Karl Marx, The Capital.

Volume III (1894)

Part III. The Law of the Tendency of the Rate of Profit to Fall
Chapter 14. Counteracting Influences

If we consider the enormous development of the productive forces of social labour in

the last 30 years alone as compared with all preceding periods; if we consider, in
particular, the enormous mass of fixed capital, aside from the actual machinery, which
goes into the process of social production as a whole, then the difficulty which has
hitherto troubled the economist, namely to explain the falling rate of profit, gives place
to its opposite, namely to explain why this fall is not greater and more rapid. There must
be some counteracting influences at work, which cross and annul the effect of the
general law, and which give it merely the characteristic of a tendency, for which reason
we have referred to the fall of the general rate of profit as a tendency to fall.
The following are the most general counterbalancing forces:

I) Increasing intensity of exploitation

The degree of exploitation of labour, the appropriation of surplus-labour and surplus-

value, is raised notably by lengthening the working-day and intensifying labour. These
two points have been comprehensively treated in Book I as incidental to the production
of absolute and relative surplus-value. There are many ways of intensifying labour
which imply an increase of constant, as compared to variable, capital, and hence a fall in
the rate of profit, such as compelling a labourer to operate a larger number of machines.
In such cases – and in most procedures serving the production of relative surplus-values
– the same causes which increase the rate of surplus-value, may also, from the
standpoint of given quantities of invested total capital, involve a fall in the mass of
surplus-value. But there are other aspects of intensification, such as the greater
velocities of machinery, which consume more raw material in the same time, but, so far
as the fixed capital is concerned, wear out the machinery so much faster, and yet do not
in any way affect the relation of its value to the price of the labour which sets it in
motion. But notably, it is prolongation of the working-day, this invention of modern
industry, which increases the mass of appropriated surplus-labour without essentially
altering the proportion of the employed labour-power to the constant capital set in
motion by it, and which rather tends to reduce this capital relatively.

Moreover, it has already been demonstrated – and this constitutes the real secret of the
tendency of the rate of profit to fall – that the manipulations to produce relative surplus-
value amount, on the whole, to transforming as much as possible of a certain quantity of
labour into surplus-value, on the one hand, and employing as little labour as possible in
proportion to the invested capital, on the other, so that the same reasons which permit
raising the intensity of exploitation rule out exploiting the same quantity of labour as
before by the same capital. These are the counteracting tendencies, which, while
effecting a rise in the rate of surplus-value, also tend to decrease the mass of surplus-

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value, and hence the rate of profit produced by a certain capital. Mention should also be
made here of the widespread introduction of female and child labour, in so far as the
whole family must now perform more surplus-labour for capital than before, even when
the total amount of their wages increases, which is by no means always the case.
Everything that promotes the production of relative surplus-value by mere improvement
in methods, as in agriculture, without altering the magnitude of the invested capital, has
the same effect. The constant capital, it is true, does not, in such cases, increase in
relation to the variable, inasmuch as we regard the variable capital as an index of the
amount of labour-power employed, but the mass of the product does increase in
proportion to the labour-power employed [...]

II) Depression of wages below the value of labour-power

This is mentioned here only empirically, since, like many other things which might be
enumerated, it has nothing to do with the general analysis of capital, but belongs in an
analysis of competition, which is not presented in this work. However, it is one of the
most important factors checking the tendency of the rate of profit to fall.

III) Cheapening of elements of constant capital

Everything said in Part I of this book about factors which raise the rate of profit while
the rate of surplus-value remains the same, or regardless of the rate of surplus-value,
belongs here. Hence also, with respect to the total capital, that the value of the constant
capital does not increase in the same proportion as its material volume. For instance, the
quantity of cotton worked up by a single European spinner in a modern factory has
grown tremendously compared to the quantity formerly worked up by a European
spinner with a spinning-wheel. Yet the value of the worked-up cotton has not grown in
the same proportion as its mass. The same applies to machinery and other fixed capital.
In short, the same development which increases the mass of the constant capital in
relation to the variable reduces the value of its elements as a result of the increased
productivity of labour, and therefore prevents the value of constant capital, although it
continually increases, from increasing at the same rate as its material volume, i.e., the
material volume of the means of production set in motion by the same amount of
labour-power. In isolated cases the mass of the elements of constant capital may even
increase, while its value remains the same, or falls. [...]

