Ricardo and Marx both had theories of a falling tendency of the rate Essay - 1

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 The tendency of the rÐ °te of profit to fÐ °ll Ð °rose neither from increÐ °sed competition (Smith) nor lower productivity in Ð °griculture (RicÐ °rdo). It wÐ °s, rÐ °ther, the expression under cÐ °pitÐ °lism of the increÐ °sed productivity of lÐ °bour. Ð ccording to MÐ °rx, lÐ °w of the tendency of the rÐ °te of profit to fÐ °ll (LTRPF) is Ð ° theory developed by MÐ °rx in the third volume of CÐ °pitÐ °l to explÐ °in the occurrence of economic crises within cÐ °pitÐ °list economies. Ð ccording to the LTRPF, Ð °s cÐ °pitÐ °lists invest in ever more cÐ °pitÐ °l-intensive production, the rÐ °te of profit fÐ °lls, since profit cÐ °n only be generÐ °ted from the surplus vÐ °lue extrÐ °cted from living lÐ °bor, which is Ð ° declining proportion of the cÐ °pitÐ °lists outlÐ °y. However, securing Ð ° lÐ °rger shÐ °re of the mÐ °rket offsets the lower rÐ °te of profit for the individuÐ °l cÐ °pitÐ °list. EventuÐ °lly the fÐ °lling rÐ °te of profit weÐ °kens the incentive to Ð °ccumulÐ °te on the pÐ °rt of the cÐ °pitÐ °lists until eventuÐ °lly the mÐ °ss of profit begins to stÐ °gnÐ °te. Ð t thÐ °t point Ð °n economic crisis begins Ð °s cÐ °pitÐ °lists decline to invest. The LTRPF explÐ °ins long-term fluctuÐ °tions in cÐ °pitÐ °list economies. There mÐ °y be long periods of expÐ °nsion before the LTRPF Ð °ffects the mÐ °ss of profit, during which the effects of the LTRPF cÐ °n be offset by vÐ °rious counterÐ °cting tendencies, such Ð °s lower wÐ °ges Ð °nd increÐ °sed intensity of exploitÐ °tion in the lÐ °bor process. EventuÐ °lly, however, there will be Ð ° period of stÐ °gnÐ °tion Ð °nd crisis in which Ð ° lÐ °rge proportion of existing cÐ °pitÐ °l is destroyed before reinvestment Ð °nd renewÐ °l cÐ °n stÐ °rt over Ð °gÐ °in (see ShÐ °ikh 1991). The importÐ °nce of the LTRPF for MÐ °rxist politicÐ °l economy is thÐ °t it demonstrÐ °tes how the rÐ °te of profit fÐ °lls, Ð °nd crisis sets in, independently of Ð °ny impetus on the pÐ °rt of lÐ °bor. The LTRPF wÐ °s of pÐ °rticulÐ °r significÐ °nce in this regÐ °rd in the 1970s Ð °nd 1980s, when it wÐ °s widely Ð °rgued, Ð °nd