I have just released a new study of the rates of profit of U.S. corporations, 1929-2007, with emphasis on the period since the early 1980s. It’s entitled “The Persistent Fall in Profitability Underlying the Current Crisis: New Temporalist Evidence.
You can obtain the text, and an accompanying spreadsheet file containing data and graphs, by clicking on the link.
Please note that the study is kind of long — 27,000 words, 106 double-spaced pages. If you just want the main conclusions, here they are:
This paper’s principal findings are
1. U.S. corporations’ rate of profit began to fall about a decade after the end of World War II and the falling trend has persisted until the present time. Some measures of the rate of profit leveled off or increased very slightly after the early 1980s, while others have continued to decline. None indicates that a genuine, sustainable rebound in profitability took place.
2. Claims to the contrary are based on cherry-picking of the data and on the use of current-cost “rates of profit” that are not rates of profit in any normal sense.
3. The persistence of the fall in the rate of profit is not eliminated when rates of profit are adjusted for inflation in the general price level or in the monetary expression of labor-time.
4. Because the rate of profit has not rebounded, there has not been a growing divergence between the rate of profit and the rate of capital accumulation. The rate of accumulation has tracked the rate of profit quite closely, and the former has fallen in response to the fall in the latter.
5. Distributional changes account for little of the fall in the rate of profit because, apart from a one-time fall in the profit share of income in the late 1960s, there has been no sustained distributional change. Once that brief period is set aside, almost the entire fall in the rate of profit is traceable to a rise in the value composition of capital rather than to a fall in the rate of surplus-value.
6. The dominant cause of the fall in the rate of profit, by far, was the tendency of the rate of profit to fall toward a lower incremental rate of profit determined by the growth rate of employment and the share of profit that is reinvested. Changes in the profit share of income, and in the relationship between nominal prices and the real value of commodities as determined by labor-time, had a very minor influence.
7. Since 1982, the ratio of surplus-value to advanced capital seems to have fallen in relationship to the rates of profit derived from official government data, because of a marked increase in depreciation due to obsolescence (moral depreciation) resulting from increased employment of computer technology.
These results strikingly disconfirm the claim, which is based on the contention that the rate of profit has rebounded during the last quarter-century, that the present economic crisis is rooted in nothing deeper than financial-sector phenomena (such as irresponsibility and deregulation that produced unsustainable asset-price bubbles) that are essentially unrelated to and separable from movements in profitability. They therefore fail to lend support to the now-fashionable belief that greater state control over the financial sector will suffice to prevent the recurrence of similar crises in the future.
My findings also indicate that Marx’s law of the tendential fall in the rate of profit fits the facts remarkably well. The substantial explanatory power of this law can be seen especially in the fact that the principal source of the fall in the observed nominal rate of profit was the pronounced tendency for the rate of profit to fall toward a lower incremental rate of profit that is regulated by the factors that the law singles out (the growth rate of employment and the rate of surplus-value that is reinvested).
It is time to reclaim this law and the value theory in which it is grounded. Yet they cannot be reclaimed as long as the myth that they have been proven to be internally inconsistent is allowed to persist. The record needs to be set straight, and the “Marxian economics” tradition ––which has given us “consistent” but spurious current-cost rates of profit that head ever upward while the economy goes down the tubes and, as a direct result, Marxian theories of the current economic crisis that take surface financial-sector phenomena to be essential causes of the economic crisis––needs to be repudiated.