature of society at any point in time. The particular level of development of the means of production (ranging from the simplest tools to the most complex machinery) involves a corresponding network of social relationships. It is the totality of these relations which forms the economic structure of society, which in turn, is the real basis of all legal, political and cultural superstructures. Thus, if we start from the materialist view of history, it is clear that the motive force behind historical development is the material development of the productive forces. In all societies the forces of production develop and expand or become more complicated until, at a certain point, this development conflicts with the network of social relationships from which they had originally been engendered. The old-established social relations, which had once facilitated the development of the productive forces now make it more and more difficult for those forces to further develop. This is the period of social revolution which arises as the material forces of production expand, creating a need for the social relations and superstructures of the old society to be overthrown. Hence,

No social order is ever destroyed before all the productive forces for which it is sufficient have been developed, and new superior relations of production never replace older ones before the material conditions for their existence have matured within the framework of the old society. Mankind thus inevitably sets itself such tasks as it is able to solve, since closer examination will always show that the problem itself arises only when the material conditions for its solution are already present or at least in the course of formation. ... The bourgeois mode of production is the last antagonistic form of the social process of production — antagonistic not in the sense of individual antagonism but of an antagonism that emanates from the individuals’ social conditions of existence — but the productive forces developing within bourgeois society create also the material conditions for a solution to this antagonism. The prehistory of human society accordingly closes with this social formation.(5)

The development of the productive forces within feudalism created the conditions for the rise of capitalist production which eventually led to the overthrow of feudal social, political and legal relations and the taking over of state power by the bourgeoisie. Once established as the dominant mode of production, it has been the historic task of capitalism to develop the productive forces of society on an unprecedented world-wide scale and in so doing it has created the necessary level of material development for the establishment of production directly for the whole of humanity’s needs (i.e. communism). It is the purpose of this series to show that by the beginning of this century (approximately 1914) capitalism had accomplished its historic task of providing the material basis for communism; that any subsequent accumulation of capital no longer entailed a progressive development of the productive forces (‘progressive’ in the sense of furthering the development of conditions for a higher mode of production); hence any growth of the productive forces which has occurred has been on a decadent basis — a sign that capitalism is declining as a mode of production.

Before going on to analyse decadent capitalism, however, it is necessary to outline the basic characteristics of capitalism and the fundamental drive which forces capital to expand and develop the productive forces whilst at the same time imposing certain objective limits to capital’s inability to further develop the productive forces of society.

Capitalist society, then, like any other mode of production, is ultimately a process whereby the material necessities for life are produced, but the specific historical form which this production takes is characterised by the contradiction between the capitalist’s production for profit and the fundamental requirement of producing to satisfy society’s basic needs.

The Labour Theory of Value

In a society where people produce their own means of subsistence the products of their labour are utilities or use values, which may be in the form of objects for consumption or objects which are to function as part of the means of production. In a primitive communist society, where there is no division of labour and producers satisfy their own needs, production is in the form of use-values alone. As soon as the level of production develops beyond a subsistence economy and people begin to exchange some of their products (barter) then a commodity character is also given to these goods. Commodities have the dual character of being objects of utility (or use-values) and objects which can be exchanged for other commodities (exchange-values).

All commodities are produced by human labour and any single commodity can be seen as the crystallisation of the human labour required to produce it. The value of a commodity is the amount of human labour in the abstract which is incorporated in that commodity. The only way the amount of labour embodied in a commodity can be measured is by measuring the length of labour time necessary to produce it. Thus labour time is the measure of value. However, although labour is the source of all value, the value of a particular commodity is not determined by the length of time it takes any individual worker to produce it. (If this were so then value would vary in accordance with, say, how fast or slow any individual worker was.) The value of a commodity is determined by the average amount of social labour time necessary to produce it at any particular level of development of the productive forces, and it is this fact which enables commodities of differing physical qualities to be compared with one another for the purpose of exchange. (Thus, for example, if it takes 5 hours on average for a weaver to produce 15 yards of cloth and 5 hours on average for a carpenter to make a table, then 15 yards of cloth are equal in value to one table. If we further assume that the price of any commodity is equal to its value, then the price of a table will be the same as the price of 15 yards of cloth.) It is only through the process of exchange that the value of commodities can be manifested since the value of one commodity can only be expressed in terms of another commodity.

