Profitability and Its Determinants: Operationalizing the ‘Law of the Tendency of the Rate of Profit to Fall’ in the US Economy, 1950–2020

This analysis seeks to demonstrate the theoretical and empirical salience of the ‘law of the tendency of the rate of profit to fall’ in relation to the concrete evolution of the US economy between 1950 and 2020. The theoretical-methodological approach adopted in this study is based on the work of Shane Mage and Murray E.G. Smith. This approach re-specifies the Marxian value categories and ratios for purposes of empirically operationalizing them as a theory of fundamental capitalist dynamics using national accounting data. Contributions include (1) the treatment of systemically necessary unproductive labour as a ‘constant capital overhead cost’ and (2) a method of managing ‘fictitious profits’ that are imputed into the national accounts and thereby enabling a more realistic estimate of ‘social surplus value’ (the numerator of the Marxian average rate of profit) in what has become an ‘era of fictitious capital’. The empirical findings reveal a persistent rise in the organic composition of capital, as well as a rise in the rate of surplus value, accompanied by a long-term downward trend in the average rate of profit in the postwar US economy.


Introduction
Since the 1950s, numerous political economists have established the empirical actuality of the 'law of the tendency of the rate of profit to fall' (LTRPF): that productivity-enhancing, labour-displacing technological innovation in the methods of commodity production exerts a downward pressure on the average rate of profit (ARP) of a capitalist economy. 1 This law is the culmination of Marx's value-theoretical analysis and provides a comprehensive crisis theory that accounts for the economic malaise suffered by a number of capitalist economies since the 1970s (cf.Brenner, 2006).
While the present paper contributes to the body of literature that has empirically assessed the veracity of the LTRPF, it differs from other studies in its approach to specifying and estimating the value categories and ratios that Marx used throughout the three volumes of Capital.The theoreticalmethodological approach adopted in this study is based on the pioneering work of Shane Mage and Murray E.G. Smith.The Mage-Smith approach situates Marx's crisis theory as 'underproductionist' with respect to the creation of surplus value while better conceptualizing certain forms of unproductive labour as 'constant capital systemic overhead costs'.Beyond this, Smith has called attention to the need to identify three 'temporal modes of value', opening the way to distinguishing components of financial profits resting on surplus value production from those deriving from relations of credit and debt.
This paper proceeds through four principal sections.First, value, capital and the value categories and ratios are introduced; second, the national income accounts, unproductive labour and fictitious capital are discussed in relation to the value categories; third, the Marxian LTRPF is outlined; and fourth, empirical results for the US economy are presented and summarized.

Value and Capital
For Marx, capitalism is a class-antagonistic mode of generalized commodity production and exchange in which the human capacity to labour is regularly bought and sold on markets with a view to profit making.As in any class-divided system, the exploitation of the labouring masses results in a 'surplus product' on which the ruling classes subsist.Under capitalism, the primary ruling class (capitalists) exploit a 'property-less' working class through the imposition of work and the extortion of surplus labour (Cleaver, 2019).Under capitalism, appropriated surplus labour, and thus the surplus product, assume the form of surplus value (the basis of monetary profit), the mass of which is equal to the value produced by the working class above and beyond the remuneration that they are paid (Marx, 1976).
Marxist political economic value theory is therefore concerned with the capital-labour relation as the socio-economic basis that structures market exchange.Economic value is equal to the quantity of 'socially necessary abstract labour-time' (SNALT) expended in the (re)production of a commodity, while prices reflect the exchange-ratios of commodities in monetary terms.In other words, 'economic labour-value' originates in production through the expenditure of human labour and then appears in circulation in its objectified form with a price-tag; value refers to the social practice of representing labour-time by money-prices (Mattick, 2018: 138, 153).The relationship between value and price at the aggregate level is a precise one (as an equality of aggregates) but imprecise at the level of individual commodities and market prices (Foley, 2013: 7).The market prices of individual commodities are established by a variety of factors like supply and demand; but prices nonetheless tend to gravitate towards their social anchor in labour value.