IV) Relative over-population

Its propagation is inseparable from, and hastened by, the development of the
productivity of labour as expressed by a fall in the rate of profit. The relative over-
population becomes so much more apparent in a country, the more the capitalist mode
of production is developed in it. This, again, is the reason why, on the one hand, the
more or less imperfect subordination of labour to capital continues in many branches of

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production, and continues longer than seems at first glance compatible with the general
stage of development. This is due to the cheapness and abundance of disposable or
unemployed wage-labourers, and to the greater resistance, which some branches of
production, by their very nature, render to the transformation of manual work into
machine production.

On the other hand, new lines of production are opened up, especially for the production
of luxuries, and it is these that take as their basis this relative over-population, often set
free in other lines of production through the increase of their constant capital. These
new lines start out predominantly with living labour, and by degrees pass through the
same evolution as the other lines of production. In either case the variable capital makes
up a considerable portion of the total capital and wages are below the average, so that
both the rate and mass of surplus-value in these lines of production are unusually high.
Since the general rate of profit is formed by levelling the rates of profit in the individual
branches of production, however, the same factor which brings about the tendency in
the rate of profit to fall, again produces a counterbalance to this tendency and more or
less paralyses its effects.

V) Foreign trade

Since foreign trade partly cheapens the elements of constant capital, and partly the
necessities of life for which the variable capital is exchanged, it tends to raise the rate of
profit by increasing the rate of surplus-value and lowering the value of constant capital.
It generally acts in this direction by permitting an expansion of the scale of production.
It thereby hastens the process of accumulation, on the one hand, but causes the variable
capital to shrink in relation to the constant capital, on the other, and thus hastens a fall in
the rate of profit. In the same way, the expansion of foreign trade, although the basis of
the capitalist mode of production in its infancy, has become its own product, however,
with the further progress of the capitalist mode of production, through the innate
necessity of this mode of production, its need for an ever-expanding market. Here we
see once more the dual nature of this effect. (Ricardo has entirely overlooked this side
of foreign trade).

Another question – really beyond the scope of our analysis because of its special nature
– is this: Is the general rate of profit raised by the higher rate of profit produced by
capital invested in foreign, and particularly colonial, trade?

Capitals invested in foreign trade can yield a higher rate of profit, because, in the first
place, there is competition with commodities produced in other countries with inferior
production facilities, so that the more advanced country sells its goods above their value
even though cheaper than the competing countries. In so far as the labour of the more
advanced country is here realised as labour of a higher specific weight, the rate of profit
rises, because labour which has not been paid as being of a higher quality is sold as
such. The same may obtain in relation to the country, to which commodities are
exported and to that from which commodities are imported; namely, the latter may offer

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more materialised labour in kind than it receives, and yet thereby receive commodities
cheaper than it could produce them. Just as a manufacturer who employs a new
invention before it becomes generally used, undersells his competitors and yet sells his
commodity above its individual value, that is, realises the specifically higher
productiveness of the labour he employs as surplus-labour. He thus secures a surplus-
profit. As concerns capitals invested in colonies, etc., on the other hand, they may yield
higher rates of profit for the simple reason that the rate of profit is higher there due to
backward development, and likewise the exploitation of labour, because of the use of
slaves, coolies, etc. […]

We have thus seen in a general way that the same influences which produce a tendency
in the general rate of profit to fall, also call forth counter-effects, which hamper, retard,
and partly paralyse this fall. The latter do not do away with the law, but impair its effect.
Otherwise, it would not be the fall of the general rate of profit, but rather its relative
slowness, that would be incomprehensible. Thus, the law acts only as a tendency. And it
is only under certain circumstances and only after long periods that its effects become
strikingly pronounced.