Correct me if I’ve misunderstood, but your “revision of orthodoxy” appears to rest on your assumption that C = depreciation, which was not Marx’s view. A capitalist doesn't just manage annual costs, their aim is to expand their entire stock of capital. Even if the rate of depreciation were zero, so that a capitalist can reinvest all of their profits and their capital stock increases by that amount, it’s possible that it might take 1 year of profits to double that capital stock, or it might take 100 years. That makes a big difference for the capitalist. For Marx, capital is self-expanding value — if there’s no such thing as a total value of capital, the entire concept of "self-expanding value" doesn’t make sense.
If I have an advanced robot factory that maintains itself so that the rate of depreciation is zero, and it can also produce more year-on-year, than according to you (as far as I can tell), the rate of profit will take off to infinity, whereas according to Marx it will go to zero. This limiting case shows that your theory is giving up on some of the core revolutionary implications of the falling rate of profit. When the Sam Altmans talk about AI producing infinite value, they implicitly assume that an increase in productivity automatically brings about an increase in profit. They don’t realize that production under capitalism also has social preconditions and not only technical ones. The Marxist can answer that by introducing these more productive technologies, they will actually drive the average rate of profit down and further destabilize the capitalist system. Is this not your view?
Your other key claim is that the investment rate is a “free historical value,” ie. the capitalist class can choose to divert profits from investment into their own consumption. You argue that a “general political coalition” that curbs the competition inherent in the capitalist market can keep the investment rate artificially low. This, you say, is itself an outcome of the falling profit rate: the capitalists lower investment rates and increase consumption, which you argue
stalls growth but also suspends the decline of the rate of profit. You call this “destroying the logic of capital,” and you say it has been successful. Hence, you say there’s “a contradiction in Marx's predictions” because the falling rate of profit can be counteracted by the self-preservation instincts of monopoly capitalists.
I think this is wrong - first, because the investment rate is not a free variable. It is impossible to eliminate competition from the capitalist market. Rather than the lower investment rate being a means of counteracting the falling profit rate, it is a symptom of it. Second, because lowered investment cannot stop the falling rate of profit. Your argument is that as the rate of investment stalls, the rate of depreciation stalls also, so the profit rate levels out. For Marx, even if the rate of investment stalls, as long as net investment (subtracting out depreciation) is greater than zero, constant capital will keep increasing in size, which means the decline in the profit rate will slow but not stop altogether. The only way to escape this is through the destruction of capital stock (e.g. through war), or for the growth of the productive forces to grind to a halt.
Is the empirical evidence that capital has agreed to stop replacing living labor with dead labor? No, the opposite! The capitalists see automation as a panacea that will extricate them from their troubles.
It is certainly true that as the profit rate falls, and the capitalists no longer get a good return on investment, they increasingly turn to financial speculation, debt, etc, which represents a decline of productive investment. The diversion of resources into capitalist consumption signifies that the capitalist class, which has always had the dual role of a class of parasites on the social product and the managers of its growth, becomes a class of parasites pure and simple; and that the social relations of production on which capitalism depends have become an “integument” to the further growth of the productive forces, which must be smashed through social revolution. In other words, we should draw revolutionary conclusions from this state of affairs, whereas you suggest that the “logic of capitalism” i.e. of its breakdown, can be indefinitely suspended by the subjective decisions of the capitalists. The parasitizing and plundering of the productive process can’t be sustained indefinitely, the use of debt is only a temporary remedy that will eventually fail.
So for 1), Marx was very clear then when speaking of what contributed to total value of a given commodity, C was determined by the part of the means of production that were used up to produce it, which is the depreciation. If the means of production were not used up in production, then we would have to find a different way of spreading out the cost of investment so that is accounted for. In such a a world with a zero depreciation rate, investment itself would become C, without the qualification I add that it only becomes C when investment rates are stable. Wrt self expanding value, keep in mind that depreciation will always be some percent of the capital stock, so that when the capital stock grows, so does depreciation, hence, from a mathematical point of view, there's pretty much no difference between this self expansion counted in depreciation or the capital stock as a whole.
2) wrt to the robot factory example, where V and C are zero (let's say the cost of the initial investment has already been accounted for), the profit rate would be undefined, since the zero is in the denominator. This is correctly compatible with both an infinite profit rate and a zero profit rate, since it depends on whether anyone else can perform this miraculous feat (if they can, it goes to zero, if they can't, it's a monopoly with arbitrary prices).