The Capitalist Mode of Production and the Law of Value

Although commodity production and the concomitant division of labour which this implies were necessary pre-conditions for the development of capitalism, there are certain other historical conditions which had to exist before capitalism could come into existence, that is, before the so-called primitive accumulation of capital could take place.

First of all exchange via barter had to give way to a money economy. Money, as the universal commodity in which the exchange value of all commodities can be expressed, appears first as a convenient standardised measure of exchange value, and later as a medium of exchange, facilitating the expansion of trade.

The general character of money which allows it to represent the exchange value of all other commodities means that money is the “material representative of general wealth”.(6) As such, money historically became an end in itself, as commodity production and trade expanded. The Mercantilist system was based on the possibility of accumulating wealth in the general form of money through trade.

Another fundamental pre-condition for the rise of the capitalist mode of production is the existence of ‘free’ labourers who do not themselves own any means of production and are therefore forced to sell their labour-power (work for a wage) in order to live.

...The labourer instead of being in the position to sell commodities in which his labour is incorporated, must be obliged to offer for sale as a commodity that very labour-power, which exists only in his living self.(7)

The existence of wage labour means that labour-power is now turned into a commodity whose exchange-value is the average socially necessary labour time which it takes the labourer to produce his own material needs. Expressed in money terms, the exchange-value of labour equals the wages of the worker. Once labour power is turned into a commodity the production of surplus-value, that is, value over and above that which is necessary for the workers to maintain and reproduce themselves, is made possible. According to the law of value, commodities are exchanged in accordance with their value, or the amount of labour time which they embody. Under capitalism the operation of the law of value means that profits are made by capitalists selling commodities produced by the workers at their value, whilst at the same time the workers are paid the equivalent of the exchange-value of their labour-power. This is so, because once the labourer is obliged to sell their labour power in order to live they are also forced to work for a longer period of time than it takes them to produce the amount of value equivalent to their material needs. It is this surplus-value, created by the labour-power of the workers and appropriated by the owners of the means of production, which is the source of capital’s profit.

Capital Accumulation

After the original ‘primitive accumulation’ of capital has taken place (historically primitive accumulation occurred when merchants invested part of their accumulated wealth in productive industry) and capitalism is established as a mode of production, then capitalism itself provides the mechanism for its own expansion.

Marx drew up an abstract model of simple reproduction in a closed society composed entirely of capitalists and workers which illustrates this fact. From the viewpoint of society as a whole, the total social product can be divided into constant capital (raw materials, machinery etc.) plus variable capital (wages paid to the workers by the capitalists) plus surplus-value. If we assume that the whole of the constant capital is used up during the course of the turnover of capital, then the value of the total social product can be represented as follows:

c + v + s

If this total social product is further divided into two major departments of production, Department I comprising the production of the means of production and Department II comprising the production of means of consumption, the original formulae can be elaborated as follows:

Department I

c + v + s

Department II

c + v + s

= total social product

In order to explain how simple reproduction occurs, (that is, a situation where the capitalists consume the whole of the surplus-value produced and hence the total social product is reproduced anew, but not enlarged), let us follow Marx’s schema:

Department I

4,000c + 1,000v + 1,000s

Department II

2,000c + 500v + 500s

= total social product (9,000)

Whilst this table is an abstraction which demonstrates the relation between the two departments of production in terms of value, it must not be forgotten that the total value produced by each department is in the form of actual physical objects. If we examine the relationship between the two departments it is clear that in order for the cycle of production to begin anew there must be some exchange of commodities between the two departments. The 4,000 constant capital produced by Department I (in the form of machinery, machine tools, etc.) need only be redistributed within the same Department; but workers cannot be paid with, nor capitalists personally consume, the means of production which are represented by 1,000v + 1,000s. On the other hand, the 2,000 constant capital necessary for the production process to begin again in Department II is useless if it remains in the form of consumer goods, whilst the 500v and 500s can be consumed by the workers and capitalists of that Department. The 1,000v and 1,000s of Department I must be exchanged for Department II’s 2,000c if reproduction is to continue smoothly. In other words, equilibrium conditions for simple reproduction necessitate that:

