The growth of unproductive expenditure in the world economy has been the main reason that has prevented the full recovery of the profit rate in the world economy. The main expenses are unproductive speculative investments, spending on security for the benefit of those who can not use capital productively and military adventures.

1. 1
THE CAPITALIST WORLD SYSTEM PERFORMANCE IN RECENT PERIOD
Fernando Alcoforado *
Figure 1 shows the evolution of the rate of profit, the rate of surplus value and the organic
composition of capital for the United States, largest world economy, from 1951 to 2013
with the use of the foundations of Marxist economy. This figure was taken from the article
Capitalismo & Crises Econômicas (Capitalism & Economic Crises) prepared by Jacques
Gouverneur, Doctor of Law from the Université Catholique of Louvain, Belgium and a
PhD in Economics from the Université d'Oxford, Great Britain, and Marcel Roelandts who
works as a researcher and utters several courses in various universities and "Hautes
Ecoles", published on the website <http://www.capitalism-and-crisis.info/pt/Bem-
vindo/Novo>.
Figure 1- Profit rate - Rate of surplus value - Organic composition of capital.
United States 1951-2013
Source: Gouverneur, Jacques e Roelandts, Marcel. Capitalismo & Crises Econômicas
(Capitalism & Economic Crises). <http://www.capitalism-and-crisis.info/pt/Bem-vindo/Novo>.
Subtitle: Taxa de lucro=Profit rate; Taxa de mais-valia= Rate of surplus value; Composição
orgânica do capital= Organic composition of capital.
In Figure 1, the profit rate measures the return on total capital invested. It indicates how
the latter is valued and thus expresses the degree of compliance of capitalist finality. Of all
the laws of capitalism is that which Marx considered as the most historically important. Its
fluctuations have two dynamics: 1) Short-term pulses of accumulation cycles, composed
successively of a period of high profit rate, followed by a low, ending a recession (1954,
1958, 1970, 1974- 75, 1980-82, 1991, 2001, 2009). Are economic cycles typically studied

2. 2
by Marx in The Capital, cycles he called "decennial"; and, 2) The Trend developments in
the profit rate in the medium term give rise to four major phases of fifteen years each one
for the high (1951-66), down (1966-82), upwards (1982- 97), down (1997-2009) and
apparently new to the top 2009. However, it is not because the profit rate falls in output of
each cycle of accumulation that necessarily is in the presence of a downward trend in
profit rates . It is in the medium term that the downward trend acts, as indicated by Marx
in The Capital, and not every short cycle. These are the conclusions of Gouverneur and
Roelandts.
According to Jacques Gouverneur and Marcel Roelandts, profit rate fluctuations [l'=
=m'/(coc +1)] result from its evolution in the rate of surplus value (m') as the numerator
and of the organic composition of capital (coc) as the denominator: 1) The rate of surplus
value (m') distributes the social product between profits and wages (v). The investment
dynamics and crises depend, therefore, largely on the balance between the proportionality
of that division, as explained by Marx in Book II of The Capital. Fluctuations in the rate of
surplus value gives rise to three phases that give rhythm to the evolution of capitalism in
the post-war: it increases from 1948 to 1966 decreases by the year 1982, and retakes its
upward curve since then; and, 2) The organic composition of capital (coc) measures the
intensity in fixed capital in value when productivity gains cannot compensate the expenses
to get production means. The organic composition of capital relates the constant capital (k)
to variable capital (v). It is the relationship between the components that only transmit its
value and those that create new value, or among those that do not produce surplus value
and those who produce surplus value, or even between past labor crystallized in machines
and represented this work by employees. It is the relationship between the components
that are only convey your value and those that create new value, or among those who do
not produce added value and those that produce, or even between past labor crystallized in
machines and the present work represented by employees. This relationship is then
calculated relating the fixed capital invested with the wage bill employed.
Jacques Gouverneur and Marcel Roelandts claim that Figure 1 shows a very strong
correlation between the evolution of the profit rate and the rate of surplus value with the
organic composition of capital coming later to add or counteract its effects. So much when
of the low of surplus value as of the retaken, the profit rate back to fall first as a result of
the reversal of the rate of surplus value and the organic composition of capital has added
its effects only after. We cannot forget that both the numerator of the profit rate (the rate
of Surplus Value- m'), as its denominator (the organic composition of capital-coc), are all
two heavily influenced by developments in labor productivity.
According Gouverneur and Roelandts, to move forward, capitalism has the need to
support on their two legs: the production and consumption. In fact the profit rate is a
synthetic variable that simultaneously expresses the dynamics and contradictions relating
to the production and realization of value. As its development depends on both the
effectiveness of capital (coc in the denominator) as the division of the total product (the
rate of surplus value, m' in the numerator), it measures both the capital's ability to ensure
its profitability as the appropriateness of markets to production. Gouverneur and Roelandts
claim that the profit rate should be conceived as a comprehensive indicator of the
restoration of conditions of production and realization of the total social product. It
expresses both the contradictions linked to the distribution of value product (class struggle,
ie, the rate of surplus value in the numerator), and the intensity of the mechanism in fixed
capital (the productive forces, ie, the organic composition of capital in the denominator).