3) wrt to net investment: the investment rate I'm talking about is gross investment/(depreciation+ profit) . If this investment rate doesn't move, as I say in the essay, depreciation will converge to investment and net investment will be zero. These values, when connected through time, are meant to be normalized such that the capital stock value is adjusted to its present day replacement value, for example by adjusting it according to the relative price changes in the means of production industry vs consumption industries. In the original simulations I just did this assuming the values represented percentages of total value.
This doesn't mean that automation will cease, in many industries investment will continue to increase, just not in general.
Lastly 4), can this be continued indefinitely? Maybe, maybe not. In history, there are many examples of things just getting worse for very, very long periods of time.
1) When Marx speaks of the value transferred to a single commodity, c represents the consumed constant capital. But in the equation for the rate of profit, C refers to the total capital advanced.
“Depreciation will always be some percent of the capital stock, so that when the capital stock grows, so does depreciation” — Not so, because the percentage can change. It is possible in principle for capital stock to increase without depreciation increasing.
2) The relevant thought experiment here (because it shows how your predictions differ from those of Marx) is depreciation = 0 and V>0, which is possible in principle (if you have a self-maintaining "robot factory" (depreciation = 0) that still requires some variable capital). In this case, the rate of profit becomes S/V, which can increase without bound. You say yourself that, according to your model, monopoly would allow the profit rate to go off to infinity, since it allows the monopolist to charge arbitrary price. But that is false, because the monopolist must still exchange their goods on the capitalist market, the effect of which will be to lower the average rate of profit among the non-monopolists.
3) It's not surprising that the rate of investment is going down. The question is whether this stops or only slows the falling rate of profit. According to you, it causes the rate of profit to converge to a nonzero value. According to Marx, it continues toward zero, though at a slower rate.
4) It's still conceivable (from what we’ve said so far) that the rate of profit, while continuing to go toward zero, takes an infinite amount of time to get there. In practice, the result will be mounting stagnation, crises of mounting severity, and social revolution. However, my purpose wasn’t to speculate about timelines, but to point out that by redefining C as depreciation rather than the total stock advanced your model diverges from Marx and loses the core revolutionary implication of his model: that capitalist development inexorably leads to its breakdown.
Changing the depreciation rate so that depreciation no longer grows in proportion to the capital stock doesn't change the fact that it's only the the depreciation which goes into the unit costs and that changing the depreciation rate also entails changing those costs over time. The capital stock itself doesn't pose any costs to the capitalists besides 1) investment or 2) depreciation. This is why, as I've argued elsewhere, it only makes sense to use depreciation as C in the rate of profit.
Wrt 2), I was just speaking of the micro logic, if we want to speak of the macro, Profit still equals net investment plus capitalist consumption. If there is no investment, then it will be fully determined by the rate of exploitation, where S just becomes 100% capitalist consumption.
3) & 4) as I've shown elsewhere, because of the very same accounting logic I've expressed here, and because, as far as we know depreciation rates aren't changing that much, profit rates have been rising in the US slightly under neoliberalism, whether you use depreciation or capital stock as C. See this blog: https://nicolasdvillarreal.substack.com/p/the-tendency-for-the-rate-of-profit
1) It’s definitional that capital stocks don’t pose any costs to capitalists aside from investment and depreciation. This is not an argument for using depreciation in the determination of the profit rate, it misses the point that the entire capital stock represents a value that must be reproduced and expanded, and on which a rate of return is expected. The rising organic composition of capital means that the the amount of surplus value relative to the capital advanced decreases over time - that is the essence of the tendency of the rate of profit to fall.
If a capitalist can spend (a) $100 million on a factory with a depreciation rate of 1% or (b) $10 million with a depreciation rate of 10% (so the total depreciation is the same), and if they both produce the same S and use the same V, you would say that the profit rate for each is identical. But the capitalist will of course prefer the latter case, since they’re getting 10 times the return on their investment as the former.
You haven’t addressed your formula's breakdown (that S/V could be infinite), which shows the theoretical inconsistency of your definition of C when applied to the rate of profit.
The rate of profit is determined at the level of the whole capitalist market, not that of an individual capitalist. Your insistence on taking “accounting logic” as your starting point is a case of taking “surface appearances” for fundamental laws. This is indeed a revision of Marx, but to your detriment.