Iv +Is = IIc

This outline of abstract simple reproduction demonstrates that the accumulation of capital is essentially a self-generating process and this remains true for extended reproduction, that is, in the situation where the total social product is increased during the reproduction cycle.

In reality the competition between capitalists constantly forces them to undercut their competitors by selling at a lower price. To do this they have to produce their commodities more cheaply and hence they must return part of the surplus value to the production process in the form of new machinery which increases the productivity of labour; the history of capitalism is one of increasing accumulation or expanded reproduction. Nevertheless an elaboration of the first model will serve to show that extended reproduction remains essentially a reproduction of the worker-capital relationship.

To return again to the two departments of production, if we now allow for part of the surplus produced by each department to return to the production process as capital, then the surplus of each department can be divided in A, representing the portion destined for the personal consumption of the capitalists, and B, representing the portion to be turned into capital. Thus,

Is = IA + IB


Part B of both departments can be further broken down into a part which is destined for accumulation as constant capital (IBc plus IIBc) and a part which is to be accumulated as variable capital (IBv and IIBv). Hence the formula for total social production now appears as:

Department I Ic +Iv +IA +IBc +IBv

Department II IIc + IIv + IIA +IIBc + IIBv

The reproduction of the first three aspects of both departments has already been dealt with under simple reproduction.

We are concerned here with that part of the surplus which is to be recapitalised. For the same reasons as in the case of simple reproduction, if expanded reproduction is to occur it is clear that IBv must equal IIBc. The necessary exchange between the two departments for expanded reproduction to occur can be demonstrated by combining the formula for exchange between the departments for simple reproduction with this equation. Thus:

Iv + IA + IBv = IIc + IIBc

In other words: the entire new variable capital of the first department and the part of the surplus value of the same department which falls to unproductive consumption must be equal to the new constant capital of the second department.(8)

From this model of expanded reproduction it is obvious that the accumulation of capital is a self-expanding process which involves a growth in constant capital, a growth in the consumption of the workers and a growth in the consumption of the capitalists. Thus,

Commodity production creates its own market insofar as it is able to convert surplus value into new capital.(9)

We shall see below that the self-expansion of capital is accompanied by the tendency for the rate of profit to fall which, in turn, places limits to capital’s ability to “convert surplus-value into new capital”.

The Organic Composition of Capital and the Formation of an Average Rate of Profit

We have seen how competition forces each capitalist to continually transform part of the surplus value into capital and how the accumulation of capital is thus a self-expanding process. But since the aim of every capitalist is to maximise profits (and therefore the amount of surplus-value produced), they will cease to transform surplus value into capital if such an action, at a certain point, brings in less profit than previously and thus capital accumulation would cease.

To return to the increase in the amount of surplus-value which an increase in profits implies. Such an increase means that workers will have to produce more surplus-value and thus leads to an increase in the rate of exploitation s/v or in the rate of surplus-value. There are two main ways in which capitalists can increase exploitation:

  1. By lengthening the working day (absolute surplus-value);
  2. By reducing the exchange value of labour power — i.e. the length of time which the labourer has to work to produce enough value for their own subsistence (relative surplus-value). This can be achieved by a) cheaper food costs, and b) higher productivity.

