Ricardo and Marx both had theories of a falling tendency of the rate Essay

Ricardo and Marx both had theories of a falling tendency of the rate of profit in the development of capitalism. What were the different theoretical bases for t - Essay Example It ws, rther, the expression under cpitlism of the incresed productivity of lbour. ccording to Mrx, lw of the tendency of the rte of profit to fll (LTRPF) is theory developed by Mrx in the third volume of Cpitl to explin the occurrence of economic crises within cpitlist economies. ccording to the LTRPF, s cpitlists invest in ever more cpitl-intensive production, the rte of profit flls, since profit cn only be generted from the surplus vlue extrcted from living lbor, which is declining proportion of the cpitlist's outly. However, securing lrger shre of the mrket offsets the lower rte of profit for the individul cpitlist. Eventully the flling rte of profit wekens the incentive to ccumulte on the prt of the cpitlists until eventully the mss of profit begins to stgnte. t tht point n economic crisis begins s cpitlists decline to invest. The LTRPF explins long-term fluctutions in cpitlist economies. There my be long periods of expnsion before the LTRPF ffects the mss of profit, during which the effects of the LTRPF cn be offset by vrious countercting tendencies, such s lower wges nd incresed intensity of exploittion in the lbor process. Eventully, however, there will be period of stgntion nd crisis in which lrge proportion of existing cpitl is destroyed before reinvestment nd renewl cn strt over gin (see Shikh 1991). The importnce of the LTRPF for Mrxist poli... The LTRPF ws of prticulr significnce in this regrd in the 1970s nd 1980s, when it ws widely rgued, nd sometimes ccepted on the Left, tht the economic crisis nd unemployment of the time resulted from excessive wge demnds tht hd generted infltion. Proponents of the LTRPF could mintin tht economic crises would occur even if workers ccepted the cpitlists' clls for wge cuts. If it is ccepted tht the LTRPF is inherent in cpitlist economies, nd tht crises re unvoidble, then the only wy to prevent further crises is to remove the constrints of cpitlism (see Hrmn 1984; Mndel 1981). Citing Mrx in the Cpitl, "the progressive tendency of the generl rte of profit to fll is, therefore, just n expression peculir to the cpitlist mode of production of the progressive development of the socil productivity of lbour. This does not men to sy tht the rte of profit my not fll temporrily for other resons. But proceeding from the nture of the cpitlist mode of production, it is thereby proved logicl necessity tht in its development the generl verge rte of surplus-vlue must express itself in flling generl rte of profit. Since the mss of the employed living lbour is continully on the decline s compred to the mss of mterilised lbour set in motion by it, i.e., to the productively consumed mens of production, it follows tht the portion of living lbour, unpid nd congeled in surplus-vlue, must lso be continully on the decrese compred to the mount of vlue represented by the invested totl cpitl. Since the rtio of the mss of surplus-vlue to the vlue of the invested totl cpitl forms the r te of profit, this rte must constntly fll." (Krl Mrx, Cpitl Volume 3, chpter 13) In nutshell, this lw sttes tht the tendency of the socil cpitl to