[OPE-L:8504] Re: A possible reason why profit rates do not equalise--belated comment

From: michael a. lebowitz (mlebowit@sfu.ca)
Date: Mon Feb 24 2003 - 12:31:01 EST

At 15:04 09/01/2003 +0000, Paul Cockshott wrote:

>I have been thinking about the problem of why the
>rate of profit between sectors does not appear to
>equalise in the way expected by Marx.
>Readers will recall that this intersectoral equalisation
>is supposed to ensure that industries of differing
>organic compositions of capital will all show the
>same rate of profit, even though those with a
>high organic composition produce proportionately
>less surplus value. This was to be effected by
>industries with a high organic composition selling
>their output above its value and contrawise for
>those of low organic composition.
>What we have found empirically is that although
>industries with a high organic composition of capital
>do sell somewhat above their value, this increment
>is not sufficient to offset the higher organic
>composition. It looks as if their is a sort of
>competition going on between the law of the
>equalisation of the rate of profit and the law
>of value. This is consistent with the evidence
>that labour values and prices of production seem
>to be almost equally good predictors of market
>It has occured to me that this apparent competition
>between the law of value and the law of the equalisation
>of profit rates may in fact be a reflection of the
>class struggle between labour and capital.

Paul went on to talk about the rigidity of the movement of capital from low 
profit sectors (and thus the delay in the reduction of supply and increase 
in prices that equalises profit rates) and the other difficulty in those 
sectors of trying to lay off workers and intensify labour. Jerry (in #8298) 
then underlined the former point, stressing the extent to which fixed 
capital serves as a barrier to exit.
         Unfortunately, taking as a point of departure (in Marx's scathing 
comment) not 'reality but the new theoretical form in which the master had 
sublimated it', I've tended to look at reports of the empirical finding 
relating market prices to labour values as just a curiosity, not quite Marx 
and thus have spent little time wondering about why these results might 
emerge. The point by Paul and Jerry that, effectively, it is only through 
its money-form that capital moves from sectors of low return to high return 
however underlines the extent to which the equalisation of profit rates as 
described by Marx (in the classical tradition) can only be a 'tendency'.
         Yet, it seems to me that there is something far more fundamental, 
a more fundamental 'rigidity', that needs to be introduced into this 
discussion--- a question related to the side of workers. (No surprise that 
I would raise this.) Isn't the entire discussion of the 'transformation' of 
values into prices of production premised on (a 'law' of) the equalisation 
of rates of surplus value? After all, in the absence of such an 
equalisation, why should we think there is an inconsistency between a law 
of value and a law of equalisation of profit rates? So, theoretically, what 
produces equalisation of rates of surplus value?
         If the efforts of individual capitals to maximise their growth 
leads to intersectoral movement and takes the form of the tendency to 
equalise profit rates, can we suggest that it is the effort of workers to 
maximise their goals as wage-labourers that leads to movement between 
capitals and thus produces a tendency for the rate of surplus value to 
equalise? Given Marx's point that the wage necessarily appears as a payment 
for the entire workday rather than for the necessary portion, we couldn't 
suggest that workers are consciously comparing rates of exploitation; 
rather, what they would observe are differing wages and differing lengths 
and intensities of the workday. (The other factor affecting the rate of 
surplus value, productivity, would be obscured and would presumably appear 
to workers only indirectly in the form of profit levels of particular 
firms-- a basis for struggle in those firms and industry but not an 
inducement in itself for interfirm movement.) Thus, the movements of 
wage-labourers as such would be based on their search for a 'fair day's 
wages for a fair day's work'. Logically, then, insofar as workers move from 
sectors where wages are low and the workday high, this would be a basis for 
a tendency for equalisation of rates of surplus value. On the other hand, 
for rates of surplus value (rather than only wages and workdays) to be 
equalised, it appears necessary that the organised worker in a sector of 
high productivity not only 'measures his demands against the capitalist's 
profit and demands a certain share of the surplus value created by 
him'  but is also successful in having wages move in accordance with 
         Now, if these are the theoretical requirements for a 'law' of the 
equalisation of the rate of surplus value, what is the likelihood that they 
will be realised in practice? Even in the best case scenario, we must 
acknowledge that movements of workers from sector to sector, given the 
particular skills and training fixated in particular workers, are likely to 
be more rigid than the movements of capital; i.e., (in the absence of the 
homogenisation of workers) it will be especially the new generations of 
workers who will migrate to sectors of high wages, etc. Thus, even if this 
were the only rigidity, the tendency would operate mainly in the long term. 
Yet, add to this, among other things, the difficulty of workers moving from 
community to community--- not to mention across national boundaries in an 
age of global capital, the availability of new reserve armies (eg. peasants 
for whom low wages available represent substantial increases in income), 
the difficulties not only in organising trade unions in new workplaces but 
also in keeping wages moving in accordance with productivity in sectors 
already organised.
         In practice, one might suggest, the overwhelming pattern will be 
unequal rates of surplus value. Why, then, should sectors with a high 
organic composition of capital tend to have low profit rates? If the rate 
of surplus value there is higher than average (logical if there is a link 
between the technical composition of capital and productivity), then the 
flow of capital away from such sectors to equalise profit rates is not 
required. So, the question is--- what evidence is there for the 
equalisation of rates of surplus value in practice? And, is there any 
reason for us to think that the tendency is strong enough (or relevant 
enough) for us (collectively) to spend any more time producing new 
solutions for the 'transformation problem'  (starting the next million 
submissions on same to the few existing journals)? Insofar as there is a 
tendency for the rate of profit to equalise, this would not be inconsistent 
with relative prices regulated by labour values if the countertendencies to 
the law of equalisation of rates of surplus value overwhelm the tendency. 
Just asking.
         in solidarity,

Michael A. Lebowitz
Professor Emeritus
Economics Department
Simon Fraser University
Burnaby, B.C., Canada V5A 1S6

Currently in Cuba. Can be reached at:

Michael Lebowitz
Calle 13 No. 504 ent. D y E, Vedado, La Habana, Cuba
Codigo Postal 10 4000
(537) 33 30 75 or 832  21 54

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