Capitalist enterprise continually strives to raise profits by increasing the productivity of labor. This is done by enlarging the scale of production and displacing labor with more efficient equipment working up larger amounts of raw materials, thus lowering the proportion of variable to constant capital. The capitalists, who, in their calculations, convert values into prices of production, i.e., into costs, imagine that constant capital itself produces profit because they include a profit on its consumed portions in figuring costs and selling prices. But as only its own used-up value is incorporated in commodities, constant capital produces no new value and no surplus value; labor, living labor alone produces surplus value, of which profit is the realized form. If the rate and mass of surplus value remain the same after an increase in constant capital, a fall ensues in the rate of profit because the surplus value is now a smaller ratio of a larger total of invested capital, on which the rate of profit is calculated. It can be otherwise only if the elements of constant capital are considerably cheapened; in this case the old or even a higher rate of profit may be secured. The higher composition of capital, however, increases the rate of surplus value: while the living labor incorporated in a commodity falls, the unpaid portion, representing the surplus value, rises. But this rising tendency of surplus value is accompanied by antagonisms which set in motion its opposite, the tendency of the rate of profit to fall. The rise in surplus value produced by the higher productivity of labor can result in a rising rate of profit only under certain definite conditions: if the rise in the value of labor’s surplus product is greater than the rise in the value of constant capital, if all the new fixed capital is set in motion by labor, if prices and profits are not lowered by competition, if markets absorb the enlarged output of commodities and permit complete realization of surplus value and profit. It is the fact that these conditions are rarely, if ever, present simultaneously which activates the tendency of the rate of profit to fall.
Lewis Corey, The Decline of American Capitalism (1934)