The Law Of The Rate Of Profit To Fall:Theory And Practice

The Law of the rate of profit to fall, a very important economic law,that proposed by Marx through examining the operation mechanism of capitalist production mode and its inherent contradictions in dialectical materialism and historical materialism and on the basis of analysis and summarize the predecessors’ good ideological achievements rationally.However, in the conditions of the socialist market economy, especially in the background of the deepening of globalization trend and the external factors’impact on China’s economic appears day after day, how to apply it to analyze and solve a series of important and practical economic problem such as coordinated development about the investment and consumption, the real economy and fictitious economy, the traditional industry and high-end industry, and then to better understanding and grasping the rules and trend of China’s economic development, undoubtedly, is urgently to be solved as one of current theory problem.In the microcosmic view, profit rate is a important indicator that can reflect the enterprise operating conditions and evaluate the enterprise economic benefits.From the macroscopic angle, profit rate acts as the conditions stimulation and power of capital accumulation, and the capital accumulation is a key variables that influence the economic growth and volatility. Therefore.it is typical significance that a detailed investigation into fluctuations,trend and influencing factors of the real economy’s profit rate in the period of the economic transformation,to understand the development and evolution of the China’s economic situation, judge the pros and cons of relevant policies and measures.and further to know and master the healthy development of the market economy’s inherent requirements and operation characteristics.In the long-term study of the theory, academic circles focus on the evolution tendency of profit rate in the capitalist economy especially and ignore the wave and trends change of the profit rate in the socialist market economic.Many scholars habitually think that, the general rate of profit to fall is a capitalist special economic phenomenon, and most of the existing empirical analysis only aim at the capitalist market economy. In the1990s, some scholars, according to the actual condition of socialist economy, put forward the judgment that the Law of the rate of profit to fall also exists in socialist countries, but they lack the validation of the actual statistics.In this paper, according to Marx’s Law of the rate of profit to fall, we investigate the reality level and history about the profit rate of the real economy since China’s reform and opening, in order to find out the evolution trends of China’s real economy from the results of the measurement, then inspects the existence of the Law of the rate of profit to fall in socialist market economy and analyzes the specific reasons for forming the trend.According to Marx’s Law of the rate of profit to fall and drawing on Western Marxism economics analytical framework and research methods, we preliminary estimates of the profit rate of the real economy since the reform and opening up, in order to identify the profit evolution trend of the real economy, and then test whether the Law of the rate of profit to fall plays a role in the socialist market economy. Empirical analysis shows profit rate trend of China’s real economy and the industrial sector since the reform and opening up entirely consistent with Marx’s prediction.We also make a perspective on history of the China’s real economy and industrial department through Simon Mohun’s analysis framework.We not only discuss the direct factors that influence the fluctuation of profit rate, but separate and compare all kinds of variables that influences the direct factors. Through Simon Mohun’s analysis framework we measure and decomposite general and net profit rate of the United States’Non-financial corporate business from1966to2009. we compare the fluctuations of profit rate between China and the United States, and then show institutional background and policy factors behind the profit rate trend.Based on the theoretical interpretation of the fluctuations, trends and causes of the profit rate in the real economy, we explore the internal relation between a decline in profit rate and change in China’s economic growth dynamic. Uses the Law of the rate of profit to fall to preliminary judge China’s imbalance in investment structure, consumption demand shortage and rising export dependence.On the basis of in-depth analysis and summary, the paper mainly points out the risk contained by the current economic growth’s power structure, the risk is mainly manifested in four aspects.That is investment efficiency decreases, some industries appear excess capacity, asset bubble risk increases, high dependence on foreign trade.According to the conclusion on the experience research, we further discusses the direction and countermeasures about the change in the China’s economic growth power. The present economic growth power structure has been in trouble and can not last.In order to make the Chinese economy gradually got onto the stable, coordinated, efficient and sustainable development track, we must accelerate the transformation and upgrading of the current economic growth momentum structure.we must keep the economic growth from expanding investment and exports transferred to expand domestic demand, especially in the consumption demand. Resolutely curb the behavior of real estate speculation, promote housing prices return to a reasonable level. We should firmly grasp the real economy and guide capital flows to real economy. Based on the understanding of the Law of the rate of profit to fall and acknowledgment and analysis of the driving force of China economic growth, we propose the countermeasures that expand consumer demand and promote the innovation to prevent excess capacity and strengthen endogenous growth momentum, to slow down the pace of falling in profit rate, and make it become the trending down.