An increase in the productivity of labour involves an increase in the volume of exchange-value which the labourer can produce in a given time. Whilst on the one hand the social productivity of labour expresses itself in an increase in the mass of commodities, on the other hand, the value of any single commodity is lowered. A rise in the productivity of labour which involves the production of an increasing mass of commodities further implies development in the forces of production — improvements in machinery, introduction of more efficient techniques, etc. which result in an increase in the ratio of constant to variable capital. Thus, although the actual number of workers may rise, this rise will not be in the same proportion as the increase in investment in new machinery, etc. The increased proportion of constant capital in relation to variable capital is what Marx calls the rise in the ‘organic composition’ of capital (c/v). It is the continuing rise in the organic composition of capital which leads to the tendency for the rate of profit to decline and which, in turn, places objective limits to the ability of capital to accumulate. The rate of profit itself can be symbolised as s/c+v, that is, it is the surplus-value gained after allowing for the depreciation and replacement of constant capital plus the wages of the workers.

However, our analysis from the standpoint of the labour theory of value is concerned with the total social capital, and thus we are only secondarily concerned with the rate of profit in any particular firm or even branch of industry. What we are concerned with is the formation of an average, or general rate of profit, which tends to emerge as a result of competition and this law is in every way as important as that of the falling rate of profit for a comprehension of the movement of capital.

In treating of commodity production in Volume I of Capital, Marx assumes that the price of a commodity equals its value, barring fluctuations of supply and demand, i.e. p = v. But in Volume III he argues that in general the more the industrial capital develops, the less prices of commodities tend to equal their values.

This ‘deviation’ of p from v seems to undermine value theory, but in fact it provides its firmest confirmation. Though individual prices always bear some relation to value, Marx’s achievement in Volume III was to show that value equals price only at the level of the capitalist economy as a whole, i.e. total p = total v; that:

... the deviation of prices from values mutually balance one another... And in the same way the sum of all the prices of production of all commodities in society, is equal to the sum of all their values.(10)

It is clear that, other things being equal, the value of a commodity with a high composition will be lower than that of a capital with a low composition, since less labour will be incorporated in it. Irrespective of this, competition forces each capital to sell at roughly equivalent prices; thus the capital of high composition sells above, and the one of low composition below, value. The effect of this is clear — a constant drain of value from low to high composition capitals.

It is easy enough to grasp this primitive example of equalisation within a single industry, but the tendency, (which to begin with is a local and then a national one), eventually establishes itself on a global scale and to illustrate this we must turn to the rather more complex examples given by Marx in Volume III.

If every branch of industry were to sell its commodities at value certain consequences would follow. Those industries with a low capital component would make high profits, and those with a high capital component, low profits. However, capital would be attracted to the former, leading to a vast increase in output and a glutted market; similarly, labour would be able to push up its exchange value and thus provide a motive for its replacement by constant capital. The other industries would meanwhile be starved of capital, growth would slow down, output slacken and prices rise. At the end of this cycle the flight of capital would clearly be in the reverse direction to what it had been at the beginning. The outcome of all the capital movements and price fluctuations is the formation of an average rate of profit and the correct distribution of surplus value throughout the whole economy. To the capitalist this movement expresses itself as the fact that the market will take his goods priced, not at their ‘value’, but at their costs of production (cost price), plus the average going rate of profit. These prices are in no way arbitrary and independent of value relations,

The overall fall or rise in the prices of production and the average rate of profit is caused by the changing value relations, and the changing value content of commodities in the course of the changing productivity of labour and the structural changes in the organic composition of total capital.(11)

This can be illustrated with an abstract example of five spheres of production, with differing capital compositions and a constant rate of exploitation.


The average composition of capital is 78c + 22v and the average rate of profit 22%. Thus prices will be formed in the following way:


This law means that capitals do not receive back at the end of the circulation process that part of total value created by them.

(Capitals) do not secure the surplus-value and consequently the profit created in their own sphere by the production of these commodities, but only as much surplus-value and profit as falls to the share of every aliquot part of the total social capital ... Every 100 of any invested capital, whatever may be its organic composition, draws as much profit during one year ... as falls to the share of every 100 of total social capital during the same period.(12)

This mechanism, then, involves a constant value flow to those industries which are most technologically advanced, and speeds the process of capital concentration within any national capital. But in its drive towards the creation of a world market, and a globalisation of the capitalist mode of production, capital carries within itself the extension, the ever-widening of the equalisation of the rate of profit; sucking value from backward areas whose development is arrested by unequal exchange and hence snatching from them the bulk of the fruits of their primary accumulation.

