Yet Marx himself regarded it as absolutely central. It enabled him to assert that capitalism is doomed by the very forces of production which it itself unleashes:
The rate of self-expansion of capitalism, or the rate of profit, being the goal of capitalist production, its fall . . . appears as a threat to the capitalist production process.26
This "testifies to the merely historical, transitory character of the capitalist mode of production" and to the way that "at a certain stage it conflicts with its own further development". 27 It showed that "the real barrier of capitalist production was capital itself" .28
Marx did not pick the idea that profit rates fall out of thin air. It was common among economists who preceded him.29 As Eric Hobsbawm has said, "Two things worried the early 1 9th century businessmen and economists: the rate of their profits and the rate of expansion of their industries. " Adam Smith had believed profit rates must fall as a result of increased competition and Ricardo because of supposed "diminishing returns" in agriculture.30 Marx provided an explanation which did not depend on such questionable assumptions,31 but upon grasping that the dynamic of capitalist accumulation contains within it an irresolvable contradiction.
Each individual capitalist can increase his own competitiveness through increasing the productivity of his workers. The way to do this is for each worker to use more and more "means of production"-tools, machinery and so on-in his or her work. That involves the means of production expanding more rapidly than the workforce. There is a growth in the ratio of the physical extent of the means of production to the amount of labour power working on them-a ratio that Marx calls the "technical composition of capital" .32 But other things being equal, a growth in the physical extent of the means of production will also be a growth in the level of investment needed to buy them. So there will also be an expansion in the ratio of investment to the workforce, in the value of the means of production compared with wages (or, to use Marx's terminology, of "constant capital" to "variable capital" ) . This ratio is Marx's "organic composition of capital" (as explained in Chapter One).33 Its growth, for Marx, is a logical corollary of capital accumulation.
The Dynamics of the System
69