I am not against trying to measure the rate of profit directly, but given the difficulty of doing that, it's probably more important to look at its indirect effects. If the rate of profit is falling, you’d expect to see mounting stagnation, debt, financialization, inability to productively invest. If the profit rate were increasing, that would provide for a renewed phase of boom. We are seeing the former, not the latter.
I think this would be a useful exchange to have in Cosmonaut.
Your understanding of the rate of profit also, is quite mistaken, as Marx is quick to point out, it's the good years of economic development when profit rates are falling secularly. We do see a huge secular bloom in the petty bourg, it doesn't necessarily mean anything for economic growth, however.
You're welcome to write something for Cosmonaut related to this, but I think we've said most of what is necessary to be said here.
The reproduction of the capital stock is measured precisely by the depreciation, for only investing as much or more than the depreciation can you reproduce the capital stock as is.
In your examples of the $100M vs the $10M their really is not a difference once you consider the resale value of the asset itself, which is what all capitalists do when underwriting and investment.
As for the formula, if you do just want to talk about mathematical robustness I'd like to remind you that I was careful to make all the variables I use, such as S/(S+V) and I/(C+S) in such a way to avoid those problems, and your issue is actually with Marx's rate of profit formula, not anything I've done.
“The reproduction of the capital stock is measured precisely by the depreciation, for only investing as much or more than the depreciation can you reproduce the capital stock as is.” - This is a tautology. The depreciation is indeed, by definition, the amount required to reproduce the capital stock, but it does not measure the total value of capital tied up in the production process, nor the expansion of that total value. If I have twice as many factories, but have figured out a way to make them depreciate half as much as before, I have twice the capital stock, not the same amount.
The point about resale value is a red herring. The resale value is irrelevant to calculating the rate of profit generated by the factory while it is producing. Suppose there are two capitalists, each with $100 million. The first invests in our $100 million factory with a $1 million depreciation, while the second invests in a $10 million factory with a $1 million depreciation, and let us assume for the sake of argument that each factory uses the same input of variable capital and produces the same quantity of surplus value. The second capitalist can buy 10 of the smaller factories and get 10 times as much profit as the first. Just how are these two situations equivalent?
What is Marx’s view? See Capital Vol. III, Part III. The Law of the Tendency of the Rate of Profit to Fall, Chapter 13. The Law As Such: “The rate of profit must be calculated by measuring the mass of produced and realised surplus-value not only in relation to the consumed portion of capital reappearing in the commodities [i.e. depreciation - PR], but also to this part plus that portion of unconsumed but applied capital which continues to operate in production.” Or here (in the same chapter): “The drop in the rate of profit, therefore, expresses the falling relation of surplus-value to advanced total capital, and is for this reason independent of any division whatsoever of this surplus-value among the various categories.” This is completely clear.
Your claim that this is an issue with Marx’s formula is false. I have explained how your formula for the rate of profit goes to infinity where Marx’s formula goes to zero. I constructed that thought experiment precisely to show a divergence between your model and his. It’s not a question of “mathematical robustness,” but whether your formula differs from Marx’s and whether it describes reality.
“it's the good years of economic development when profit rates are falling secularly” -- Yes, that’s what you’d expect, but you’re reversing cause and effect: the growth is made possible by high profit rates, and the same growth then increases the organic composition of capital and drives the profit rate down, leading to crisis.
It is not so easy to advance beyond Marx. Studying the tendency of the rate of profit to fall is highly important because it provides the theoretical basis for understanding why capitalism's own development inexorably brings about its dissolution, and I think bringing in differential equations is particularly interesting and important. But the first step is that you get the basic model laid out by Marx correct.
Appreciated proposal! The 'class compromise' from the 1930's made capitalism safe - up to the investment stagnation of the 1970's. As capitalists dried up on profitable national investment opportunities the social-democratic state reacted by reducing taxes in the hope that with more money available they should be more willing. Class struggle was 'dead' after 40 years. The obvious response of nationalizing unwilling capital was no longer on the table. By threatening offshoring the capitalist class has had the upper hand in the tax/investment fight. Labor has lost both the class struggle and the investment struggle.
I don't know if it was a lack of national investment opportunities per se, more that that profits extracted couldn't support the capitalist class as it had existed any longer, so something had to change.
