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Andrew Glyn

Profits – Catastrophic Drop

(Autumn 1979)

From Militant International Review, No. 17, Autumn 1979, pp. 22–23.
Transcribed by Iain Dalton.
Marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

It was only five or six years ago that the Marxists were denounced by the capitalist economists as distorting the facts, for pointing out the long-run decline in the profitability of British capitalism. But now what Marx described as their “horror of the falling rate of profit” (Capital, Vol. 3) takes the form of an almost obsessive probing of the facts. Recent articles in the Bank of England Quarterly Bulletin (December 1978) and in the government magazine Trade and Industry (22 September 1978) provide striking confirmation of the catastrophic decline in profitability. The following table, showing the development of the rate of profit (see below) since 1960, summarises information from both these articles:

RATE OF PROFIT % (before tax)










All industrial and
commercial companies









(After tax)









Manufacturing industry









Food, drink, tobacco
















Metal manufacture








Engineering, ships, vehicles








Textiles, clothing








Wholesale distribution







Retail distribution







Sources: BEQB, Table C; Trade & Industry, Tables 1, 2, 3.

The rate of profit shows the percentage return received by the capitalist for every pound invested. Suppose the capitalist invests £700,000 in a factory. Workers in the factory produce £500,000 of commodities each year. The capitalists’ costs are £100,000 for materials, fuels, etc.; £200,000 for wages; leaving him a ‘gross’ profit of £200,000 a year. But in addition he sets aside £100,000 in depreciation so that when new factory and machinery can no longer be profitably used – 7 years in the example – he will be able to purchase new ones. This leaves him with a net profit of £100,000 for materials and £200,000 for wages. So that his net profit expressed as a percentage of capital employed is 10%. This is his rate of profit. It shows for example the amount he has expanded his capital during the year. It is often called the rate of return on capital employed or the return on investment. In Marx’s terms, constant capital used up (c) is £200,000 (£100,000 depreciation plus £100,000 materials), variable capital (v) is £200,000 (the wage bill) and surplus value is £100,000. The rate of profit is surplus values divided by constant capital advanced (the whole £700,000 for the factory plus the £100,000 for materials) and variable capital advanced (£200,000) which again gives the same rate of profit at 10%.

Competitive power eroded

What comes out very clearly from the figures is that the rate of profit in industry as a whole, and especially in manufacturing, was declining throughout the sixties and early seventies. For example in manufacturing the rate of profit during 1970–72 was more than a third below 1960–64, and it fell further in 1973, supposedly a ‘boom’ year. Only in the distribution sector was profitability maintained. However the deepening crisis after 1973 affected even this sector, whilst manufacturing profitability virtually disappeared as the effects of the world recession were added to the downward trend. In some industries in fact the rate of profit became negative: the capitalists were actually eating into their capital to keep production going.

Just how desperate the situation is can be shown by a longer-term comparison calculated by the Bank of England which shows profits as a percentage of national income. This does not show the rate of profit (for which the longer term figures are not available) but rather is an indicator of the share of the value produced by the working class appropriated by the capitalists as pre-tax profits directly.


Share of industrial &
commercial companies’
profits in domestic issues



















Sources: BEQB, Table A

Over the last four years, then, the share of profits has been one half of the level of the slump years of the early 1930s. Nor have all the attempts of the capitalists to restore profitability over the last few years had the desired effect. The table for the rate of profit shown above indicates an increase in pre-tax profitability of barely ½% between 1975 and 1977, and after tax no increase at all. Admittedly the figures exclude North Sea Oil, but even when these are added it varies the rate of profit in 1977 by a mere ½% to around 4½%. The latest figures for profits show a rise of about one quarter between the third quarter of 1977 and the third quarter of 1978 – roughly the period covered by phase 3 of the last Labour government’s incomes policy. This rise practically doubled the growth of earnings – will have pushed the rate of profit up a bit further, to about 5% before tax, or 4½% leaving out North Sea Oil profits. But even this increase leaves the rate of profit at well under half the level of the early sixties. In the second quarter of 1978 manufacturing productivity was a wretched 3% above the level of 1978 – no basis at all on which to rebuild the profitability of British capitalism and its competitive power on world markets.

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