Capitalism in terminal decline: the compelling empirical data trends

20 min readAug 1, 2023
The general rate of profit tends historically towards zero. Source: Estaban Maito
As capital accumulates, the rate of profit (above) falls.

Click here for a short summary

The evolution of production from (labour-operated) mechanisation to (supervised) automation is abolishing the source of (exchange) value and profit — the capitalist’s veiled theft/exploitation of commodity-producing labour’s labour time.

This historical process is not reversible. Innovation is inherent to the nonstop nature of evolution and humanity’s striving for labour-saving, life-enhancing progress; but capital accumulation itself demands innovation, absolutely rising productivity and cheaper-to-produce commodities, in order to offset falling profitability initiated by previous expansions in production.

That is, as more commodities are made in less time or with less labour, the labour time contained in the average commodity approaches zero, a historical limit to devaluation, making money, capital and commodification obsolete.

Socialism, replacing private enterprise (producing commodified utilities) with social enterprise (producing decommodified utilities) is therefore becoming an economic necessity for the first time.

(Source: Michael Roberts). The organic composition of capital (OCC) = the ratio of constant capital (value of/outlay on machines/robots/computers) to variable capital (value of/outlay on labour) in commodity production. A rising OCC tends to manifest in a relative underproduction of surplus value (exploited/appropriated labour time) relative to capital value (which is therefore subsequently devalued). This is also an overaccumulation of capital — surplus capital that cannot be (re)invested profitably in commodity production, hence the falling rate of profit. Labour time is the source of profit/exchange value because labour time in the abstract is the one thing that all commodities (incuding the money-commodity) have in common that makes them exchangeable. Labour time is passed into machines and then commodities; then realised as profit when commodities are sold/exchanged. If, as a result of innovation, constant capital falls relative to variable capital, then the OCC falls and the rate of surplus value rises — but this is the exception, not the rule. In fact— because of the ever-greater demands of capital accumulation (the rising demand for greater value-creation) and intensifying competition over (at least relatively) dwindling profits — expanded production increasingly tends to be based on innovation, which is therefore increasingly focused on the efficiency of automation.
“Find a factory anywhere in the world built in the past five years — not many people work there.” James Manyika, McKinsey Global Institute, 2017
Services are also increasingly automated to reduce the outlay on labour. Services workers are relatively unexploitable since they handle (if any) only finished or near-finished commodities.

Long-term indicators

➤ The average global rate of profit is trending historically towards zero, having fallen from an estimated 43% in the 1870s to 17% in the 2000s and 11% in the 2010s.

Basu et al.

➤ Interest rates (borrowing costs) have trended downwards over seven centuries5,000 years, even — regardless of the political-banking-legal regime. (Interest is a form of profit, parasitically siphoned from value originating in commodity production.)

“The decrease in interest rate is a symptom of the annulment of capital only inasmuch as it is a symptom of the growing domination of capital in the process of perfecting itself — of the estrangement which is growing and therefore hastening it’s annulment.” — Karl Marx / “The rate of interest is related to the profit rate in a similar way as the market price of a commodity is to its value [or labour time]…. The general rate of profit, in fact, reappears in the average rate of interest as an empirical, given fact.” — Henryk Grossman

➤ GDP growth rates in ‘high income countries’ are trending towards and already closing in on zero, having averaged around 6% in the 1960s and below 2% since 2000.

➤ The post-recession recovery from the 2007–09 Global Financial Crisis (GFC) — based on unsustainable debt and a temporary shale gas revolution that peaked in 2019 — has been the weakest, relatively, since WWII.

Whereas US GDP grew by 43% over the first 39 quarters of the 1991–2001 expansion, in the first 39 quarters of the expansion up to March 2019, it grew by only 22%. At that rate, the latter would have had to continue for another six years to equal the aggregate growth of 1991–2001, and nine more to match the the 54% recorded in 1961–69.

US GDP growth
Decade-by-decade average GDP growth rates in ‘high income countries’. Stepped line represents decade average. (Source: World Bank.)
Source: Financial Times. UK GDP per head (which tends to concentrate into fewer private hands, anyway) was 30% smalle in 2023 than was expected in 2007.

➤ The rate of productivity growth has trended downwards over the past seven decades to near-zero.

