People usually look for a theory of secular decline in Marx’s notes on the tendential fall in the rate of profit, which Engels edited and compiled as chapters 13 to 15 of volume three of Capital. There, the tendency of the profit rate to equalise across lines — combined with the tendency of productivity to rise in all lines — is held to result in an economy-wide, tendential decline in profitability. Decades of debate have centred on the “rising organic composition of capital”, to which this tendency is attributed, as well as on the complex interplay of the various tendencies and counter-tendencies involved. Yet those engaged in this debate often neglect that the same account of the composition of capital underlies another law, expressing itself in both cyclical and secular crisis tendencies, one that may be read as Marx’s more considered re-formulation of this account — chapter 25 of Capital volume one: “The General Law of Capitalist Accumulation.” If the unemployed tend to be reabsorbed into the circuits of capitalism as an industrial reserve army — still unemployed, but essential to the regulation of the labour market — they then equally tend to outgrow this function, reasserting themselves as absolutely redundant: "The greater the social wealth, the functioning capital, the extent and energy of its growth, and therefore also the greater the absolute mass of the proletariat and the productivity of its labour, the greater is the industrial reserve army. The same causes which develop the expansive power of capital, also develop the labour-power at its disposal. The relative mass of the industrial reserve army thus increases with the potential energy of wealth. But the greater this reserve army, the greater is the mass of a consolidated surplus population, whose misery is in inverse ratio to the amount of torture it has to undergo in the form of labour. The more extensive, finally, the lazarus-layers of the working class, and the industrial reserve army, the greater is official pauperism. This is the absolute general law of capitalist accumulation.” [Marx, Capital, vol.1 (MECW 35), p. 638] In other words, the general law of capital accumulation is that — concomitant with its growth — capital produces a relatively redundant population out of the mass of workers, which then tends to become a consolidated surplus population, absolutely redundant to the needs of capital. [This surplus population need not find itself completely ‘outside’ capitalist social relations. Capital may not need these workers, but they still need to work. They are thus forced to offer themselves up for the most abject forms of wage slavery in the form of petty-production and services.] Endnotes, Misery and Debt, On the Logic and History of Surplus Population and Surplus Capital, Endnotes #2 (2010), https://endnotes.org.uk/articles/misery-and-debt

This is the secret of the “general law”: labour-saving technologies tend to generalise, both within and across lines, leading to a relative decline in the demand for labour. Moreover, these innovations are irreversible: they do not disappear if and when profitability is restored (indeed, as we shall see, the restoration of profitability is often conditioned on further innovations in new or expanding lines). Thus left unchecked this relative decline in labour demand threatens to outstrip capital accumulation, becoming absolute. […] What Marx is here describing is not a “crisis” in the sense usually indicated by Marxist theory, i.e. a periodic crisis of production, consumption or even accumulation. In and through these cyclical crises, a secular crisis emerges, a crisis of the reproduction of the capital-labour relation itself. If expanded reproduction indicates that workers and capital pushed out of contracting industries will try to find places in new or expanding lines, the general law of capital accumulation suggests that, over time, more and more workers and capital will find that they are unable to reinsert themselves into the reproduction process. In this way the proletariat tendentially becomes an externality to the process of its own reproduction, a class of workers who are “free” not only of means of reproduction, but also of work itself. For Marx this crisis expresses the fundamental contradiction of the capitalist mode of production. On the one hand, people in capitalist social relations are reduced to workers. On the other hand, they cannot be workers since, by working, they undermine the conditions of possibility of their own existence. Wage-labour is inseparable from the accumulation of capital, from the accretion of labour-saving innovations, which, over time, reduce the demand for labour: “The working population ... produces both the accumulation of capital and the means by which it is itself made relatively superfluous; and it does this to an extent which is always increasing” [Marx, Capital, vol.1 (MECW 35), p. 638]. It might seem that the abundance of goods, which results from labour-saving innovations, must lead to an abundance of jobs. But in a society based on wage-labour, the reduction of socially-necessary labour-time — which makes goods so abundant — can only express itself in a scarcity of jobs, in a multiplication of forms of precarious employment. Endnotes, Misery and Debt, On the Logic and History of Surplus Population and Surplus Capital, Endnotes #2 (2010), https://endnotes.org.uk/articles/misery-and-debt

