Causality and the Rate of Profit

I have returned to an long-standing interest in causality in Marx’s political economy as a result of involvement in controversies about the falling rate of profit. In particular a debate with Michael Roberts, currently one of the leading exponents of the thesis that the fundamental and decisive cause of capitalist crisis is the tendency of the rate of profit to fall.  Other subsidiary causes are added into the mix, but on an ad hoc ad lib basis – for example levels of debt and financial fragility.  See e.g. my post. This contains links to Michael’s reply.

I worry that many participants in these, and allied debates, rely too heavily on a simple conception of isolated and direct cause and effect processes – mechanical causation in  Althusser’s terminology.

A current example is the on-going controversy between David Harvey and Michael Roberts which has revolved round the question of whether the latter is too mono-causal in his account of the crisis. See the exchange between the two in the excellent collection of articles on the 2008 financial crisis edited by the Turkish scholar Turan Subasat. Also the further stage of debate reported here in Michael’s blog.

Pete Green has sent me a well argued critical comment on this latest round of the Harvey vs. Roberts debate which I will publish in the near future as a guest post.

One of the influential sceptics about a declining rate of profit as the master key to explain all crises  is Costas Lapavitsas.  He makes the case with particular sharpness in a recent interview.

A tendency has emerged explaining everything pretty much in terms of some putative tendency of the profit rate to fall. This kind of thinking has somehow mutated into the Marxist account of the macroeconomic performance of capitalism and the behaviour of capitalism over time. …. in theoretical terms I find this kind of practice by Marxists terribly poor and saddening. It tells you very little in theoretical terms. Empirically it has no substance at all. I have measured the rate of profit time and again. In fact, I’m publishing work now  on the rate of profit in the USA and there is no evidence that it has been falling in any serious ways since the early 1980s. Of course it fluctuates but there has been no evidence that is has been falling in the long term. …  crises are very complex events so a theory of crisis most also be complex… It is not enough to invent a decline in the rate of profit and then on the basis of that add some kind of low level of sociology which is presumed to explain the crisis from the rate of profit.

The falling rate of profit exponents often try to short-circuit theoretical debate by arguing that the available data provide conclusive empirical evidence to support their explanation of the 2008 crisis.  In a series of posts starting in March 2016 I show that the US National Accounts data provide no convincing evidence that a fall in the average rate of profit was the cause of the crisis.

In any case, apart from the huge technical limitations I and others identify, it is simply implausible that the comparatively small variations in profit rates which took place in the years before 2008 could be the major cause of such a deep financial crisis.

For example, tendencies in industrial profit rates cannot explain the rapid rise in mortgage default by US households in 2006; the general fall in house prices which resulted, and the impact of this on consumer demand.  See my summary of the important book by Mian and Sufi which explains this major dimension in the 2008 crisis.

There are also many other difficulties. For example, the questionable conception of the rate of profit as a linear variable; the higher it is, the healthier the system, and vice versa. This is rarely stated explicitly, but often implicitly assumed.

Or again, how can the continuous operation attributed to the falling tendency of  the rate of profit explain the cyclical patterns in economic growth, demand and employment which are so evident in empirical studies of capitalist economies?

To be clear: I’m not questioning that cause and effect processes are how the world operates.  Mechanical causality is not the happiest of terms – maybe transitive causality would be more accurate. But neither in science nor in everyday life can there be any question of abolishing the concept or denying the processes it refers to.

The objection is that when it you are trying to understand a system – it can be misleading to treat individual causes in isolation from each other.  Or to explain what happens in a system by taking a number of separate causes and trying to add them up together. Causes come in clusters and interact with each other.  Individual causes have different effects depending on the state of the overall system.  Chains of causation build up through the operation of feed-back loops.

Perhaps a better starting point is to think of capitalism as a complex adaptive system.[1] In such a system it would not be plausible that a single underlying cause (or contradiction) could have the direct, continuous, and overwhelming causative power which Michael Roberts and others attribute to the average rate of profit in the major economies. There, is for example, a logical glitch here –an often overlooked non-sequitur. The quest for profits drives the system. OK we are all in agreement about that.  But you cannot conclude from this that, if the system enters crisis, however major, it can only be because the rate of profit is not high enough.  There is a difference between what drives a system and the outcomes which result from failure in the system.