The returns on US research and development (R&D) fell during 1985–2015 by 65%, despite a 250% rise in the number of scientists and engineers engaged in R&D.

(Source: Harvard Business Review)

➤ Almost half, 43%, of around 9,000 commercial banks in the US disappeared between 2000 and the end of 2017 (already down from 14,000 in 1986 and 30,000 in 1921).

➤ As commodity production becomes increasingly unprofitable, surplus capital is channelled instead into asset speculation and rentier capital.

The proportion of total bank lending to businesses in 17 advanced nations has fallen relative to loans going to mortgages and property speculation, the latter from about 30% in 1900 to 60% in 2013. On average, non-mortgage lending accounted for 73% of the total in 1928 and 65% in 1970, but fell to less than 40% by 2007.

(Jordà, Schularick and Taylor)

Similarly, the gap between ‘value stocks’ (financial dividends) and ‘growth stocks’ (returns on production) has continually widened. A $1 investment in each in 1927 would have by 2020 diverged nearly 18 times in favour of the former ($51,514 vs. $2,922). The earnings of the former, however, depend on the success of the latter, since real value orginates in commodity production.

Anchor Capital Advisors (Note the y-axis increases ten-fold with each data point)

➤ The number of public US companies, through bankruptcies and mergers, fell from 8,000 in 1996 to 4,500 in 2016 and 3,700 in 2022.

Of seven major merger and acquisition waves in the US since the 1890s, four (60%) have taken place since 1989.

In the airline sector, for example, the top four firms served 43% of the market in 1985, rising to 72% in 2017.


➤ Between 1964 and 2014, the average lifespan of S&P 500 companies shrank from around 60 to 18 years.

➤ According to Goldman Sachs, about 50% of listed US firms are unprofitable, trending up from about 10% in 1960.

➤ From 1977 to 2013, startups as a share of all US firms fell from 16.5% to 8%, a decline pervasive across states and sectors.

Fewer than 4% of US 30-year-olds in 2013 were entrepreneurs compared with 5.4% of those born in 1965–80 and 6.7% in 1944–62. The same downward trend in entrepreneurship has taken place among older citizens of prime working age.

Share of new firms as % of total firms (Source: Census Bureau Business Dynamics)
Despite better educational attainment, fewer than 4% of US 30-year-olds in 2013 were entrepreneurs compared with 5.4% of those born in 1965–80 and 6.7% in 1944–62. The same downward trend in entrepreneurship has taken place among older citizens of prime working age.

➤ UK stock traders, although rising as a proportion of the population with each generation, are now holding onto shares for 0.8 years on average — down from 9.7 years in 1980, a decline of 91.75%.

Similarly, US traders are holding onto stocks for 10 months — down from 5 years in 1975.

➤ Of the roughly 750 currencies that have existed since 1700, only around 20% remain.

➤ British pound sterling had by 2011 lost more than 99.5% of its purchasing power since its adoption as official currency in 1694.

The US dollar in 2018 had lost more than 96% of its purchasing power since 1913, having barely changed in the previous 140 years (when relative growth was higher but absolute growth was much slower).

The vast amount of that figure, 91%, ensued after 1949, when the US supplanted Britain as the world’s dominant imperialist superpower.

The figure since 1970 is 85% (93.5% for Britain), around the time of the first major post-WWII recession and the start of the digital/computing/automation revolution.

Although the rate of innovation tends to slow down as the rate of profit falls, the pace of innovation tends to accelerate absolutely. Computing power tends to double every 18–24 months (Moore’s Law) and total production tends to double every 25 years, devaluing commodities as much less labour time is contained in each commodity, thereby also devaluing the money-commodity.

➤ Production costs and consumer commodity prices have therefore trended secularly/historically towards zero.

For example, whereas the world’s fastest supercomputer in 1975 was worth $5m ($32m in 2013’s money), the price of an iPhone 4 released in 2010 with the equivalent performance was $400.

Aerospace companies producing propulsion systems in 2010 for $24m in 24 months were by 2018 3-D printing their engines for $2,000 in two weeks.[1]

One gigabyte of data storage fell from $193,000 in 1980 to just $0.03 in 2014.

While sequencing the first human genome took 13 years and in 2001 cost $100 billion, the cost had fallen to below $1,000 by 2016 and now takes about 24 hours.