While economic reproduction is a unity of the production and circulation of value, circulation is not generative of surplus value (Marx, 1976: 268;Yaffe, 1972).Marx is clear that capitalism as a system of generalized commodity production is not only about the production of physical commodities but essentially about the production of surplus value and the reproduction of the capital-labour relation (Mage, 1963: 57-58;Marx, 1976: 376, 672;Smith, 2019: 79).From the standpoint of the capitalist system as a whole, it is important to recognize that circulation and social upkeep activities are in the service of the self-expansion requirements of production for profit.In other words, their purpose is to secure the realization of surplus value in price-form to reproduce the social conditions of value-expansion or 'valorization' (Mage, 1963: 33, 65;Smith, 2019: 81, 181;Yaffe, 1972). 2  For Marx, capital is not a thing but a social relation: it is 'value-in-motion'.Capital must therefore be understood as involving the continual bringing together of (1) the means of production as monopolized by capitalists and (2) the expenditure of labour-power by workers.Marx represented this socio-economic process of capitalist reproduction as the 'circuit of capital': M-C (LP&MP) . . .P . . .C^-M^.Here, money (M) is advanced to purchase two types of commodities (C): labourpower (LP) and means of production (MP).LP and MP are combined in a production process (P) to create a new output commodity of greater value (C^); when sold at its value, this output commodity realizes a greater sum of money (M^) than the initial sum invested (M).Hence, the difference between C and C^ and, further, between M and M^, is surplus value.
Operationally, the Marxian circuit of capital and law of value amount to the following: (1) productive living labour is the source of all new value and surplus value and (2) value exists as a definite quantitative magnitude at the level of the whole economy, setting limits on the value available for representation in such phenomenal categories as aggregate prices, profits, wages and so on (Smith, 1991(Smith, , 2010(Smith, , 2019)).Accordingly, this creates a macro-economic identity that can inform an analysis of long-term economic trends: setting aside fictitious forms of capital (representing 'anticipated future value'), total prices equal total values and total profit equal total surplus value (Foley, 2008;Mage, 1963: 14, 32-33;Smith, 2019;Smith et al., 2021).

The Value Categories
The gross labour product in value terms is equal to the sum of constant capital, variable capital and surplus value.The social capital or capital in general (constant capital + variable capital), is the unity of four spheres of operation: (1) production (the creation and transportation of 'marketable' or 'social use-values', i.e. exchange-values); (2) circulation (the distribution of 'social use-values'); (3) social maintenance (the consumption of some 'social use-values' for purposes of social upkeep) and (4) personal consumption (the consumption of 'social use-values' by people) (Shaikh and Tonak, 1994;Smith et al., 2021).
Within Sphere 1, variable capital (v) is equal to the total portion of capital that is invested in the living wage-labour directed to produce surplus value within an exploitative labour process -that is, 'productive', rather than 'unproductive', living labour.Constant capital (c) -the means of production, including raw materials, tools, machines, built environments, energy and so on -is equal to the remainder of the total capital investment, which plays a vital yet indirect role in the production of surplus value.
Constant capital has a twofold character: circulating constant capital (c or cf) considered as a value flow must be distinguished from the constant capital considered as a stock (represented by C, which differs from what C represents in the circuit of capital scheme considered above).Surplus value (s), the lifeblood of the system, is concealed by the wage-form: it is equal to the value that workers produce above and beyond their collective after-tax remuneration.Surplus value, in its independent forms of after-tax profit of enterprise, interest and ground/technological rent, as well as the after-tax salaries paid by capitalists to themselves, is distributed and realized in money-form through the competitive fight between 'many capitals' in the market (Mage, 1963;Smith, 2019).

US National Income Accounts in Value Terms: Unproductive Labour, the Temporal Modes of Value and Fictitious Capital
The value categories can and should be conceptualized in actual money terms that correspond to the behaviour of individual firms and that are recorded in the national income accounts (Freeman, 1991;Mage, 1963;Moseley, 1991;Shaikh, 2010;Shaikh and Tonak, 1994;Smith, 2010Smith, , 2019;;Smith et al., 2021: 179).However, there are many complications that call into question the reliability of national accounting data.Despite these problems, the macro-economic price data in the national accounts represents a mass of commodities that can and should serve as a rough index for the total magnitude of homogeneous social labour-time expended in the production/circulation of this aggregate commodity output.So, with some finesse, it is possible to roughly estimate value magnitudes by arranging the data in the national accounts in accordance with the value categories as conceptually based on Marx's law of value (Freeman, 1991: 3-4). 3The point of this exercise is not to perfectly ascertain exact and unadulterated value magnitudes in the US economy proper, but rather to see what the available data 'says' about rough trends in the core Marxian ratios.It is important -even if only in a general, approximate sense -to map and interpret empirical trends in capitalist development because this can help to inform political-programmatic perspectives and goals (Smith, 2019: 278).