But does it make any sense to think of a system itself as acting as some kind of cause?  A capitalist system for example. Is something like this implied when attempts are made to capture and explain the structures and dynamics of capitalism by terms like complex adaptation, and system?

Many scholars have contributed to thinking about these and allied questions.  I have started with the account of structural causality by Althusser and his Reading Capital colleagues for several reasons.[2] They closely studied the text of Marx’s Capital. The rigorous philosophical training which they had undergone in the French higher education system gave then an unusual alertness and clarity about Marx’s methods of argumentation.  More important, their way of reading Capital, and the originality of their theoretical angle of vision, owed much to the context of their collective work.  Paris in the 1960s was the locus of an extraordinarily fertile and creative interaction between philosophical thought and political action.[3] It was the rich development of structuralist thought in France which enabled and predisposed Althusser to see patterns of structural causality in Marx’s account of history.[4]

It was Althusser’s argument that, though Marx may have said little about the logical status of this type of causality, he was able, in a practical way, to find ways of using the concept in Capital.  For example in his analysis of modes of production (slave, feudal. capitalist etc.) in which forces and relations of production were combined in differing structural patterns. But Althusser considered that it was important to explain how structural causality worked as an epistemological paradigm.  What kind of causality is at work when the mode of production, as a structure, acts as a determining influence in social development.

But what happens next is that Althusser himself then gets into intractable difficulties in trying to formulate clearly what he means by the concept of structure. For example he often seems to alternate between: (1) a holistic concept of structure –  the effects which the structure of a totality might have in ordering its constituent elements; and (2) a structure which has no existence except in its effects. A form of immanent causality.  

I’ll comment more about this inconsistency, and why it matters, in my next post.


Althusser, Louis, Étienne Balibar, Roger Establet, Pierre Macherey, and Jacques Rancière, 2015, Reading Capital, (Trans. Ben Brewer and David Fernbach), London: Verso.

Elliott, Gregory 1987, Althusser: The Detour of Theory, London: Verso.

Mason, Paul 2015 Post Capitalism: A Guide to Our Future, London: Penguin Books.

Mian, Arif and Amir Sufi 2014, House of Debt, Chicago: University of Chicago Press.

Montag, Warren, 2013, Althusser and His Contemporaries, Durham NC: Duke University Press.

Peden, Knox 2014, Spinoza contra Phenomenology: French Rationalism from Cavaillès to Deleuze, Stanford CA, Stanford University Press.

Subasat, Turan (ed.) 2016, The Great Financial Meltdown: Systemic, Conjunctural or Policy Created? Cheltenham: Edward Elgar.


[1] There is a a lively defence of the concept of capitalism as a complex adaptive system in Mason 2015,  in the chapter called ‘Was Marx Right’.

[2] Althusser et al. 2015.

[3] Elliott 1987.

[4] See Montag 2013, and Peden 2014.


2 thoughts on “Causality and the Rate of Profit”

  1. I agree. A starting point would be to recognise, as I set out in my book Marx and Engels Theories of Crisis, that Marx himself sets out a series of causes of economic crises that essentially come down to a rupture in the circuit of capital due to a variety of features, as well as describing political crises (US Civil War preventing cotton getting to British textile factories) that have economic consequences, not to mention his analysis of financial crisis (crises in the banks, stock markets etc) that on their own should have no impact on the real economy, but in practice via credit crunches etc. always tend to do so.

    A crisis of overproduction is only one type of economic crisis described by Marx in this context, although every economic crisis, manifest in a rupture in the circuit of capital, always results in a crisis of overproduction. For example, the political crisis of the US Civil War, is as Marx describes a most extreme example of a problem that can be regularly encountered that material inputs required for production cannot be produced, can only be produced with a delay, cannot be produced in sufficient quantity, or can only be produced at a high price. This crisis is not caused by overproduction, other than in the meaningless sense that more productive capacity exists than can be utilised given the availability at that particular time of some important material input. But, the impossibility of obtaining cotton (and the replacement Indian cotton, being more expensive, and lower quality, requiring more size and so on) by causing a rupture in the circuit of capital – realised money-capital cannot be metamorphosed into productive-capital – does then manifest itself as a crisis of overproduction. The textile workers laid off, can no longer buy the commodities they require for their consumption, so that, as Marx says, this means that all those commodities, bread and so on, which the workers buy, although not previously overproduced, are now relatively overproduced.

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