Source: Our World in Data

In 2000, the cost of producing one kilogram of protein through precision fermentation cost $1 million, but in 2020 the cost had fallen to around $100.

As soon as a company like Nestle starts buying its milk this way (it is already investigating viability) — as it must to re-widen its own profit rates— the conventional farming industry will become uncompetitive and unprofitable.

Rethink X also predicts total systemic collapse this decade.

➤ With deposits becoming shallower and deeper and extraction more capital-intensive (dependent on machinery relative to labour), the Energy Return on Investment (EROI) on fossil fuel has fallen from above 100:1 (a return of 100 units of energy for every 1 invested) in 1930 to around 3–6:1 in 2019.

The labour intensity (including the labour needed to produce capital-intensive extraction machinery) of fossil fuel production and its non-renewability (constantly reproducing the industry’s demand for labour) has been vital to capitalism’s overall profitability.

To The Ends of The Earth
Delannoy et al.
Source:, February 2021

The ‘tight/shale oil revolution’ breathed some life into the oil industry in the 2010s but peaked in 2019.

In 2013–18 the world consumed four barrels of conventional oil for every one barrel of new discoveries.

The value of Saudi Arabia’s state assets, mainly in oil, is predicted to fall from $900bn to minus-$2trn around 2030.

In 2015, the total debt of the oil and gas sector globally stood at roughly $2.5 trillion, 250% higher than at the end of 2006.

The fossil fuel industry only remains ‘profitable’ because of its ultra-parasitic dependence on debt/public subsidies — no bottomless pit — of $16bn a day and artificial cuts to production that normally raise consumer prices by 70–80%.)

➤ Just as the number of slaves in the US declined as a percentage of the population (from approx. 25% in 1790 to 16% in 1860) before slavery ended; manufacturing workers declined as a percentage of the US workforce from 26.4% in 1970 to 8% in 2018.

Science has usurped manufacturing as the mother of production and the working class is now largely based in services instead of physical commodity production, even in South America and Sub-Saharan Africa.

Whereas the capitalist class is a relatively dwindling minority of the world population, the working class — people dependent on wages for income (including welfare) — has grown exponentially.

The IMF estimates that the effective global workforce quadrupled in size between 1980 and 2003 (aided by the overthrow of the Soviet Union and the ‘liberalisation’ of China, adding up to 1.47 billion workers).

Even the ‘developed’ imperialist nations (those which frequently export capital overseas to expand and cheapen their exploitable labour base) have seen a “deepening proletarianisation” of the population (John Smith). “Proletarians have increased their already overwhelming predominance within the economically active population [EAP]…. Between 1980 and 2005 the proportion of waged and salaried workers in total EAP in … the developed nations steadily rose, from 83% to 88% (in 2005, around 500 million people).” In the US, the figure is even higher, with waged workers as a proportion of the EAP increasing from 90.6% in 1980 to 93.2% in 2011.[2]

The green, yellow and red serve loosely as a proxy for feudal, capitalist and socialist bases of production.

Short-term indicators

➤ Trade restrictions have been hitting record levels since 2015, before Brexit and the presidency of Donald Trump.

➤ The medium real revenue growth of ‘FAANG’ stocks — Facebook, Amazon, Apple, Netflix and Google, the five best-performing American technology companies of the 2010s, comprising about 20% of the value of the S&P 500— turned negative in 2022 for the first time.

➤ 2022 was the worst year for stocks and bonds combined since 1871. Long-term US government bonds staged the biggest drop since 1788. The classic investor blend of bonds and equities put in the worst performance since 1932.

At its lowest point in 2022, the S&P 500 index in the US had shed $11trn in market capitalisation, similar to the entire annual economic output of Germany, Japan and Canada combined.

Losses on the banking industry’s investment securities totalled $690bn in the third quarter (Q3) of 2022 — compared to less than $100bn in 2008 at the height of the GFC.

A total of 4,746 commercial banks in Q3 held total assets of $23.6trn, matched by total liabilities (money owed); but devaluations of face value investments as a result of rising interest rates meant the banking industry as a whole was a conservatively estimated — not including exposure to hidden derivatives and cryptocurrency — $400bn short of solvency.

