This landmark paper studies, empirically, the two causes for variations in the postwar US profit rate, including the long fall that started in the 1950s. It show shows that changes in capital stock greatly outweight the effect of changes in the rate of exploitation as Marx predicted. On this basis it criticises Robert Brenner’s (2002,2003) claim that nothing in either present or past economic theory explains the long-term fall in the profit rate, offering a ‘third explanation’, alternative both to the profit-share hypothesis which dominates today, and the rising output-capital ratio account associated with Marx and Kalecki.
The paper shows Brenner’s rejection of the Marx-Kalecki framework arises because his theoretical paradigm, adapted uncritically from his critics, cannot allow for the effect of falling prices on capital stocks. His own ‘third explanation’ is incompatible with this same framework and can be sustained only by understanding it as the mechanism behind, or ultimate cause of, the movement of the output-capital ratio in price terms.
The paper developed out of [Historical Materialism’s SOAS seminar] and was intended for submission in the International Socialism Journal, but was not completed. Later I placed it on academia.