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A marxist theory

Let's mark:
p' = rate of profit
m = returns
c = value of machinery i.e. means of production
v = cost of labour

Now, p' = m/(c+v) applies.

As Marx saw and as we know today that an inducement to produce on an even greater scale is thereby to increase the organic composition of capital further i.e. to buy more efficient machines. Marxists also see that profit is derived from solely from human labour. Therefore, because capitalists must invest more on machinery (c) c+v increases and c/v -ratio increases at the same time. Marx claimed that there were social limits to the extent to which capitalists could increase the exploitation rate, while no such thing limited the growing organic composition of capital. Consequently, Marx envisioned that greater and greater cut-throat competition among capitalists for that declining profit, increasing the tendency for capital to be concentrated in fewer and fewer hands, combined with the greater misery of labor would culminate in ever greater crises.

Now, even though 'v' surely increases the productivity of labour increases at the same time. Therefore, if we are to adopt marxist terminology, the exploitation rate can be increased too. And furthermore, capitalism is not a linear process that goes ever deeply into a crisis but thanks to the cyclic nature of capitalism the rate of profit has step-like raises once a while due to new innovations. So, you may sweep the sweat from your forehead; capitalism is not about to collapse yet.

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