Reply to Andrew Kliman’s points (see the comments on my 13 March 2012 review of his book, The Failure of Capitalist Production)
Firstly, thanks for clarifying some issues. Secondly, I may have not fully presented what you were arguing when I made the comments in my review of your book, but I think that the logic of what I said stands, given your general thesis about the share of worker incomes (including benefits, etc) being roughly constant over time. I should also have been more specific about which ‘composition of capital’ I am talking about.
The ‘organic composition’ of capital as defined by Marx expresses the positive correlation that usually exists between the technical and value compositions of capital (see the opening paragraphs of Chapter 25, Volume 1 of Capital). The technical composition looks at the use-value division between means of production and labour-power. The value composition is the value of means of production versus the value of labour-power employed. There can be cases where one goes up and the other one goes down, but overall they will tend to move (usually higher) together, and so produce a rising organic composition. The use-value side of the process is critical for showing the limits of how much labour-time capital can potentially exploit, but I agree that the value composition is most relevant for tracking the movements in the rate of profit. If some of the questions you have about the points I made are down to me using ‘organic composition’ rather than ‘value composition’, then hopefully this clarifies things.
Let us turn to the other points in question. You argue that the rate of profit (using US data) started out high, after 1945, and then fell owing to the impact of much lower incremental profit rates thereafter. Your analogy was with average ages at a party (p135 in your book). When the host is 22 and is the first to arrive, the average age is 22. Then the guests begin to arrive, and each one is 10 years old. So the average age begins to fall towards 10, even though ‘nothing changes during the party’. You only referred to average profits in this particular section, not to any composition of capital (as I incorrectly suggested). But only a few pages earlier, on p128, you argued that the data indicate your proxy measure for the rate of surplus value was flat and that “almost all the entire fall in the rate of profit was due to an increase in the ratio of advanced capital to employee compensation”.
The algebra surely indicates that if the rate of profit fell and if the rate of surplus value was constant, then the (value) composition of capital must have risen. In your argument, the average rate of profit fell because “the CPS-MA rate of profit on new investments (CPS-MA-NEW), the additional profit as a percentage of the additional advance of capital, was much lower” (p135-6). I did not discuss in my review what you meant by CPS-MA, etc, but the overall logic is clear. You must be arguing that the value composition of capital did not rise in the post-war period on new investments. Instead, the average composition of capital rose because the value composition of new investments was much higher, but presumably constant at the higher levels for these new investments. It was this constant value composition of capital on new investments in the post-1945 period that I found to be implausible.
Tony Norfield, 22 March 2012