The “general law of capitalist accumulation”, with its clear implications for the interpretation of Capital, has been overlooked in our own time because under the name of the “immiseration thesis” it was taken up and abandoned many times over in the course of the 20th century. It was held that Marx’s prediction of rising unemployment, and thus the increasing immiseration of the working population, has been contradicted by the history of capitalism: after Marx’s death, the industrial working class both grew in size and saw its living standards rise. Yet quite apart from the fact that these tendencies are often over-generalised, more recently their apparent reversal has made the immiseration thesis seem more plausible. The last 30 years have witnessed a global stagnation in the relative number of industrial workers. A low-wage service sector has made up the difference in the high GDP countries alongside an unparalleled explosion of slum-dwellers and informal workers in the low GDP countries. So is the immiseration thesis correct after all? That is the wrong question. The question is: under what conditions does it apply? Marx wrote about the growth of consolidated surplus populations in 1867. Yet the tendency he described — by which newer industries, because of their higher degree of automation, absorb proportionally less of the capital and labour thrown off by the mechanisation of older industries — did not play out as he had envisaged. As we can see from the graph on the facing page, Marx’s view was correct, in his own time, for the UK: the rising industries of the early second Industrial Revolution — such as chemicals, railways, telegraph etc. — were not able to compensate for declining employment in the industries of the first Industrial Revolution. The result was a steady fall in the rate of growth of manufacturing employment, which looked set to become an absolute decline sometime in the early 20th century. What Marx did not foresee, and what actually occurred in the 1890s, was the emergence of new industries that were simultaneously labour and capital absorbent, and which were able to put off the decline for more than half a century. The growth of these new industries, principally cars and consumer durables, depended on two 20th century developments: the increasing role of the state in economic management, and the transformation of consumer services into consumer goods. The emergent industries of which Marx wrote in the 1860s — gas-works, telegraphy, and railways, (we would add only electrification) — were already in his time beginning to be made available to consumers. Yet the consumer services generated from these technologies — initially reserved for the enjoyment of a wealthy elite — were secondary to the services they provided within the internal, planned economy of industrial firms. Railways emerged as a labour-saving innovation within mining, which was subsequently extended to other industries. It became a service offered to consumers only after extensive national-rail infrastructures had been developed by state-supported cartels. Even as costs fell and mechanised transportation via rail became available to more and more people, as a consumer service it preserved many of the features of its initial employment as a “process innovation” within industry. National railways, carrying passengers in addition to freight, absorbed large amounts of capital and labour in their construction but were subsequently relatively automated processes requiring less capital and labour for their upkeep. The advent of the automobile industry, subsidised by state funding of roads, eventually transformed the consumer service of mechanised transport into a good that could be purchased for individual consumption. This segmentation and replication of the product — the transformation of a labour-saving process innovation into a capital-and-labour absorbing “product innovation”— meant that this industry was able to absorb more capital and labour as its market expanded. A similar story can be told of the shift from telegraphy to telephones, and from electronic manufacture to consumer electronics. In each case, a collectively consumed service — often emerging from an intermediary service within industry — was transformed into a series of individually purchasable commodities, opening up new markets, which in turn became mass markets as costs fell and production increased. This provided the basis for the “mass consumerism” of the 20th century, for these new industries were able to simultaneously absorb large amounts of capital and labour, even as productivity increases reduced relative costs of production, such that more and more peasants became workers, and more and more workers were given stable employment. Yet, as the unprecedented state deficit-spending which supported this process indicates, there is no inherent tendency to capital that allows for the continual generation of product innovations to balance out its labour-saving process innovations. On the contrary, product innovations themselves often serve as process innovations, such that the solution only worsens the initial problem. When the car and consumer durables industries began to throw off capital and labour in the 1960s and 70s, new lines like microelectronics were not able to absorb the excess, even decades later. These innovations, like those of the 2nd industrial revolution described above, emerged from specific process innovations within industry and the military, and have only recently been transformed into a diversity of consumer products. The difficulty in this shift, from the perspective of generating new employment, is not merely the difficulty of policing a market in software — it is that new goods generated by microelectronics industries have absorbed tendentially diminished quantities of capital and labour. Indeed computers not only have rapidly decreasing labour requirements themselves (the microchips industry, restricted to only a few factories world-wide, is incredibly mechanised), they also tend to reduce labour requirements across all lines by rapidly increasing the level of automation. Thus rather than reviving a stagnant industrial sector and restoring expanded reproduction — in line with Schumpeter’s predictions — the rise of the computer industry has contributed to deindustrialisation and a diminished scale of accumulation — in line with Marx’s. Endnotes, Misery and Debt, On the Logic and History of Surplus Population and Surplus Capital, Endnotes #2 (2010), https://endnotes.org.uk/articles/misery-and-debt