Variable capital is represented on this account by a specific portion of the US national income accounts category wages and salaries; surplus value is represented by corporate profits plus the salaried accruals to the top 0.1% of income earners; and constant capital stock is represented by net capital stock in private corporate fixed assets. 4Due to difficulties distinguishing different elements of the constant capital flows, circulating constant capital (including raw material and energy consumption) is omitted from the denominator of the average rate of profit (ARP) and the numerator of the organic composition of capital (OCC). 5However, the total constant capital flow can be estimated and it forms the core variable of what Smith (2019) calls the 'value composition of output' (VCO) -the ratio cf/(cf + vf + sf) (see Figure 2).Variable capital can also be said to have a stock component (V) independent of its primary expression as a flow.But firms rarely hold a payroll stock because wages are paid in arrears (i.e.wages are usually not advanced before the work is performed), so variable capital is not usefully seen as 'invested' but rather as a flow (v or vf) while constant capital can be treated as both a flow (c or cf) and a stock (C) (Mage, 1963: 37-38).
The value categories form the core value ratios for Marx's LTRPF.The relationship between surplus value and variable capital indicates the rate of surplus value (RSV): RSV = s/v.The relationship between investment in means of production (or 'dead labour') and investment in productive 'living labour' indicates the composition of capital -in particular, the OCC: OCC = C/(s + v).Formulating the OCC in this way depicts its clear-cut and determinative relationship with the ARP if the latter is formulated as ARP = s/C. 6  The Productive-Unproductive Distinction: 'Systemically Necessary Unproductive Labour' The productive-unproductive labour distinction was at the heart of classical political economy and orthodox national income accounting for nearly a century (Mazzucato, 2017).It was eventually displaced by the neoclassical approach to economic theory and accounting, which conceived all economic activity other than personal consumption as productive (i.e.contributing to output) (Shaikh and Tonak, 1994: 3).
In the Marxian view, productive labour (PL) is physical and/or mental labour that is employed by a capitalist to produce use-values sold on the market for a profit (i.e.Sphere 1: social use-values which take the form of exchange-values) (Mage, 1963;Marx, 1963;Smith, 1991Smith, , 1993Smith, , 2019)). 7In contrast, labour that does not produce surplus value is 'unproductive' due to the fact that it is not employed by capital for purposes of producing actual commodities (Mage, 1963: 58).Yet, labour that is unproductive can still be 'systemically necessary' for the social capital as a whole, because after the commodity is produced and shipped, it must finally be sold, and general social upkeep is also required through resource allocations directed by the capitalist state.Unproductive labour can be understood in three distinguishable ways: Unproductive labour (UL): labour services that are exchanged with revenue, that is, as a luxury expenditure on the part of the capitalist (such as domestic servants who work directly for the household that pays them).
Systemically necessary unproductive labour (SNUL): labour that does not directly contribute to the creation of surplus value but to its realization; such labour is employed by 'unproductive capital' (commerce and finance) and by the capitalist state (administration), as well as some of the labour employed by productive capital in managerial capacities.
Non-productive labour (NPL): forms of labour that capital does not recognize as value producing (like unpaid domestic, social reproduction labour).
Like PL and SNUL, UL and NPL are subjected to forms of exploitation.But, from the standpoint of the socail capital as a whole, both PL and SNUL directly supply systemically necessary labour and in doing so perform surplus labour on behalf of capital and are therefore exploited within the circuit of capital and circulation -albeit, in distinct ways.PL is exploited in production (Sphere 1) and SNUL is exploited in the spheres of circulation and social upkeep (Spheres 2 and 3).Just as productive capital makes a profit by not paying productive labourers a wage equivalent to the new value they produce, unproductive capital derives profit from not paying to their workers the full amount of value transferred from the sphere of production to the sphere of circulation through their activities (Marx, 1981: 407).In other words, although SNUL creates no surplus value, the unpaid portion of its wage allows for its employer to secure a share of the social capital's mass of surplus value via the equalization of profit rates and sphere-to-sphere transfers of value (Sphere 1 to Spheres 2 and 3).In this sense, both PL and SNUL are exploited through having to perform 'unpaid labour'; while the former is exploited in the production of commodities, the latter is exploited in the realm of social reproduction.
When Marx distinguishes between productive and UL, he is not adopting the standpoint of the individual capitalist.After all, a cashier may be considered 'productive' of commercial profit because that wage-labourer is performing surplus labour that effects a transfer of new (surplus) value from the sphere of production to the retail sphere and to a commercial capitalist.From the standpoint of the social capital, a cashier is not a source of surplus value, but merely a contributor to its realization.Only productive wage-labour augments the social surplus product, the total mass of surplus value.For a wage worker to be productive, the consumption of their labour-power by capital must occur simultaneously with the production of new commodities (Marx, 1976).
