Tendency of The Rate of Profit To Fall - Further Controversy

Further Controversy

Some argue, with Marx, that the TRPF applies only to the sphere of capitalist production. Thus, it is argued, it is eminently possible that while industrial profitability declines, average profitability in activities external to real production (for example, commercial trade, capital gains and asset speculation) increases. Investment in production is only one mode of capital accumulation, but not the only one. Thus, even if the growth rate of production stagnates, asset sales may boom. In advanced capitalist societies such as the United States, constant capital applied in private sector productive activities represents only about 20–30% of the value of the total physical capital stock, and perhaps 10–12% of total capital assets owned, and therefore it is unlikely that a fall in the industrial rate profit could by itself explain economic crises.

Others claim that for Marx, commercial trade and asset speculation were unproductive sectors, in which no value can be created. Therefore, they argue, all income of these sectors is a deduction on the value created in the productive sectors of the economy. Booms in unproductive sectors may temporarily act as a countervailing factor to the TRPF, but not in the long run. On the contrary, Fred Moseley argues, in the United States the rate of profit is lower than it was in the decades after World War II, because of a rising share of unproductive labor with respect to productive labor. This is a reason of its own for a falling general rate of profit in distinction to the TRPF. Yet both Moseley's calculations and his definition of unproductive labor have been criticised by other Marxists.