In the sections which follow, we shall see how the tendency towards equalisation of profit rates, along with the tendential fall in the rate of profit, allows us to understand the salient features of capitalist development, both in its period of growth and in its period of decline. But we must always remember that,

It is the nature of the rate of profit, and of economic laws in general, [that] none of them has any reality except as an approximation, tendency, average, and not as an immediate reality.(13)

The Tendency for the Rate of Profit to Fall

The accumulation of capital then necessitates a rise in the organic composition of capital which in turn leads to the tendency for the rate of profit to fall.

This is in every respect the most important law of modern political economy and the most essential for understanding the most difficult relations. It is the most important law from the scientific standpoint ... hence it is evident that the material productive power already present, worked out, existing in the form of fixed capital... that the productive forces brought about by the historical development of capitalism itself, when it reaches a certain point, suspend the self-realisation of capital instead of positing it.(14)

To illustrate with an example using Henryk Grossman’s figures(15), assuming an organic composition of 1:1, with 30 constant and 30 variable capital and a rate of exploitation of 100%, then the rate of profit (s/c + v) will be 50%.

With an organic composition (5:1) say 250 constant and 50 variable capital, and the same rate of exploitation, the rate of profit will be 16.6% ... both constant and variable capital is increased. Not only is the scale of production expanded, but the number of workers employed increased.(16)

Nevertheless, the rate of profit has fallen and the rise in the organic composition of capital means that an increasingly larger part of the surplus value produced must be used for the purpose of increasing the ever growing constant capital. To elaborate with another example using Grossman’s figures,

... by a composition of 200c - 100v - 100s (surplus-value), the constant capital can (assuming the total surplus-value to be used for accumulation) be increased by 50% of its original size. At a higher stage of capital accumulation, with considerably higher organic composition, e.g. 14,900c - 100v - 150s the increased mass of surplus value is only sufficient, when used as additional capital (AC) for an increase of 1%.(17)

From this analysis it is clear that accumulation is limited by the fact that at a high stage of accumulation there will reach a point where the organic composition of total capital is so large and the rate of profit so small, that to enlarge on the existing constant capital would absorb the whole of the surplus-value produced.(18) Moreover, as this crisis is approached, the portion of the value for distribution amongst the workers and the capitalists is also reduced, making a sharpened struggle for the maintenance of wage levels by the workers inevitable — as well as lay-offs and unemployment resulting from the lack of enough surplus value for additional accumulation of capital and inability to further develop the productive forces. Thus we find in the accumulation process itself the drive towards the collapse of the capitalist system. Historically this tendency to collapse has been manifested in the periodic crises of “over-production” of capital; crises which have been overcome by the devaluation of capital, greater capital concentration and centralisation involving the absorption of smaller capitals by larger enterprises; and eventually renewed accumulation with a higher organic composition and a higher rate of exploitation. Nevertheless capitalism’s history of periodic crises followed by renewed accumulation does not alter the tendential fall in the rate of profit and the long-term tendency to collapse.

If the crisis is only an embryonic collapse, the final collapse of the capitalist system is nothing else but a crisis fully developed and unhindered by any counter-tendencies.(19)

In reality the tendency for the rate of profit to fall generates various counter-tendencies which at first may successfully avert the fall, the major ones being:

  1. Increasing the rate of exploitation, either by reducing the living standards of the workers or by a rise in productivity. We saw earlier that the growth in the organic composition of capital itself involves a rise in productivity and thus the rate of surplus-value is increased which may provide a counter-tendency to the fall in the rate of profit.(20) In times of crisis capitalists can also increase surplus-value by absolute increases in exploitation (wage reductions, longer hours, etc.).
  2. Lowering the cost of raw materials and hence cheapening the elements of constant capital and increasing the rate of surplus value proportionally. Similarly, cheaper foodstuffs, other things being equal, will lower the exchange value of labour power and hence the cost of production for the capitalist.
  3. Foreign trade. By selling commodities above their value to capitals abroad with a lower organic composition, capitals of a relatively high organic composition can make extra-profits and thereby contribute to the counter-acting of the falling rate of profit.

