by Robert Montgomery 12/6/2023

When Marx wrote that “the limit to capital is capital itself,” he was referring to an inherent contradiction within the capitalist system. Marx believed that the relentless pursuit of profit and accumulation of capital would eventually lead to its own limitations and contradictions.

Capitalism is driven by the constant need to expand and accumulate capital by expanding profits. Capitalists increase profits by expanding production and investing in new technologies. Capitalists maximize profits by exploiting workers by extracting surplus value from their labor. This leads to the concentration of wealth and capital in the hands of a few, while workers face exploitation and alienation.

However, as capital accumulates and investment in machinery and technology increases, the ratio of constant capital (machinery, raw materials) to variable capital (wages paid to workers) tends to rise. This means that a larger portion of the total capital is invested in machinery and technology, while the share allocated to wages decreases.

The increasing use of machinery and technology leads to an increase in labor productivity, which Marx refers to as the organic composition of capital. While this boosts efficiency and output, it also reduces the relative importance of labor in the production process. As a result, the rate of profit tends to decline because less surplus value is extracted from a given amount of labor.

As competition among capitalists intensifies, they are compelled to invest in new technologies to maintain a competitive edge. This creates a pressure to reduce costs, including wages, which further contributes to the tendency of the rate of profit to fall.

Marx argued that the tendency for the rate of profit to decline would lead to economic crises, as profitability becomes increasingly challenging for capitalists. The declining rate of profit, combined with other contradictions within the capitalist system, would create conditions that undermine the stability of capitalism.

Eventually, the system reaches a point where the working class cannot produce enough surplus value to return a high enough rate of profit on invested capital. As consumers the working class cannot afford to buy all the goods produced. This results in economic downturns, unemployment, and social unrest