(In November 2022, the Bank of International Settlements (BIS, the ‘Bank of Central Banks’) warned that “mostly very short-term” geographically-hidden off-balance-sheet dollar debt held by financial firms had passed $80trn — exceeding the stocks of dollar Treasury bills, repurchase agreements and short-term corporate debt combined. In June 2022, the total market capitalisation of crypto tokens plummeted from its peak in November 2021 by 70%.)

➤ A third ‘one-in-100-year’ financial bubble in three decades — the first three to surpass the bubble preceding the 1929 Wall Street Crash — engulfing the world economy has been labelled ‘the everything bubble’ (the previous two being the 2000–01 dot com bubble and the 2007–09 housing bubble) since it now encompasses every asset/debt class for the first time.

(Stock market capitalisation = total value of stocks.) ‘The everything bubble’ is the third time a global financial bubble has ballooned greater in relative size than the pre-1929 bubble but the first time it has engulfed every asset class, including government bonds.
‘Record high’ stock market growth driven by only two (wildly overvalued) stocks (Nvidia and Meta)

Global debt in 2015 was 2.5 times higher than the global money supply (up from two times higher in 2013). According to the IMF, the ‘private sector’ globally entered 2020 — before the COVID-19 lockdowns — with record debts.

Official US national debt-to-GDP — driven by private sector debt heaped onto the backs of the public — hit an all-time high of 128.4% in 2021 — rising again to 131.5% in 2023 — higher than the 119% at the end of WWII.

In July 2019, US debt-to-GDP was estimated to be 2.5 times higher than the official figure (when including ‘off-balance-sheet’ debt like Social Security and Medicare; respectively estimated as on course to go bankrupt in 2026 and 2034).

Global debt to GDP (IMF)

➤ To bail out private banks and private corporations (by purchasing their debt, spending the money into existence), the balance sheet of the Federal Reserve, the US central bank, rose from $900bn in September 2008, during the GFC, to $9 trillion (trn) in 2020 — an unprecedented 10-fold increase.

➤ The US’s M1 money supply (very liquid monies such as cash and traveller’s checks) rose from $1.6trn in May 2009, to $4trn in February 2020, to $16.5trn in June 2020; and $20.7trn in March 2022.

The broader M2 supply (M1 plus less liquid monies such as savings and money market funds) went from $8.4trn in June 2009 to $15.3trn in February 2020 and $22trn in April 2022.

That meant 80.7% of all M1 ever put into circulation was ‘printed’ (electronically) in just 23 months; 69.5% for M2 in 26 months.

For comparison, the total the US spent on its wars on Afghanistan, Iraq, Syria and Pakistan from 2001 to 2020 cost cost $6.4trn.

➤ Lifting the US economy out of recession has required on average since 1958 a baseline interest rate cut of 6% (in order to cheapen capital to incentivise lending and borrowing); but since the (worst ever) stock market crash in March 2020, rates were already near zero, having been cut after March 2020 from 0.75% in the UK and 1.75% in the US.

Neither country had ever gone down to 0% before 2009.

UK baseline interest rate 1800–2020. Source: Bank of England
Far from having full control of the central bank interest rate and causing recessions, as often claimed by right-wing libertarians, the Fed typically lowers the base rate following a decline in and in line with the yield on the 2-year Treasury, which falls with rising demand as investors without profitable opportunities in commodity production seek a relative safe haven.
Bank lending tightens and *then* the Federal Reserve cuts rates, in order to cheapen capital to reincentivise borrowing and investment, to stave off or end a recession.

➤ As ‘smaller’ or poorer banks and corporations go bust or default on their debts to the central bank, the central bank balance sheet (and thus the money supply) naturally falls and so interest rates inversely rise — making new debt needed to pay off the interest on old debt more expensive, including for governments and central banks.

In 2023 the Congressional Budget Office projected that US government interest costs would grow nearly threefold from $331bn in 2021 (2% of GDP) to $910bn in 2031, from 7% to 12% of the federal budget, totalling $5.4trn over 10 years — making it the fastest growing component of the federal budget — and 45% of the federal budget in 2050 ($60trn, 9% of GDP). That’s far higher than the previous postwar peak of 19%.

Source: Apollo

➤ After more than a year of rising interest rates, at the start of 2023 the percentage change in the M2 money supply declined absolutely for the first time since the end of 1932, during ‘the Great Depression’ — from a greater relative ‘height’ and at a greater relative ‘steepness’.