Wow
Correct me if I’ve misunderstood, but your “revision of orthodoxy” appears to rest on your assumption that C = depreciation, which was not Marx’s view. A capitalist doesn't just manage annual costs, their aim is to expand their entire stock of capital. Even if the rate of depreciation were zero, so that a capitalist can reinvest all of their profits and their capital stock increases by that amount, it’s possible that it might take 1 year of profits to double that capital stock, or it might take 100 years. That makes a big difference for the capitalist. For Marx, capital is self-expanding value — if there’s no such thing as a total value of capital, the entire concept of "self-expanding value" doesn’t make sense.
If I have an advanced robot factory that maintains itself so that the rate of depreciation is zero, and it can also produce more year-on-year, than according to you (as far as I can tell), the rate of profit will take off to infinity, whereas according to Marx it will go to zero. This limiting case shows that your theory is giving up on some of the core revolutionary implications of the falling rate of profit. When the Sam Altmans talk about AI producing infinite value, they implicitly assume that an increase in productivity automatically brings about an increase in profit. They don’t realize that production under capitalism also has social preconditions and not only technical ones. The Marxist can answer that by introducing these more productive technologies, they will actually drive the average rate of profit down and further destabilize the capitalist system. Is this not your view?
Your other key claim is that the investment rate is a “free historical value,” ie. the capitalist class can choose to divert profits from investment into their own consumption. You argue that a “general political coalition” that curbs the competition inherent in the capitalist market can keep the investment rate artificially low. This, you say, is itself an outcome of the falling profit rate: the capitalists lower investment rates and increase consumption, which you argue
stalls growth but also suspends the decline of the rate of profit. You call this “destroying the logic of capital,” and you say it has been successful. Hence, you say there’s “a contradiction in Marx's predictions” because the falling rate of profit can be counteracted by the self-preservation instincts of monopoly capitalists.
I think this is wrong - first, because the investment rate is not a free variable. It is impossible to eliminate competition from the capitalist market. Rather than the lower investment rate being a means of counteracting the falling profit rate, it is a symptom of it. Second, because lowered investment cannot stop the falling rate of profit. Your argument is that as the rate of investment stalls, the rate of depreciation stalls also, so the profit rate levels out. For Marx, even if the rate of investment stalls, as long as net investment (subtracting out depreciation) is greater than zero, constant capital will keep increasing in size, which means the decline in the profit rate will slow but not stop altogether. The only way to escape this is through the destruction of capital stock (e.g. through war), or for the growth of the productive forces to grind to a halt.
Is the empirical evidence that capital has agreed to stop replacing living labor with dead labor? No, the opposite! The capitalists see automation as a panacea that will extricate them from their troubles.
It is certainly true that as the profit rate falls, and the capitalists no longer get a good return on investment, they increasingly turn to financial speculation, debt, etc, which represents a decline of productive investment. The diversion of resources into capitalist consumption signifies that the capitalist class, which has always had the dual role of a class of parasites on the social product and the managers of its growth, becomes a class of parasites pure and simple; and that the social relations of production on which capitalism depends have become an “integument” to the further growth of the productive forces, which must be smashed through social revolution. In other words, we should draw revolutionary conclusions from this state of affairs, whereas you suggest that the “logic of capitalism” i.e. of its breakdown, can be indefinitely suspended by the subjective decisions of the capitalists. The parasitizing and plundering of the productive process can’t be sustained indefinitely, the use of debt is only a temporary remedy that will eventually fail.
So for 1), Marx was very clear then when speaking of what contributed to total value of a given commodity, C was determined by the part of the means of production that were used up to produce it, which is the depreciation. If the means of production were not used up in production, then we would have to find a different way of spreading out the cost of investment so that is accounted for. In such a a world with a zero depreciation rate, investment itself would become C, without the qualification I add that it only becomes C when investment rates are stable. Wrt self expanding value, keep in mind that depreciation will always be some percent of the capital stock, so that when the capital stock grows, so does depreciation, hence, from a mathematical point of view, there's pretty much no difference between this self expansion counted in depreciation or the capital stock as a whole.
2) wrt to the robot factory example, where V and C are zero (let's say the cost of the initial investment has already been accounted for), the profit rate would be undefined, since the zero is in the denominator. This is correctly compatible with both an infinite profit rate and a zero profit rate, since it depends on whether anyone else can perform this miraculous feat (if they can, it goes to zero, if they can't, it's a monopoly with arbitrary prices).