The conception of SNUL as an absolute deduction from and/or a non-profit component of surplus value (e.g.Moseley, 1991;Shaikh and Tonak, 1994) is widely accepted despite the fact that not only do many SNUL workers perform surplus labour, but they also perform labour that is systemically necessary (Laibman, 1993: 228-232).As Mage (1963: 65) conveys, any reference in Marx to an 'absolute deduction' from surplus value is purely from the standpoint of the capitalist class themselves (i.e.'class-centric') and certainly not from the standpoint of the social capital as a whole.If SNUL wages are treated as an element of surplus value, it falls outside of the circuit of capital; hence, to place it inside the circuit, it must be specified as either variable capital (representative of new value) or constant capital (representative of previously existing values).
Based on the pioneering work of Mage (1963), Smith (1991Smith ( , 1993Smith ( , 2019) ) proposes that the SNUL wage-bill of workers who are necessary for the system's basic operations is most appropriately conceived as a 'systemic overhead cost' from the standpoint of the social capital.The qualitative difference between constant capital and variable capital refers to their distinct social functions and not to their physical attributes (Mage, 1963: 31).So, according to the Mage-Smith approach, and insofar as SNUL evinces an array of qualities more similar to constant than to variable capital, it ought to be treated as part of the former.It is undeniable that the means of production (such as a saw, a bundle of wood, or a conveyer-belt) are materially much different than living wage-labour, whether unproductive or productive.But it is a 'fetishistic error' to conceptualize Marx's value categories based simply on the basis of the physical properties of the various elements of the total social capital (Smith, 2019: 262).In specifying the three value categories, what matters is the particular social relations expressed by each of them, and their specific connection to the labour and valorization processes (i.e. to how new, surplus value is created and then manifested in commodity output).Constant capital represents the factors of the production and reproduction process of capital which fulfil an indirect role in the production of surplus value.Consequently, the SNUL wage-bill and associated expenses should be seen as an allocation of the social capital belonging to constant capital (i.e. as a component of constant capital flow).
The capitalist state is also viewed as a SNUL expense.The state functions as a 'machine of social reproduction', as its primary job is to uphold an institutional framework that supports and perpetuates the social conditions of valorization (Smith, 2019: 233-236).Accordingly, the majority of tax revenues is best treated as an element of the constant capital flow.It follows that variable capital and surplus value must then be measured after-taxation.Moreover, it should be noted that the state sometimes captures a portion of currently produced surplus value to expand the scope of its activities (Smith, 2019: 233).
In sum, many services, sales and governmental 'social maintenance' workers function as a unique form of constant capital, and therefore, their wages are most appropriately treated as a component of the constant capital flow, rather than as 'part of' or as an 'absolute deduction' from surplus value (such as in Shaikh, Moseley and others).This conceptualization allows for a more precise definition of variable capital and, in turn, a more accurate measure of the determinants of the ARP.Such a conceptualization is necessary because over the postwar period an asymmetry developed between the burgeoning SNUL sphere and the withering productive sphere, resulting in a hypertrophy of 'systemic overhead costs' (Smith, 1991(Smith, , 1993(Smith, , 2019)).The growth in such overhead costs contributed somewhat to the sluggish economic growth and faltering profitability between the 1960s and 1980s.

The Temporal Modes of Value, Fictitious Capital and the 'Normalization Procedure'
Just as the national accounts fail to distinguish between PL and UL, they also fail to distinguish between financial profits based on flows of new value (rooted in Sphere 1) and financial profits based on relations of credit and debt (i.e.'fictitious capital' often manifesting as 'fictitious profits') (Smith, 2019: 274).According to Smith (2019: Chapter 10), Marx's value categories have a temporal dimension, and therefore his (undeveloped) notion of fictitious capital (FC) must also be understood temporally -as anticipated future value (AFV).Unlike new value (NV) and previously existing value (PEV), which refer to extant values manifested in the constant and variable capital used to produce new commodity outputs, FC functions as paper assets (stocks, bonds, debt obligations, etc.) that promise a future flow of NV.
