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The Decline of the Rate of Profit in the Postwar U.S. Economy: An Alternative Marxian Explanation

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  • Fred Moseley

    (Department of Economics, Mount Holyoke College, South Hadley, MA 01075)

Abstract

This paper presents an explanation of the decline of the rate of profit in the postwar U.S. economy which is based on Marx's distinction between productive labor and unproductive labor. According to this theory, the conventional rate of profit depends on the rate of surplus-value, the composition of capital, and the ratio of unproductive labor to productive labor. Estimates of these variables are presented which suggest that the main cause of the decline of the rate of profit was a very significant increase in the ratio of unproductive labor to productive labor. This explanation is contrasted with the "profit squeeze" explanations presented by Weisskopf and Wolff, and a post-period empirical test is conducted to evaluate the relative predictive ability of these competing explanations. The results of this test suggest that the alternative Marxian explanation presented here is the most consistent with the absence of a significant increase in the rate of profit in the past decade.

Suggested Citation

  • Fred Moseley, 1990. "The Decline of the Rate of Profit in the Postwar U.S. Economy: An Alternative Marxian Explanation," Review of Radical Political Economics, Union for Radical Political Economics, vol. 22(2-3), pages 17-37, June.
    • Handle: RePEc:sae:reorpe:v:22:y:1990:i:2-3:p:17-37
    DOI: 10.1177/048661349002200202
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    References listed on IDEAS

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    1. Feldstein, Martin & Dicks-Mireaux, Louis & Poterba, James, 1983. "The effective tax rate and the pretax rate of return," Journal of Public Economics, Elsevier, vol. 21(2), pages 129-158, July.
    2. Martin Feldstein & Lawrence Summers, 1977. "Is the Rate of Profit Falling?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 8(1), pages 211-228.
    3. Barry P. Bosworth, 1982. "Capital Formation and Economic Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 13(2), pages 273-326.
    4. Michael C. Lovell, 1978. "The Profit Picture: Trends and Cycles," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 9(3), pages 769-789.
    5. Moseley, Fred, 1988. "Rate of Profit in the U.S. Economy, 1947-67: A Critique and Update of Wolff's Estimates," American Economic Review, American Economic Association, vol. 78(1), pages 298-303, March.
    6. Gough, Ian, 1972. "Marx's theory of productive and unproductive labour," LSE Research Online Documents on Economics 51144, London School of Economics and Political Science, LSE Library.
    7. William D. Nordhaus, 1974. "The Falling Share of Profits," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 5(1), pages 169-218.
    8. Weisskopf, Thomas E, 1979. "Marxian Crisis Theory and the Rate of Profit in the Postwar U.S. Economy," Cambridge Journal of Economics, Oxford University Press, vol. 3(4), pages 341-378, December.
    9. David Leadbeater, 1985. "The consistency of Marx's categories of productive and unproductive labour," History of Political Economy, Duke University Press, vol. 17(4), pages 591-618, Winter.
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