Ithank dylan riley for the opportunity to clarify some of the arguments put forward in my article ‘Rate and Mass’ published in nlr 130. My intent was to take some of Marx’s key propositions, mostly drawn from the Grundrisse, to situate them within the overall framework of his theory of capital, and to indicate where and how such propositions might shed light on the state of contemporary capitalism. I tried to be faithful to Marx’s formulations and to this end incorporated substantial quotations from his texts. I leave it to readers to decide if my arguments are faithful to Marx or merely ‘Harveyian’ or ‘Ptolemaic’ constructions, as Riley depicts them.footnote¹

The question that occupies me through most of the text, Riley claims, is how do capitalists respond to the tendency of the rate of profit to fall in ways that might counteract it? My starting point, however, has nothing to do with counteracting the falling rate of profit. My focus is on the origin and implications of Marx’s ‘dual law of falling rate and rising mass’ of profit. Riley apparently views the rising mass as a counteracting influence in my account. This is an error. At no point do I, or Marx, view it so. The dual law is discussed in Volume 3 of Capital both before and independently of the discussion of countervailing influences. When the rising mass is discussed in the Grundrisse it is never presented as a countervailing one.

So how does this dual law with which I am concerned work, and how do these two distinctive results—falling rate and rising mass of profit—arise out of a singular process? The capitalist seeks to command as much mass of value and surplus value as possible. Possession of and command over this mass is the source of capitalist class power as well as the ultimate measure of an individual capitalist’s wealth and success. The billionaires’ club is defined by their command over the mass. The significance of the rate of profit lies in its contribution to the mass. Capitalists acquire more mass by either raising the rate of exploitation of existing labour power—hence increasing their profit—or by increasing the number of labourers employed. These are two strategies, often combined, for achieving the same end of increasing the mass. Far from being a countervailing influence, command over the mass is closer to the be-all and end-all of accumulation.

Riley begins, however, by rejecting Marx’s theory of the falling rate of profit as merely ‘orthodox’.footnote² If capitalists find that technological change leads to a falling rate of profit, then why would they bother to engage with it? There are two answers here. The first lies in Marx’s theorization of relative surplus value. More efficient producers can sell at the average cost in the market but produce at lower cost. This extra profit disappears as competing producers adopt the more efficient technologies. The result is an incentive for leap-frogging technological innovation and ever-increasing labour productivity. This is driven by ‘the coercive laws of competition’, over which individual capitalists have no control.footnote³ Two important social consequences follow. First, as the cost of wage goods declines due to the rising productivity of labour in the wage goods industries, so the value of labour power (wage rates) can fall while sustaining the same material standard of living. This increases the surplus value (profit) for all capitalists. Historically, up until 1970 or so, workers in the advanced-capitalist countries shared the benefits of rising productivity. Some achieved a rising material standard of living. Since the 1970s, most of the benefits of rising productivity have gone to capital. This is the positive impact of relative surplus value for capital. But it simultaneously triggers the negative impact of a falling profit rate.

The second theoretical answer is more complicated. It derives from the tendency of the profit rate to be equalized across all producers through competition. Commodities no longer exchange at their value (the costs of labour power and material inputs plus the surplus value) but at prices of production (the costs of labour power and material inputs plus the average rate of profit). The result, Marx shows, is that capitalist producers contribute to surplus value according to the labour power they employ while appropriating surplus value according to the capital they advance. ‘The capitalist class distributes the total surplus value so that it shares in it evenly in accordance with the size of its capital, instead of in accordance with the surplus value actually created by the capitals in the various branches of business.’ Labour-intensive firms, sectors, regions and countries consequently subsidize capital-intensive firms, sectors, regions and states. Marx called this ‘capitalist communism’.footnote⁴

This theoretical insight explains ‘why the capitalists are birds of a feather’ and ‘united by a real freemasonry’ in opposition to the working class. It could also happen that ‘a capitalist who employed not a single worker would have just as much of an interest in the exploitation of the working class by capital and just as much derive his profit from unpaid surplus labour as would a capitalist who . . . laid out his entire capital on wages.’footnote⁵ This is Marx’s answer to all those who ask, when first confronted with his value theory, how it is, if all value originates with productive labour, that a fully automated firm that employs little or no labour can still command a profit. It would have been useful if Riley had understood this, for it explains how and why capitalists continue to pursue capital-intensive production in the face of falling rates of profit.

The interesting question here is the degree to which profit rates equalize through competition. Under the Bretton Woods arrangements considerable protections were afforded capitalist enterprises by the existence of capital controls. But since the abandonment of Bretton Woods, profit-rate equalization has almost certainly become more salient. The cross subsidies from labour-intensive economies (like Bangladesh) to capital-intensive economies like the us and Germany have become more significant. The Chinese have recognized the point. Xi plans to convert China from a labour-intensive economy that has been giving up value galore to the us and Germany into a capital-intensive economy that would match a declining labour force and retain more of the value produced there. The us, meanwhile, is frantically seeking to prevent technology transfer to China in order to protect its hegemonic position. In a free-trade regime, such as that defined by the World Trade Organization, the scramble is on for as much capital-intensive development as possible. When Singapore was cast out of the Malaysian Federation in the 1960s, it consciously chose the path of capital-intensive rather than labour-intensive development, with consequences for all to see. Bangladesh has taken the labour-intensive path with appalling results. The us incidentally encouraged technology transfer to Singapore—as well as to Japan, South Korea and Taiwan—in order to contain the ambitions of China.