In temporal terms, constant capital, both its stock and flow components, correspond to past or PEV: value that has already been created by past forms of human labour.For example, machines, inputs, gathered raw materials, tools, buildings and so on are 'dead labour', embodying previously performed labour.Raw materials (cf) are purchased and consumed in production and reappear in the value of the final product, while assets like machines and buildings (C) see their value transferred to the new product gradually via depreciation.NV is equal to productive workers' wages plus the value that these workers produce beyond their remuneration: NV = v+s.AFV, value that has yet to be produced and may never be, is based on relations of credit and debt. 8 As value under capitalism is measured (however unconsciously) by the yardstick of SNALT, FC is essentially money-capital seeking to enlarge itself through speculative claims on future income.AFV and FC enable an economy to appear much larger and faster growing than the non-financial assets and real output that underwrite it; so the prevalence of FC embedded in national accounting data can distort Marxian empirical estimates (Roberts, 2016;Smith, 2019).Sato (2015) argues that the best strategy for dealing with this distortion is to conduct a sort of disaggregation in an attempt to suppress 'fictitiousness' and, therewith, provide a more accurate estimate of surplus value and thus a more accurate measure of profitability.
Due to limitations with the data, the method used here can only be applied to the finance, insurance and real estate (FIRE) sector of the economy.This concession is nevertheless warranted because above-average volumes of FC specifically reside in the FIRE sector.Consequently, as the profit rate of the FIRE sector is normally higher than the prevailing rate in the rest of the economy, the FIRE rate needs to be equalized -or 'normalized' -with the latter rate.This 'normalization procedure', which is informed by Smith's (2019) temporal modes of value approach and Marx's law of the tendential equalization of profit rates, levels the profit rate in the FIRE sector with the non-FIRE profit rate (Smith et al., 2021). 9As such, the difference between the FIRE sector's mass of profits (Fp) and the FIRE sector's 'normalized' mass of profits (nFp) can be considered a sort of rough proxy for FC: To arrive at an estimate for a nFp, the ARP prevailing in the rest of the economy must first be calculated; then, this 'non-FIRE ARP' must be multiplied by the corresponding year's FIRE assets (Fa): nFp non-FIREARP Fa = ( ) Figure 1 highlights the approximate difference between the FIRE sector's mass of profits prior to normalization (top line) and following normalization (bottom line) -thus, an approximation of FC imputed in the FIRE sector's profit data is indicated by the 'up/down bars'.As the production of NV becomes increasingly difficult, not only due to a rising OCC and falling ARP but also due to the growth in PEV relative to NV (due partly to a hypertrophy in SNUL and partly to the slowdown in capital investment in the productive sphere), an increasing reliance on AFV occurs and a growth in FC follows.According to Figure 1, the level of FC in the FIRE sector simmered up until the 1970s, swelling thereafter and exploding by the 2000s, peaking before the 2008 crash in 2005 and skyrocketing after the crash.

The LTRPF
As the principal goal of the capitalist system is the private appropriation of profit, the ARP -or the average return on invested capital -is the key regulator of capital accumulation, investment and economic health as a whole (Marx, 1981;Shaikh, 2016).
Contrary to Adam Smith's beneficent 'invisible hand' metaphor, for Marx, the unintended consequence of the historical development of the capitalist system -that is, its advancement through the introduction of increasingly sophisticated technologies in the methods of commodity production and exchange -is an overall reduction in the magnitude of surplus value generated relative to total capital invested (Marx, 1981: 331-332).This is Marx's LTRPF, which is a historically specific expression of the central proposition of historical materialism: that every mode of production emerges to further develop the productive forces of society, and only when it can no longer fulfil this task does a different and higher mode of production arise (Mage, 1963: 2, 104).
The LTRPF is rooted in the contradiction between the micro-level and macro-level. 10On the micro-level, competition between individual firms compel them to reduce costs per unit of output through the introduction of various productivity-enhancing and labour-displacing technologies (e.g.automation).At the macro-level, however, such individual actions translate into the widespread displacement of living labour (the source of new, surplus value) from the system as a whole.Hence, the same dynamics that bring about an accelerated accumulation of capital and, thereby, an increase in the total mass of surplus value also produces a tendential fall in the ARP (Marx, 1981: 354-356).In other words, a persistent rise in the OCC (C/s + v) puts a downward pressure on the ARP (s/C).
The LTRPF is offset by a number of 'countertendencies' that serve to undermine the rise in the OCC.The main countertendencies are: (1) increasing exploitation; (2) reducing wages below their value; (3) the cheapening of constant capital; (4) relative overpopulation and (5) foreign trade (Smith, 2010: 54-55).The capitalist state can also play a role in countering a falling ARP and, crucially, imperialism/neocolonialism often serves to raise profitability at the expense of other nations.The ultimate countertendency is the devaluation/destruction of capital due to the crisis event itself, which sets the stage for a new expansion phase through mass layoffs, bankruptcies and deflation, among other things.These countertendencies, however, do not nullify the LTRPF, as the law eventually overpowers them such that profitability tends to fall over the long run (Carchedi, 2018: 40;Marx, 1981: 349;Smith, 2019).
