The Strange Capitalist Embrace of Austerity Viewed in Terms of Marx’s Falling Profit-Rate Law

Marx’s ‘law of the tendential fall in the rate of profit’ holds that there is a tendency, during a phase of capitalist accumulation, for the ‘organic composition of capital’ (constant capital c divided by variable capital v) to rise. Other factors remaining equal, this puts downward pressure on the rate of profit r:

where s is surplus value and s/v is the ‘rate of surplus value’. If the organic composition of capital (c/v) rises, then r will fall unless the rate of surplus value (s/v) is increased sufficiently to offset the effect.

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