3) wrt to net investment: the investment rate I'm talking about is gross investment/(depreciation+ profit) . If this investment rate doesn't move, as I say in the essay, depreciation will converge to investment and net investment will be zero. These values, when connected through time, are meant to be normalized such that the capital stock value is adjusted to its present day replacement value, for example by adjusting it according to the relative price changes in the means of production industry vs consumption industries. In the original simulations I just did this assuming the values represented percentages of total value.
In terms of empirical data, I/(C+S) has indeed been falling in the US: https://fred.stlouisfed.org/graph/?graph_id=1477454
This doesn't mean that automation will cease, in many industries investment will continue to increase, just not in general.
Lastly 4), can this be continued indefinitely? Maybe, maybe not. In history, there are many examples of things just getting worse for very, very long periods of time.
1) When Marx speaks of the value transferred to a single commodity, c represents the consumed constant capital. But in the equation for the rate of profit, C refers to the total capital advanced.
“Depreciation will always be some percent of the capital stock, so that when the capital stock grows, so does depreciation” — Not so, because the percentage can change. It is possible in principle for capital stock to increase without depreciation increasing.
2) The relevant thought experiment here (because it shows how your predictions differ from those of Marx) is depreciation = 0 and V>0, which is possible in principle (if you have a self-maintaining "robot factory" (depreciation = 0) that still requires some variable capital). In this case, the rate of profit becomes S/V, which can increase without bound. You say yourself that, according to your model, monopoly would allow the profit rate to go off to infinity, since it allows the monopolist to charge arbitrary price. But that is false, because the monopolist must still exchange their goods on the capitalist market, the effect of which will be to lower the average rate of profit among the non-monopolists.
3) It's not surprising that the rate of investment is going down. The question is whether this stops or only slows the falling rate of profit. According to you, it causes the rate of profit to converge to a nonzero value. According to Marx, it continues toward zero, though at a slower rate.
4) It's still conceivable (from what we’ve said so far) that the rate of profit, while continuing to go toward zero, takes an infinite amount of time to get there. In practice, the result will be mounting stagnation, crises of mounting severity, and social revolution. However, my purpose wasn’t to speculate about timelines, but to point out that by redefining C as depreciation rather than the total stock advanced your model diverges from Marx and loses the core revolutionary implication of his model: that capitalist development inexorably leads to its breakdown.
Changing the depreciation rate so that depreciation no longer grows in proportion to the capital stock doesn't change the fact that it's only the the depreciation which goes into the unit costs and that changing the depreciation rate also entails changing those costs over time. The capital stock itself doesn't pose any costs to the capitalists besides 1) investment or 2) depreciation. This is why, as I've argued elsewhere, it only makes sense to use depreciation as C in the rate of profit.
Wrt 2), I was just speaking of the micro logic, if we want to speak of the macro, Profit still equals net investment plus capitalist consumption. If there is no investment, then it will be fully determined by the rate of exploitation, where S just becomes 100% capitalist consumption.
3) & 4) as I've shown elsewhere, because of the very same accounting logic I've expressed here, and because, as far as we know depreciation rates aren't changing that much, profit rates have been rising in the US slightly under neoliberalism, whether you use depreciation or capital stock as C. See this blog: https://nicolasdvillarreal.substack.com/p/the-tendency-for-the-rate-of-profit
1) It’s definitional that capital stocks don’t pose any costs to capitalists aside from investment and depreciation. This is not an argument for using depreciation in the determination of the profit rate, it misses the point that the entire capital stock represents a value that must be reproduced and expanded, and on which a rate of return is expected. The rising organic composition of capital means that the the amount of surplus value relative to the capital advanced decreases over time - that is the essence of the tendency of the rate of profit to fall.
If a capitalist can spend (a) $100 million on a factory with a depreciation rate of 1% or (b) $10 million with a depreciation rate of 10% (so the total depreciation is the same), and if they both produce the same S and use the same V, you would say that the profit rate for each is identical. But the capitalist will of course prefer the latter case, since they’re getting 10 times the return on their investment as the former.
You haven’t addressed your formula's breakdown (that S/V could be infinite), which shows the theoretical inconsistency of your definition of C when applied to the rate of profit.
The rate of profit is determined at the level of the whole capitalist market, not that of an individual capitalist. Your insistence on taking “accounting logic” as your starting point is a case of taking “surface appearances” for fundamental laws. This is indeed a revision of Marx, but to your detriment.