Accordingly, a rising rate of exploitation as a countertendency (e.g.Heinrich, 2013) cannot alleviate falling profitability in the long run; what it can do is intensify realization problems and competition (besides provoking increased worker resistance) (Yaffe, 1972). 11The RSV (s/v) (and the rate of exploitation, s/v + SNUL), also rise along with the OCC, so both realization and valorization problems are coexisting elements of the LTRPF (Smith, 2019).Realization crises are about the problems that individual capitals/firms or particular sectors face in the sense of total supply and total demand.When a capitalist economic crisis develops it takes on the appearance of a general overproduction of commodities because the demand for money exceeds its supply (Mage, 1963: 8;Shoul, 1947: 155).However, the quantity of aggregate effective demand is determined by the interplay between aggregate investment and the ARP -if the right amount of investment is undertaken, effective demand is no issue (Shaikh, 1979).Thus, a lack of money-backed demand that contributes to realization problems is ultimately rooted in a curtailment of investment as a result of a falling ARP.Grossman (2018: 380) notes that Marx acknowledged the existence of various 'partial crises', but these were not Marx's main concern (Mattick, 2018: 257).These crises do not have the same pattern and do not impact to the same degree the whole of capitalist production and exchange as well as the class relation itself (i.e. the whole social capital).Marx was primarily concerned with what happens at the level of the whole and only then with how the individual parts are impacted.And it is at the level of the whole that Marx's LTRPF demonstrates that crises are ultimately rooted in the 'underproduction' of surplus value relative to total capital invested and overall systemic costs. 12 In the Mage-Smith Marxist tradition, cyclical economic crises are understood as the outcome of a power struggle between the main tendency (a persistent rise in the OCC and downward pressure on the ARP) and a combination of various countertendencies (rising exploitation, cheap materials, etc.) that can temporarily curb falling profitability.New crises become increasingly difficult to recover from because new economic cycles occur at a higher level of accumulation and therefore at a higher OCC.As such, 'supra-cycles' or 'long-waves' are the outcome of a compilation and intensification of internal economic problems (high OCC, relatively low RSV, etc.) that force 'external relief' (i.e. a reliance on exogenous factors like unequal value transfers/imperialist exploitation) and tend to initiate structural transitions from one historical phase of capitalist development to another, such as the pre-war period, to the postwar monopoly period, to the neoliberal period, to the 'era of fictitious capital', and so on (Smith et al., 2021; also see Tapia, 2018). 13 None of this supposes that all crises under capitalism are purely economic in nature, nor does it mean that all economic crises are strictly precipitated by a falling ARP.Regarding the latter, there are several concrete and proximate factors that may possibly 'trigger' a crisis and therefore appear as its cause, such as financial speculation, crop failures, pandemics and also sectoral realization problems, among others.But these historically particular factors simply give crises a distinct historical form while obscuring the historically general factor (Shoul, 1947;Yaffe, 1972).What transforms mere possibility into actuality, what underscores the transformation of historically particular and partial crises into an actual generalized one -that is, the general-historical cause -is the law of value and the ARP (Grossman, 2018;Kliman, 2011;Mage, 1963;Shoul, 1947;Smith, 2019).The rate at which general economic crises have emerged following a period of economic expansion over the past two centuries implies that they are not merely accidental -the outcome of irrational governmental policies, greedy capitalists, overzealous unions, corruption and so on -but instead a necessary moment of the industrial cycle and thus a necessary feature of the capitalist system's historical development (Clarke, 1994: 3, 11;Kuhn, 2018: 6;Mattick, 2018: 224-225;Smith, 2019).

Postwar Trends in the US Economy
The classical political economists recognized that the general level of aggregate profitability falls over time (Clarke, 1994;Roberts, 2016).The point of Marx's LTRPF -what he called 'the most important law of modern political economy [and the] most important law from the historical standpoint' (Marx, 1973: 666) -was to provide an explanation for the persistent tendency of profitability to fall (Mage, 1963;Mandel, 1975;Marx, 1981;Smith, 2019).The goal of the present section is to assess the core postulates of the LTRPF by charting and interpreting some empirical trends in the postwar US economy.