3. 3
In The Capital, Marx says that crises are nothing more than momentary solutions and
violent that restore for a moment the balance disturbed. The stagnation occurred in the
production would have prepared – in the capitalistic limits - a subsequent expansion of
production. According Gouverneur and Roelandts, the capital accumulation cycle imposes
the need for growth of constant capital (k) at the expense of variable capital (v). His pace
is then essentially linked to the more or less decennial cycles of rotation of the fixed
capital. According to Marx, as the value and the duration of the constant capital develop
with the capitalist mode of production, the life of industry and of industrial capital develop
in each particular company and extends over a period, say, an average of ten years. This
cycle of rotations that are linked and extend for a number of years, where the capital is a
prisoner of its fixed component, is one of the material bases of periodic crises.
Marx speaks in The Capital of an average ten-year period, not absolute. Undoubtedly
periods of reversal of capital are very different, but the crisis always serves as a starting
point for a powerful investment. The crisis provides therefore - from the point of view of
society taken as a whole - a new base material for the next rotation cycle. Wherefore, the
law [of the downward trend of profit rate] acts only as a trend whose action clearly
manifests itself only in certain circumstances and in the course of long periods. Marx
evokes "long periods" in the course of which carries the law of downward trend of the
profit rate. He speaks of a "thirty years".
In the 1990s, the growth in unproductive work level was the main cause that prevented a
full recovery of the profit rate. Why the unproductive expenditures grown so much, even
at the cost of preventing the achievement of higher profit rates? The reasons are as
follows:
• There are waves and more speculative investments waves, as capitalists seek easy
profits betting on the money markets, financial adventures, investment funds (hedge
funds) etc.
• The capitalist costs to maintain a certain social peace increase, both to spending on
security, and to grant minimum benefits to those who capital cannot use productively.
• National States resort to military adventures as a way to overshooting of the problems
facing their capitalists.
The reactions of the individual companies and the national states to declining profit rates
have the effect of reducing the resources available for productive accumulation that would
help to prevent a further reduction in profitability by reducing the pressure in the
escalation of the organic composition of capital. The work "unproductive" prevents the
increase of pressure of capital accumulation to be more capital-intensive. The value, which
would otherwise increase the ratio between means of production and work, is sucked out
of the system. The accumulation of capital becomes slower, but may continue at a steady
pace. Profit rates are lower due to the unproductive expense, but do not face sudden and
deep drops by the rapid acceleration of the capital-labor ratio [See the Chris Harman
article A Taxa de Lucro e o Mundo Atual (The Profit Rate and the Current World),
published on the website <https:
//www.marxists.org/portugues/harman/2007/mes/taxa.htm>].
Harman says that this strategy was applied in the immediate post-war period in the United
States. Spending on weapons nearing 13% of the US national product (and indirect
expenses, maybe 15%) was an important appropriation of surplus value that not continued

4. 4
capital accumulation. Was an expense which the American ruling class also expected to
win, spending one that held its global hegemony (both confronting the Soviet Union as
bringing together the European capitalist classes with the United States), and that
guarantee a market to some important productive sectors of the American economy. In this
sense, the capitalists could consider armaments as an advantage, very different in this
sense in spending "unproductive" to improve the poor living conditions. And if reduced
capital accumulation rate, it was not catastrophic, since the capital restructuring through
crises and wars had driven capital accumulation to a higher level as known in the 1930s.
Harman defends the thesis that the situation today is quite different. Since the early 1960s,
the emergence of major international competitors generated strong pressure on the United
States to reduce the percentage of production for the military spending. The stimulus for
military spending in the mid-1960s during the Vietnam War and in the 80s during the
"Cold War", allowed only a short-term alleviation to the US economy before revealing
their big problems. The increase in military spending in the Bush administration from
3.9% to 4.7% of US Gross Domestic Product (equivalent to about a third of private
investment) has exacerbated the growing public spending and the trade deficit of the
country.
According to Harman, the effect of all these forms of "spent" it is much less beneficial for
capitalism as a whole today than a century ago. It may also decrease the pressure on the
rate of profit from the organic composition of capital which certainly does not grow as fast
as it could if the entire surplus value is allocated to capital accumulation. The price that the
central capitalist countries pay for this is a slow productive accumulation and low growth
of profit rates in the long run. Hence one can understand the repeated attempts "neoliberal"
of capitalists and national states to increase profit rates, reducing the wages they pay to
employed workers, the gain of the retired, unemployed and pensioners and the restoration
of commercial criteria to reduce spending in education and health.
There remain also doubts on the part of the world where are experiencing huge investment
like China. Some analysts saw this country as the salvation of the capitalist system as a
whole. The Chinese capital has succeeded in added value for new investments - 40% of
the national product – more than United States, Europe, and even Japan. Could further
explore its employees, and has no brakes before unproductive spending levels that
characterize the core capitalist countries (although the current real estate boom is
characterized by a proliferation of high-rise buildings, hotels and shopping malls in
China). All this allowed China compete with the core capitalist countries as an export
market for many goods. However, these same high levels of investment are already
accusing a negative impact on profitability. A recent attempt application of Marxist
categories in the Chinese economy came to the result that their profit rates fell from 40%
in 1984 to 32% in 2002, while the organic composition of capital increased by 50%.
What is important is to recognize that the capitalist system has only survived because of its
recurrent crises, to advance the pressure on working conditions and large amounts of
capital diverted to unproductive expenditure. Despite all this, the world capitalist system
could not return to a "golden age" as the 1950s and did not get in the future. It may be that
capitalism is not in permanent crisis, but to be in a phase of repeated crises, of which
cannot escape. And these necessarily bring serious political, social, as well as economic
consequences.

