Marx is saying that if for some reason part of the surplus value available for investment is diverted into some other use, there is less new capital available for firms seeking innovations that will cut their costs, and the trend towards capital-intensive investment will be reduced. The same point was made much more explicitly in the 1960s by Mike Kidron-apparently without knowing that Marx had spelt the argument out.21 He pointed out that Marx's argument about the falling rate of profit:
rested on two assumptions, both realistic: all output flows back into the system as productive inputs through either workers' or capitalists' productive consumption-ideally there are no leakages in the system and no choice other than to allocate total output between what would now be called investment and working class consumption; secondly in a closed system like this the allocation would swing progressively in favour of investment.
If the first assumption, that all outputs flow back into the system, was dropped-in other words, if some of these outputs are lost to the production cycle-then there would be no need for investment to grow more rapidly than the labour employed. The law of the falling rate of profit would not operate. "Leaks" of surplus value from the closed cycle of production/investment/production would offset the tendency of the rate of profit to fall.22
As Kidron put it in a later work:
In Marx the model assumes a closed system in which all output flows back as inputs in the form of investment goods or wage goods. There are no leaks. Yet in principle a leak could insulate the compulsion to grow from its most important consequences . . . In such a case there would be no decline in the average rate of profit, no reason to expect increasingly severe slumps and so on.23
The argument is impeccable, and Kidron goes on to suggest the form these leaks have taken:
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Understanding the System: Marx and Beyond