Figure 2 measures the value flow of constant capital as a percentage of total output (cf/ (cf + vf + sf)).Other things remaining equal, an increase in constant capital overhead costs (i.e.PEV) results in a relative reduction in NV added.A rise in the VCO is an epiphenomenon of the LTRPF that also serves to intensify the downward pressure on the ARP (Smith, 2010(Smith, , 2019; also see Moseley, 1991).In Figure 2, the VCO rises steadily out of the war period and continues to rise through the crises of the 1970s and onward, dipping in 2001 before rising again and levelling off following the 2008 meltdown.Supplementary to Figure 2, Figure 3 depicts the ratio of SNUL to variable capital as another way to gauge this overhead cost.SNUL/v climbs out of the war period and picks up pace with deindustrialization in the 1980s, dropping sharply in 2001 and not surpassing its previous peak in 2000 until 2020 (at 195% of v).
Figure 4, the RSV (s/v), concerns the exploitation of specifically PL.The RSV falls leading up to the 1970s and rises dramatically with the onset of neoliberalism, continuing its ascent up to 2012 (at 122%) before declining for 4 consecutive years and levelling off thereafter.
Figure 5 depicts the trends in the OCC and ARP where the former rises and the latter falls between 1950 and 1975.The OCC climbs steadily while the ARP zigzags before plummeting nearly 40% between 1966and 1970. The OCC rises dramatically between 1978and 1994, levelling   off a decade later.The ARP simmers over the 1980s and reaches an all-time low in 1990 before undergoing two subsequent recoveries.The ARP nearly matches its earlier 1966 peak in 2006 before plummeting with the 2008 meltdown; it then rebounds in 2012 before another steep fall, followed by a timid recovery in 2018 before falling yet again leading up to the coronavirus pandemic.All in all, Marx's (1981) hypothesis of a rising OCC and a falling ARP over the long run finds support in these empirical results.
These empirical results lend support to Smith's (2010Smith's ( , 2019) ) thesis that a number of 'core' capitalist economies have succumbed to a sort of historical-structural crisis beginning in the late 1960s.Ultimately, this is a 'historical-structural crisis of valorization' characterized by two interconnected factors that contributed to the profitability crises of the 1970s and 1980s: (1) a rising OCC accompanied by a falling ARP and (2) a decline in the annual flow of NV relative to PEV due to a hypertrophy in constant capital systemic overhead costs (as reflected in a secular rise in the VCO).The 'neoliberal response' to the Great Stagflation of the 1970s served to arrest falling profitability and attempted to restore favourable conditions of valorization primarily through an extraordinary assault on real wage growth.Neoliberalism combined with an ongoing decline in  corporate taxation, globalization (accessing cheap raw-material and labour markets) and the hightech revolution (cheapening of the elements of constant capital in production) of the 1990s eventuated in a sharp rise in the RSV and a recovery in the ARP by the mid-1990s.However, this recovery was short-lived and relatively weak due to the high level in the VCO and, in particular, the OCC (which increased over 50% between 1967 and1997).The ARP began to fall in 1998 and plummeted to its postwar low (8%) for a second time in the throes of the Dot-Com crisis of 2000-2001.
The persistent and fundamentally unresolved structural crisis of valorization that pushed the ARP into a relatively low range for an extended period paved the way for a colossal expansion of the financial system (Smith, 2019: 284).The growth of the financial system in the late-1990s and especially in the 2000s -what can be dubbed an 'era of fictitious capital' -adds an additional 'third dimension' to the twofold structural crisis of valorization outlined above: an increased reliance on the financial system and FC (i.e.AFV).The logical outcome of the evolution of this increasingly acute and now multidimensional 'historical-structural crisis of valorization' led to an unsustainable financial boom (2001)(2002)(2003)(2004)(2005)(2006) and eventually a financial panic that culminated in the Great Recession of 2008.This crisis was not precipitated by a steep fall in the ARP (as with the crisis of the 1970s); rather it was 'triggered' by a collapse of the housing bubble and amplified by an unparalleled explosion of debt and FC.The financial ballooning that preceded the 2008 crash actually intensified in the decade following -a period which Roberts (2016) calls the Long Depression.This is a major reason why the pandemic-induced crisis of 2020 was so severe, with no real recovery in sight, for the sluggish, already fragile and debt-burdened economies of the global capitalist 'core' failed to recover from the previous crisis.
The new depression-grade 'twin-crisis' that began in 2020 (or even in late 2019) could very well be worse than that of the 1930s.As of mid-2022, the financial house of cards continues to crumble in the face of persistent stagflation with significant geopolitical issues only intensifying the situation.While directing blame towards the pandemic and geopolitical conflicts in eastern Europe, the International Monetary Fund has warned that the world economy is again on the precipice of another crisis (IMF, 2022a). 14However, it is clear that the pandemic and the NATO-Ukraine-Russia conflict are not the only factors.To truly understand the current and ongoing crisis, it must be put in conversation with the past.

