[page 24]
PROFITS- CATASTROPHIC It was only five or six years ago that the Marxists were denounced by the capitalist economists as distorting out long-run decline in the profitability of British capitalism. But now what Marx described as their "horror of the falling rate of profit" ('Capital" Vol 3) takes the form of an almost the facts.
obsessive probing of Recent articles in the England Quarterly Bulletin' (December 1978) and in the government (22 September 1978) provide striking confirmation of the catastrophic decline in profitability. The following table, showing the development of the rate of profit (see below) since 1960, summarises information from both these articles:
All industrial and commercial companies 7.9 (After tax) Manufacturing 10.9 industry Food, drink, tobacco Chemicals Metal manufacture Engineering, ships, vehicles Textiles, clothing Wholesale distribution Retail distribution DROP by Andrew Glyn The rate of profit shows the percentage return received by the capitalist for every pound invested. Suppose the capitalist invests £700, the 000 in a factory. Workers in the factory produce £500,000 of commodities each year. The capitalists' costs are £100,000 for fuel, etc; £200,000 for wages; leaving him a 'gross' profit of £200,000 a year. But in addition he sets aside Bank of £100,000 in when the new factory and machinery can no longer be profitably used-7 years in the example-he will be able to purchase new ones. This leaves materials and £200,000 for wages. So that his net profit expressed as a percentage of capital employed is 10%. This is his rate of profit. It RATE OF PROFIT % (before tax) 60-64'65-69 70-72 '73 '74 4.0 7.2 8.7 12.5 10.6 3.3 5.7 5.4 5.9 1.6 5.7 6.8 9.0 4.0 8.1 10.8 9.8 12.9 4.7 6.0 5.4 11.6 10.0 -0.7 2.5 6.7 5.8 8.8 1.3 7.1 8.8 6.9 11.5 7.2 6.4 6.4 11.3 10.4 7.3 9.3 11.4 11.7 11.4 17.6 18.4 - 16.8 Sources: BEQB Table C, Trade & Industry Tables 1, 2, 3. * materials, depreciation so that profit of 10%.
"76 "77 175 4.0 3.4 3.6 2.2 2.1 2.1 rate of 3.2 1.9 1.4 6.5 4.4 - 5.8 4.0 -3.0 0.9 4.0 0.6 -1.3 this 0.3 4.7 6.6 - 11.2 10.1 shows for example the amount he has expanded his capital during the year. It is often called the rate of return on capital employed or the return on investment. In Marx's terms, constant capital used up (c) is £200,000 (£100,000 depreciation plus £100,000 materials), variable capital (v) is £200,000 (the wage bill) and surplus value is f100,000. The rate of profit is surplus value divided by constant capital advanced (the whole £700,000 for the factory plus the £100,000 for materials) and varible capital advanced (£200,000 which again gives the same rate of Competitive power eroded What comes out very clearly from the figures is that the rate of profit in industry as a whole, and especially in manufacturing, was declining throughout the sixties and early seventies. For example in manufacturing the profit during 1970-72 was more than a third below the level of 1960-64, and it fell further in 1973, supposedly a 'boom' year. Only in the distribution sector was profitability maintained. However the deepening crisis after 1973 affected even sector, whilst manufacturing profitability virtually disappeared as the effects of the world recession were added to the downward trend. In some industries in fact the rate of profit became negative: the capitalists were actually eating into their capital to keep production going. Just how desperate the situation is
[page 25]