Although such measures may successfully offset the tendency for the rate of profit to decline over certain periods, in the long run they merely exacerbate the problem, since capital accumulation is accelerated and the organic composition is further increased, leaving the long-term tendency for the rate of profit to decline even more pronounced. Historically the gradual fall in the rate of profit has been resolved by economic crises as outlined above, followed by a renewed cycle of accumulation based on a more concentrated and centralised capital and a higher organic composition than previously. With every crisis the rate of profit established at the beginning of the cycle will tend to be lower than at the start of the previous cycle; the counter-tendencies to the falling rate of profit become inadequate after shorter and shorter periods and the crises themselves occur more frequently, each time with greater intensity. Moreover there are limits to the ability of the counter tendencies to remain effective, even for short periods. Increased exploitation, for instance, is limited not only by the fact that workers have to live and cannot permanently be paid wages below subsistence level, but also by the combativity of the class itself as the class struggle intensifies with the deepening of the crisis. Thus,

As the force of the counter-tendencies is stopped, the tendency of capitalist collapse is left in control. Then we have the permanent crisis, or the death crisis of capitalism. The only means left for the continued existence of capitalism is then the permanent, absolute and general pauperisation of the proletariat.(21)

We shall see that “the force of the counter-tendencies is stopped” when accumulation has reached the point where capital is the dominant mode of production on a world scale and when the law of value establishes itself as a global law.

Communist Workers’ Organisation


(1) At long last, we can now publicly extend our thanks to ‘Ant Pace’, a long-standing supporter of the CWO, who many years ago took it upon himself to re-type the text and reproduce the tables of the whole of the original article whose first part is published here.

(2) We could also note that the crypto-Stalinist twins Roberts and Carchedi seem to think that socialism is just capitalism under national control.

(3) Marx, The German Ideology, p.17 (Lawrence and Wishart)

(4) Marx, Capital Vol. II, p.37 (Lawrence and Wishart)

(5) Marx, Preface to A Contribution to the Critique of Political Economy in Early Writings, p.426 (Pelican, 1975)

(6) Marx, Grundrisse, p.226 (Pelican). The precious metals have provided the most suitable material for money, being durable, a convenient size, of uniform physical quality and relatively scarce — i.e. they are not common property and are thus objects of production with an exchange value. Thus money is itself a commodity with an exchange value which can be expressed in terms of all other commodities.

(7) Marx, Capital Vol. 1, p.147

(8) Bukharin, Imperialism and the Accumulation of Capital, p.159 (Merlin Press, 1972). See this work and its Appendix for a fuller explanation of expanded reproduction.

(9) Mattick, Marx and Keynes, p.76 (Merlin Press 1969)

(10) Marx, Capital Vol. III, p.157

(11) Mattick, op.cit. p.46

(12) Marx, op.cit. p.158

(13) Engels to Schmidt in Marx/Engels Correspondence, p.553 (Progress Publishers, 1975)

(14) Marx, Grundrisse, op.cit., pp.748-9

(15) Mattick, ‘The Permanent Crisis’, in International Council Correspondence, November 1934

(16) op.cit. p.5

(17) op.cit. p.7

(18) For a further illustration of how this point is reached, see Grossman’s model of capital accumulation reprinted in Appendix II below.

(19) op.cit., p.9

(20) Although Marx assumed a constant rate of surplus-value for the purpose of analysing the tendential fall in the rate of profit, he did not ignore the fact that, unlike other counter-tendencies, an increasing rate of surplus-value is an integral part of the rise in the organic composition. On the contrary, Marx argues in Volume III of Capital (see for example, p.209 in the chapter ‘The Law as Such’) that the rate of profit will fall in spite of a rise in the rate of surplus-value.

(21) op.cit. p.14

Wednesday, August 31, 2022

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