I am not against trying to measure the rate of profit directly, but given the difficulty of doing that, it's probably more important to look at its indirect effects. If the rate of profit is falling, you’d expect to see mounting stagnation, debt, financialization, inability to productively invest. If the profit rate were increasing, that would provide for a renewed phase of boom. We are seeing the former, not the latter.
I think this would be a useful exchange to have in Cosmonaut.
Your understanding of the rate of profit also, is quite mistaken, as Marx is quick to point out, it's the good years of economic development when profit rates are falling secularly. We do see a huge secular bloom in the petty bourg, it doesn't necessarily mean anything for economic growth, however.
You're welcome to write something for Cosmonaut related to this, but I think we've said most of what is necessary to be said here.
The reproduction of the capital stock is measured precisely by the depreciation, for only investing as much or more than the depreciation can you reproduce the capital stock as is.
In your examples of the $100M vs the $10M their really is not a difference once you consider the resale value of the asset itself, which is what all capitalists do when underwriting and investment.
As for the formula, if you do just want to talk about mathematical robustness I'd like to remind you that I was careful to make all the variables I use, such as S/(S+V) and I/(C+S) in such a way to avoid those problems, and your issue is actually with Marx's rate of profit formula, not anything I've done.
“The reproduction of the capital stock is measured precisely by the depreciation, for only investing as much or more than the depreciation can you reproduce the capital stock as is.” - This is a tautology. The depreciation is indeed, by definition, the amount required to reproduce the capital stock, but it does not measure the total value of capital tied up in the production process, nor the expansion of that total value. If I have twice as many factories, but have figured out a way to make them depreciate half as much as before, I have twice the capital stock, not the same amount.
The point about resale value is a red herring. The resale value is irrelevant to calculating the rate of profit generated by the factory while it is producing. Suppose there are two capitalists, each with $100 million. The first invests in our $100 million factory with a $1 million depreciation, while the second invests in a $10 million factory with a $1 million depreciation, and let us assume for the sake of argument that each factory uses the same input of variable capital and produces the same quantity of surplus value. The second capitalist can buy 10 of the smaller factories and get 10 times as much profit as the first. Just how are these two situations equivalent?
What is Marx’s view? See Capital Vol. III, Part III. The Law of the Tendency of the Rate of Profit to Fall, Chapter 13. The Law As Such: “The rate of profit must be calculated by measuring the mass of produced and realised surplus-value not only in relation to the consumed portion of capital reappearing in the commodities [i.e. depreciation - PR], but also to this part plus that portion of unconsumed but applied capital which continues to operate in production.” Or here (in the same chapter): “The drop in the rate of profit, therefore, expresses the falling relation of surplus-value to advanced total capital, and is for this reason independent of any division whatsoever of this surplus-value among the various categories.” This is completely clear.
Your claim that this is an issue with Marx’s formula is false. I have explained how your formula for the rate of profit goes to infinity where Marx’s formula goes to zero. I constructed that thought experiment precisely to show a divergence between your model and his. It’s not a question of “mathematical robustness,” but whether your formula differs from Marx’s and whether it describes reality.
“it's the good years of economic development when profit rates are falling secularly” -- Yes, that’s what you’d expect, but you’re reversing cause and effect: the growth is made possible by high profit rates, and the same growth then increases the organic composition of capital and drives the profit rate down, leading to crisis.
It is not so easy to advance beyond Marx. Studying the tendency of the rate of profit to fall is highly important because it provides the theoretical basis for understanding why capitalism's own development inexorably brings about its dissolution, and I think bringing in differential equations is particularly interesting and important. But the first step is that you get the basic model laid out by Marx correct.
Appreciated proposal! The 'class compromise' from the 1930's made capitalism safe - up to the investment stagnation of the 1970's. As capitalists dried up on profitable national investment opportunities the social-democratic state reacted by reducing taxes in the hope that with more money available they should be more willing. Class struggle was 'dead' after 40 years. The obvious response of nationalizing unwilling capital was no longer on the table. By threatening offshoring the capitalist class has had the upper hand in the tax/investment fight. Labor has lost both the class struggle and the investment struggle.
I don't know if it was a lack of national investment opportunities per se, more that that profits extracted couldn't support the capitalist class as it had existed any longer, so something had to change.