Wednesday, August 7, 2013


If the rate of profit is a function of variable capital (labor or wages) and constant capital (non-labor or machines, raw materials, etc.) then this chart depicts that relationship: variable capital divided by constant capital or (V/C) V representing labor and C representing non-labor. The data for the chart is from Table 1.15 of the National Income and Products Tables of the Bureau of Economic Analysis. The table purports to set forth the costs, profit and price of each unit of value added production in the U.S. The table shows the factors of value-added non-finance business production as: Labor Costs + Non-Labor Costs + Profit = Price. This analysis of the factors of price is interesting in that it shows that profit is a factor which is determined in the production or input phase of the economy rather than in the market or output phase, exactly as Marxist economics describes.

In other words, profit does not originate in the market, it is only realized  there in the price of the product.

As can be seen in the chart there is an unmistakable decline in the rate of profit (V/C) from 1929 to 2012. The only dramatic exceptions are the Great Depression and the war-profiteering of WWII.Rate of Profit

Monday, August 5, 2013

This graph is an attempt to demonstrate Marx's theory of the tendency of the capitalist rate of profit to fall. The data used to construct the chart are from the Bureau of Economic Analysis (BEA), National Income and Product Tables, Table 1.15, Price, Costs and Profit Per Unit of Real Gross Value Added.

The rate of profit (vertical axis) is calculated as Rate of Profit = Profit / Costs (the labor and non-labor costs per unit of value added production as shown in Table 1.15.) No attempt is made to adjust the profit for total capital, capital invested, capital depreciation, etc. 

There is no question that over the past 83 years the rate of capitalist profit has slowly fallen. If the period of the Great Depression and World War II are removed, the rate of fall would be more dramatic. Of course, WW II and the military spending of the Cold War, Korea, Vietnam, Iraq and Afghanistan, as well as government spending on social programs and the recent trillion dollar bank bailouts have had the effect of "moderating" the periodic crises of the capitalist system. The tendential fall in the rate of profit continues, however.