Furthermore, for Marx, this general equalization process across all spheres of production, eventually gives way to a general falling rate of profit. It does so because the motive force within capitalist production to ever-lower production-costs in order to augment profit and the rate of profit so as to expand production and lure increasing capital investment, eventually drives the value creating force itself from the labor-process, namely, labor-power. Consequently, according to Marx, after a small burst of surplus profits and higher profit rates, brought about by cost-saving production techniques, these advantages eventually give way to slumps, which in turn reduce the profit rate below its former level, producing a general falling rate of profit. According to Marx,
the progressive development [ itself ] of … productivity,… which is shown by the way that the growing use of machinery and fixed capital generally enables more raw … materials to be transformed into products in the same time by the same number of workers, i. e. with less labor, there corresponds to this a growing volume of constant capital and continual cheapening of … product [ s ]. Each individual product, taken by itself, contains, a smaller sum of labor than at a lower stage of development of production, where the capital laid out on labour stands in a far higher ratio to that laid out on means of production. With the progressive decline in the variable capital in relation to the constant capital, [ i. e. in relation to the cost of wages and means of production ], leads to a rising organic composition of the total capital, and the direct result of this is … steadily falling general rate of profit.[ 79 ]
The general falling rate of profit is the direct result of less and less labor-power being used-up in production in relation to ever-increasing sizeable amounts of means of production, that is, constant capital. To have a general falling rate of profit, variable capital, i. e. capital laid out on wages, must remain stagnant and / or decrease, while constant capital, i. e. capital laid out on means of production, must increase as profits increase and, in general, capitalist production increases. For instance, Marx outlines the general falling profit rate, pending a rate of surplus-value of 100 %, as
1) C = 50 and V = 100, then P’ = 100 / 150 = 66.66 % rate of profit. 2) C = 100 and V = 100, then P’ = 100 / 200 = 50 % rate of profit. 3) C = 200 and V = 100, then P’ = 100 / 300 = 33.33 % rate of profit. 4) C = 300 and V = 100, then P’ = 100 / 400 = 25 % rate of profit. 5) C = 400 and V = 100, then P’ = 100 / 500 = 20 % rate of profit. [ 80 ]
As per Marx’ s example, with a continuous investment in constant capital, i. e. means of production, after every turnover period, and with variable capital, i. e. wages, remaining the same after every turnover period, the rate of profit, with every turnover, continuously declines. To quote Marx,“ this gradual growth in the constant capital, in relation to variable, must necessarily result in a gradual fall in the general rate of profit”[ 81 ]. Moreover, according to Marx, this continuous re-investment of profits, produced by the capitalist mode of production, into constant capital in relation to variable capital is because“ it is always cheaper to employ constant capital rather than variable … in so far as … only wear and tear [ of constant capital ] goes into the value of the commodity, whereas the … wages [ of variable capital ] must be completely reproduced in it”[ 82 ]. It is because constant capital is replenished piecemeal in comparison to variable capital, which must be replenished, immediately, at once, that constant capital, for Marx, appears cheaper than variable capital in the capitalist’ s mind. However, for Marx, this is a false belief, by capitalists in the sense that only variable capital can create surplus value, i. e. profit, to invest primarily in constant capital, i. e. means of production, only aggravates and hastens the general falling rate of profit. So, in a peculiar contradiction, as capitalist production expands and develops, producing evermore commodities and a greater social need for means of production and cost-saving technology, in