5. 5
Recently, the press highlighted the fears triggered by the slowdown of China's growth,
raising the risks of European banks with rising defaults and doubts about the financial
health of semi-peripheral capitalist countries such as Brazil and Russia. All this came to
join a new source of concern for global markets: plummeted, in recent days, the stock
prices of the major banks in the rich world, and this was followed by speculation about the
stability of the world economy. They reappeared some of the ghosts of the financial crisis
of 2008 and 2009, which devastated the capital of financial institutions after massive
losses on mortgages. A relapse occurred in 2012, when the world feared the collapse of the
Euro, and with it, large European banks, which suffer defaults of countries and companies
of the capitalist periphery. These events difficult the credit expansion channels, essential
engine for economic growth. Not surprisingly, the recovery of financial institutions took a
central place in the anti-crisis strategy.
The central bank of central capitalist countries (United States, European Union and Japan)
remained virtually at zero short-term interest rates in recent years. This helps financial
institutions, which obtain funds paying very little and lend for longer periods at higher
rates, increasing their profits. The measures adopted generated good results. They were
observed in the United States and Europe, credit expansion and retake of growth, with
consequent gradual reduction in unemployment. The Fed (US central bank) recently felt
safe about to raise interest rates in December 2015, the first increase in nearly a decade. It
occurs, however, that signs of slowing, which until now were located in semi-peripheral
capitalist countries affected by excessive debt and the fall in commodity prices also begin
to emerge in the United States and Europe. In several countries, interest rates have already
entered the negative terrain, signal of renewed wage and price deflation trend. In this
scenario, there would be new credit crunch and loss for the banks [See the article
Desconfiança global (Global Distrust) published on website
<http://m.folha.uol.com.br/opiniao/2016/02/1738793-desconfianca-
global.shtml?cmpid=newsfolha>.
* Fernando Alcoforado, member of the Bahia Academy of Education, engineer and doctor of Territorial
Planning and Regional Development from the University of Barcelona, a university professor and consultant
in strategic planning, business planning, regional planning and planning of energy systems, is the author of
Globalização (Editora Nobel, São Paulo, 1997), De Collor a FHC- O Brasil e a Nova (Des)ordem Mundial
(Editora Nobel, São Paulo, 1998), Um Projeto para o Brasil (Editora Nobel, São Paulo, 2000), Os
condicionantes do desenvolvimento do Estado da Bahia (Tese de doutorado. Universidade de Barcelona,
http://www.tesisenred.net/handle/10803/1944, 2003), Globalização e Desenvolvimento (Editora Nobel, São
Paulo, 2006), Bahia- Desenvolvimento do Século XVI ao Século XX e Objetivos Estratégicos na Era
Contemporânea (EGBA, Salvador, 2008), The Necessary Conditions of the Economic and Social
Development-The Case of the State of Bahia (VDM Verlag Dr. Muller Aktiengesellschaft & Co. KG,
Saarbrücken, Germany, 2010), Aquecimento Global e Catástrofe Planetária (P&A Gráfica e Editora,
Salvador, 2010), Amazônia Sustentável- Para o progresso do Brasil e combate ao aquecimento global
(Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2011), Os Fatores Condicionantes do
Desenvolvimento Econômico e Social (Editora CRV, Curitiba, 2012) and Energia no Mundo e no Brasil-
Energia e Mudança Climática Catastrófica no Século XXI (Editora CRV, Curitiba, 2015).