Ouroboros

Back in 2001, a conference was held by the World Trade Organization to make one of the most economically impactful decisions regarding the lives of billions. The panel consisted of governments across the globe debating whether to let China be a member of the organization and open its borders for commerce and trade. They voted for the inclusion of China, a decision 20 years later, made China the global powerhouse we know today. But what made western countries cozy up to China? After all, the US had decades-long economic sanctions placed on China in the 20th century and wasn't very discrete in showing its antagonistic attitude towards the CCP. So, what changed in 2001 that led global economics to open its doors to China?

A contradiction of significant magnitude arises for capital owners as technological advancements in production and industry emerge and develop. When automation and machinery denoted by constant capital (CC) take up more and more of the capital owner investments as opposed to labor or variable capital (VC), a new cost structure of producing a commodity is realized. Resulting in a lower market price for that commodity and dominating the market as every enterprise adopt these improvements in productive capabilities in the hopes of staying competitive. As a result, the involvement of direct labor is lessened, and the profits extracted from said labor are diminished (holding labor intensity constant). Since all surplus value comes from labor, a crisis of falling profits strikes. This comes as a consequence of continuous competition between enterprises and the ultimate goal of lowballing every competitor and becoming the sole player in an industry, a monopoly. A temporary profit is gained for the first mover, but the long-run wholistic rate of profit is brought down.

It's important to distinguish between the total profit and the rate of profit. For instance, a textile business is investing in its machinery in order to produce the same amount of shirts in a shorter time and with less labor or variable cost. Let's say it costs the capitalist $2.00 to buy the old machine and an extra $0.50 for wages, and the finished shirt is sold for $3.00, which leaves the capitalist with $0.50 extracted for labor with a 20% rate of profit. Now the new faster machine costs $2.50, the new slashed labor wages will only cost $0.25, and the capitalist will be able to produce more while selling it at the same price of $3.00 to cut competition. This will lead to the new 9% rate of profit. This process will repeat until enterprises become too efficient for their own good, causing overproduction that calls for some cost-saving measures. A poor mass of people will be laid off, leading them to have less purchasing power and would struggle to buy anything, closing on a 0% rate of profit, causing total industrial collapse, and giving birth to an economy that lives on credit. This is why capitalists love the idea of universal basic income; they know the imminent collapse is on the horizon and want to ensure you still have some crumbs to buy their mediocre goods.

"The progressive tendency of the general rate of profit to fall is, therefore, just an expression peculiar to the capitalist mode of production of the progressive development of the social productivity of labour."

• Karl Marx

This phenomenon is relational and has its counter tendencies. It is countered by the capitalist drive to keep the rate of profit, if not rising, at least constant and steady. This can be done in a number of ways, most commonly through increasing the rate of exploitation expressed in the following equation: e = s/v

e (rate of exploitation) is equal to s (unpaid work or surplus value) divided by v (paid work or wages). This ratio can be increased by either reducing v, increasing s, or both. The unpaid work hours that can generate surplus value will become longer or more intense, followed by stagnated wages adjusted for inflation resulting in the healthy rate of profit the capitalist desires. This ratio differs across countries, and throughout time, countries with strong labor unions and robust worker protections have a lower ratio than countries that lack those necessary labor rights. This is the leading cause of poverty, wages, and poor living standards in urban areas. Private corporations' single goal is to increase shareholders' value; infinite growth plans in a world with finite resources are a recipe for disaster in global magnitudes.

Another way for the capitalist class to maintain their global profit rates is through wealth accumulation by disposition. Once they milk all private sectors for all that they're worth, they look upon public institutions like healthcare, education, pension funds, and welfare. And a call for privatization happens, usually reasoned with the false idea of efficiency. But really, what ends up happening is a complete transfer of public wealth and utilities to the few private owners that already possess great influence and stature. All levels of social solidarity in these institutions are lost and replaced by unfettered individualism, atomizing and isolating our culture even more. This call for mass privatization plans saw a rise mainly in the 1970s when most western developed countries witnessed a period of economic stagnation followed by attempts spearheaded by UK Prime Minister Margaret Thatcher and US President Ronald Reagan to privatize as much as they could get away with, not only in their respective countries but also globally through predatory institutions like the World Bank and the International Monetary Fund. In the following decades, working and middle-class wage earners everywhere witnessed a significant degradation in the quality of life and a much slimmer chance of any upward social mobility.

Something astonishing happened when the WTO voted to let China open free trade with western nations. Between 2000 and 2010, the US lost one-third of its manufacturing jobs, and other members of the organization, mainly consisting of western nations, followed a similar trajectory. This came as a result of financial markets extorting force and pressuring manufacturers to lay off their decently paid US workers and move manufacturing into countries where you can legally get away with paying starvation wages, which at that time the perfect geographical place was located in east Asia. This leads to the next desperate attempt to keep rates of profit healthy, through soft imperialism and heavy exploitation of the third world. Big US corporation sacrificed their precious Intellectual property to Chinese manufacturers for their cheap labor, while turning around and complaining about China's ability to catch up with western nations. Their unapologetic corporate greed is leading to their slow decline, all at the cost of workers everywhere. The company Apple is a prime example of this self-defeating tactic, in 2005, Apple was held up as the most valuable company in America, while not manufacturing a single product in its home country. This proved highly profitable and pushed every company competitor or otherwise to follow a similar approach causing mass layoffs and increasing unemployment everywhere in the states. This is why studying the tendency of the rates profits to fall is crucial in understanding how capitalism's internal contradictions baked in its sterling essence work against itself, its sensible irrationality builds up and culminates to a disastrous conclusion that can only be slowed and sometimes softened but can't be avoided.

"In the world of appearances, falling rates of profit and a glut of commodities are both surface representations of the same underlying problem"

• David Harvey