Conclusion
This paper presented an approach to empirically operationalizing Marx's LTRPF in relation to the US economy between 1950 and 2020 using national accounting data.The theoretical-methodological approach utilized here was based on the pioneering work of Mage (1963), followed by Smith (best summarized in his Invisible Leviathan (2019)), and further by Smith et al. (2021).In sum, the Mage-Smith approach situates SNUL as a constant capital systemic overhead cost, temporally understood in the sense of PEV and through this temporal approach, as Smith puts forth, elements of the so-called financialization phenomenon can be understood in the context of AFV.Re-orienting Marxian crisis theory as underproductionist, this approach further posits the emergence of a multidimensional historical-structural crisis of valorization from which not only the 2008 crash but also the current twin-crisis can be understood.The empirical findings presented here lend support to this thesis and, likewise, lend support to Marx's hypothesis that technological change dominates profitability on capital in the long run.That results favourable to Marx's own prognosis concerning the general developmental trajectory of capitalism can be derived well over a century after his death by using modern bourgeois statistics only strengthens the veracity of his claims about the historical limits of capitalism and the necessity and possibility of socialist transformation.
the ARP to account for the impact of wages on profitability; but when looking at the whole economy over a long period of time, such is not needed because the sum of variable capital is consumed in the process of reproduction when workers use their wages to purchase their means of consumption.The present paper is more concerned with long-term trends; for an example of a short-term ARP, see Smith et al. (2021: 191, 194).7. Productive labour is not synonymous with labour that produces physical objects; a commodity does not need to be corporeally vendible for it to be endowed with surplus value.As Marx makes clear: 'An actor for example, or even a clown . . . is a productive labourer if he works in the service of a capitalist (an entrepreneur) to whom he returns more labour than he receives from him in the form of wages' (Marx, 1963: 157).8.The so-called 'financialization' of the economy refers to the colossal expansion of financial means (financial speculation, credit and debt) relative to 'normal' capitalist enterprise.The 'era of fictitious capital' is the preferred phrase since the financial expansion of the past 40 years does not represent a 'qualitative alternation' but instead a 'quantitative alteration' in the structure of capital accumulation as a 'response' to problems of insufficient surplus value production (i.e.persistent valorization problems).On this, see Smith (2019: Chapter 10); also see Mavroudeas and Papadatos (2018) and Subasat and Mavroudeas (2021).9.This normalization procedure as a method attempting to address some issues with national accounting data was first operationalized in my MA thesis (Brock University) and subsequently in Chapter 5 of Twilight Capitalism (2021).Credit must go to Murray E.G. Smith who first came up with the idea over lunch, summer 2017.10.To be sure, the LTRPF is treated as controversial; many like Okishio (1961) and specifically Heinrich (2013) frame it as a whole as indeterminant.However, there are many responses: Kliman and Freeman (2000), Mage (2013) and Smith (2019), as well as studies like Carchedi and Roberts (2018) that provide theoretical justification and empirical evidence in support of the LTRPF.While of course raising some interesting points, Heinrich's alternatives remain unsatisfactory.11.Rising wages as an outcome of class struggle can cut into profits.Marx talks about how crises are preceded by a rise in wages at the tail end of an expansion phase.Class struggle further increases through the subsequent contraction phase, and at the point when the ruling classes fail to lift society out of a 'defeating crisis' the onus falls on the working class to do so through seizing economic control, and thus follows socialist transformation.12. Underproductionism is a term I used in my MA thesis.But, to the best of my knowledge, it originated with Yaffe (1972).13.The crisis-recovery process necessitates 'external relief' in which exogenous economic factors become increasingly important to quell internal contradictions, which mostly stem from a rising OCC.It can be argued that in some form an 'endogenous-exogenous-endogenous . . .' sequence gives rise to long waves (see Trotsky, 1923).Moreover, the various reactions to a shifting landscape of capitalist accumulation have led to a sort of adulteration of Marx's LTRPF, the operations of which begin to marginally deviate from historical period to historical period.For example, the law operated in one way during the industrial revolution, in another way during the war period and in another under neoliberalism, financialization and so on.14.And by third quarter 2022, there is yet another slowdown in the global economy, projected only to get worse (IMF, 2022b) -indicators point to a recession emerging in 2023 and even seem to imply that the worst is yet to come.

Figure 5 .
Figure 5.The average rate of profit (lhs) and the organic composition of capital (rhs): US economy, 1950-2020.Source: Author.