From March 2021 to June 2023, the rate of M2 growth fell by 31% from its peak of 26.3%, contributing to disinflation (slowing inflation) of about 5%; compared to 12% and 10.5% actual deflation in 1932.

The Fed itself started to operate at a loss in October 2022 — with its long-term assets fixed at lower rates but its short-term liabilities (money owed) burdened by rising interest rates — putting it on course to have negative tangible equity (liabilities exceeding assets) for the first time.

That meant the Treasury stopped receiving the Fed’s surpluses, a $100bn+ annual revenue source — four times the annual budget of NASA.

➤ It took eight years of interest rate hikes peaking at 19% in 1981 to bring down the inflation of the 1970s — lower wages relative to rising household debt levels mean interest rates of 3% in Britain in 2022 were the equivalent of 14% in 1980.

In 2019, after interest rates had crept back up from 0% over 30 months to 2.5%, the highest since early 2008, the US yield curve inverted for the first time since before the GFC.

(That is, the demand for and yield (interest/return/profit) on 10-year government bonds went lower than 2-year bonds; suggesting that the market as a whole is becoming more pessimistic about economic prospects for the near future.)

Remarkably, however, the inversion struck after the baseline interest rate had moved back down (from 2.25% to 2% at the end of July).

The remarkable kept coming: while falling share and rising bond prices in a crisis usually generate falling interest rates, on 9 March 2020 the 10-year US Treasury Bond interest rate spiked upwards — something that statistically should only happen every few millennia.

➤ In October 2022 the US’s Strategic Petroleum Reserve fell to a 38-year low of 21 days of domestic demand, down from 40 in 2020. The 283 million barrels sold in 2021–2 took 25 years to accumulate. The US’s diesel reserve supply also fell to a historically low 25 days.

In August 2023, the credit rating agency Fitch downgraded the US’s credit rating, which investors use as a benchmark for judging how risky it is to lend money to a government, from AAA to AA+.

As with any declining empire, the US military is using its equipment and weapons quicker than it can reproduce them; while drowning in debt and bleeding dry the tax base.

(Source: Acquisition Talk)
Federation of American Scientists.

The economic necessity of ‘state monopoly socialism’

The evolution of capitalism into ‘state monopoly capitalism’ — a description of capital accumulation’s ever-greater dependence on a) state subsidies and b) monopoly ownership of the means of production — historically precedes the next evolutionary shift of the productive forces (man and technology) into ‘state monopoly socialism’.

➤ Private enterprise is — to offset falling profit rates and improve productive efficiency — increasingly dependent on: i) state/public subsidies — trending towards 100% of income and therefore nationalisation; ii) mergers; iii) real- and long-term central planning (eliminated internal departmental competition;[3] centralised databases; real-time stock analysis; long-term budgeting/forecasting; etc.)

Taking the means of production under public ownership, a ‘final merger’, and centrally planning the economy as a whole, is therefore becoming, for the first time, an economic necessity.

The total monopoly resulting from the final merger cannot be privately owned, since there is no exchange of ownership (of commodities) within a total monopoly. The public owns the means of production and the utilities produced are therefore decommodified — making ‘trade’ (co-ordinated distribution between social enterprises) actually free.

The private sector is increasingly dependent on public subsidies — bleeding dry its last source of income.
% of 2021/22 UK Minstry of Defence (MoD) procurement budget spent on its top 10 suppliers. Source: MOD. Think tank Common Wealth reported in July 2023 that BAE Systems pay just 14.35% of its own R&D costs and QinetiQ only 4.5%. QinetiQ’s 23.2% return on investor capital was almost twice the FTSE average of 11.7% in 2022–3 and the firm paid £43m to shareholders, with the dividend per share being worth twice what it was a decade before. Common Wealth said BlackRock, Vanguard and State Street owned a combined average of 16% of the shares issued by the weapons sector.
Capitalist competition itself leads to monopoly — primarily offseting falling profitability through expanded production and the efficiency gains via economies of scale — since the merger of two companies enables the combined force to outcompete a third competitor. Other examples: the car industry; the food industry.
China’s domestic mergers. Source: Lexecon/ Mergers between domestic companies significantly increased in 2018–20 and surpassed the number of mergers involving foreign entities for the first time. 98% of cases were approved unconditionally, with only 48 approved with modifications and two blocked during 2008–20. The average time from case acceptance to review completion fell from 41.2 days during 2011–15 to 24.2 days in 2016–20.

➤ Since the private sector is losing its ability to employ value-creating (commodity-producing) labour — it does so only if profitable — society must take over responsibility for employment (via governmental departments and social enterprises), enabling actual full formal employment. (‘Full employment’ in capitalism discounts lumpenised/destitute ‘economically inactive’ workers.)

Every recession tends to result in a greater spike in unemployment.

➤ Since the workforce is now almost entirely services-based, economic stability can only be established with a compatible system, whereby value is created not by for-profit commodity-production but by break-even utility-production.

➤ Since fiat currency is dying a natural death, with cash also disappearing in relative terms, it must be replaced by a non-transferable digital voucher system, with the ‘currency’ pegged to labour time. (Note: Only so much cash can be stored physically; accumulation demands ever-greater efficiency in circulation and turnover; and cash must be converted into bonds to lower interest rates that make capital cheaper to borrow and invest.)

Workers will therefore receive all the value they create during the working day (instead of having part of it appropriated by capitalists both at the point of production — during working time — and in the form of public subsidies), paid in units of labour time worked, minus contributions to universal public services and state/governmental expenses.

A grading system will incentivise types of work (night shifts, for example) and productivity rates. Consumption prices will tend to fall to zero, rising only with falling demand (of no longer popular or obsolete products, for example).

Combined with public ownership and full employment, this system:

  • institutionalises equality of labour, underpinning equal rights (whereas rights under capitalism only really exist to the degree that you have money);
  • limits economic inequality (although the most productive workers earn the most);
  • and consistently raises living standards for all (especially via general falling prices).

Since digital vouchers are be non-transferable, cancelled like train tickets once spent, the centralisation of wealth into fewer becomes impossible.

➤ An all-socialist state (made up of socialist parties) will oversee a transitionary period in which competing private production is increasingly taken under singular public ownership (via negotiated long-term debt payments to the last capitalists, to minimise conflict).

Once that transition has been completed (globally), the state will have withered away, since the state is by definition the absolute authority of one class over another.

In the long run, as artificial intelligence, 3D-printing, lab-grown food, etc. become increasingly accessible, localised, and personalised, the divide between producer and consumer will increasingly disappear, bringing about increasing economic independence and abundant (extremely plentiful) material wealth for all.

With previously exploited and underdeveloped ‘peripheral’ regions becoming increasingly prosperous, the centrality of remaining (‘ex-state’) governmental organs will tend to wither away or decentralise into regional/localised self-governance.

So, whereas capitalism has a long-term tendency to centralise wealth and power, socialism has a long-term tendency to decentralise wealth and power.

Essentially and historically, socialism completes what capitalism started but could not finish.

➤ Digital data, precision fermentation, 3D-printing, bioplastics, microbial fuel cells, nuclear fusion, etc., are forms of additive manufacturing — growing, replicating, layering and fusing — as opposed to subtractive manufacturing — metal or trees subtracted and shaped from mines or land, for example. So:

(Polluting, non-reciprocal) subtractive and mechanised production = limited/scarce production = capitalism

(Clean, reciprocal) additive and automated production = unlimited/abundant production = communism

  1. Bastani, A., Fully Automated Luxury Communism, p. 123.
  2. See Phillips L., Rozworski, M., People’s Republic of Walmart: How the World’s Largest Corporations are Laying the Foundation for Socialism, Verso, 2019.

“While [Walmart] operates within the [international] market, internally … everything is planned… The different departments, stores, trucks and suppliers do not compete against each other in a market; everything is coordinated… (p. 21)…. It is no small irony that one of Walmart’s main competitors… Sears, Roebuck & Company, destroyed itself by … instituting an internal market (pp. 27–31).”

3. Sources: EAP data from Laborsta, quoted in Smith, J., Imperialism in the Twenty-First Century, Monthly Review Press, 2016, p. 115; International Labour Organisation, Key Indicators of the Labour Market 8th ed, quoted in Smith, op cit, p. 147.)




Ted Reese is author of The End of Capitalism: The Thought of Henryk Grossman; and Abundant Material Wealth For All