 Here, let me just remind this, put this seven here. Here I have the revenue, general motors on the foot. The revenue is the price, the socially necessary abstract labor time, that price, $7 times the quantity sold. So GM comes to market. It sells its one unit at what price? Not this. That's the private. It sells its seven. It has no choice. So it gets a revenue of $7, same for Honda. I'm sorry, same for Ford. Honda sells at $7. It sells two cars, so its revenues is $14. Here's the cost. The cost in the table that you've taken down you're looking at now or whatever is for GM, Ford 4 plus 6, Ford 4 plus 6, Honda is 8 plus 2, is 10. So the new profits in the market, the new profit, the result of this, is 1, 4, 1. 7 minus 6, 7 minus 6, 14 minus 10. Look at this. Compare this fancy mathematical expression, this vector of profits, compare this 1, 4, 1 with what you had before was 2, 2, 2, and you can see what market competition has accomplished, what Honda has done through its offensive action by going out and raising its composition of capital, raising its productivity has taken away profits from General Motors and Honda to itself via this market competition. So Honda's profits have gone up from 2 to 4. It's still exploiting its workers by 2, but it is, via the market, taken away some of the surplus, a dollar from General Motors and Ford to itself. So Marx calls this extra $2 for Ford, a super profit. Super profit is the result of market competition. And there, the rate of profit goes up for Honda, this market rate of profit goes up for Honda, so this is Honda's surplus value, as it did before, plus this super profit divided by the C plus V, so it's getting 2 plus 2 divided by 8 plus 2 is 10, so its rate of profit goes up to 40%, 4 over 10. So Honda has a higher organic composition of capital, a lower class. I'm going to erase this now and put down this new rate of profit, this market rate of profit, this new one as a result of this. Well, General Motors has now, its rate of profit has gone down, it's 1 over 6. Same thing for Ford, it's now 1 over 6, so the rate of profit for the competitors of GM has fallen as a result of market competition. And their rate of profit has now gone up, that is for Honda, from what it was before, what was it before? Third, to now four tenths. So the rate of profit has increased dramatically as a result of raising the organic composition of capital as a result of being the least cost producer in this system. So the gain for Honda, maybe I should write this down here, the gain from Honda, this is either GM or Ford, is their loss, because they are losing the same amount of super profit. So their rate of profit has gone down, it was 2, it's gone down now to 1 over the C plus V of 6, so it's 1, 6. So the rate of profit then for GM and Ford is gone down because they lose this surplus, this super profit, which is gained by Honda, and Honda gains the 2 because both GM and Ford lose a dollar each. So it's kind of, what do the economists call this, a zero sum game in which the market competition literally takes away a portion of the surplus already appropriated by the relatively inefficient capitalist enterprises and redistributes that surplus to the more efficient capitalist enterprise in the system, which in this case is Honda. So market competition, this thing that is celebrated in capitalism, can result in the death of some capitalist enterprises, and that death of some capitalist enterprises indeed is the life and expansion of the more efficient capitalist enterprises who expand. So that's an analysis of what competition does. The next step on this, very, very important, the next step on this is to try and show how this leads, what I just described to you, leads to each and every capitalist trying to, in this case, raise its composition of capital to survive so that he don't die. Because everybody quickly understands that unless they copy, match what Honda is doing in the automobile industry, they're going to die because you can see what's going to happen. If Ford and Chrysler remain passive in the face of this offensive action of Honda, then they're going to go out of business. So Marx is presenting an analysis here of bankruptcy, death for some capitalist enterprises, if they don't match up this competitive game with the innovating enterprise, in this case, Honda. Notice something here before I do the next step. What Honda did here was raise, as I showed you, its C, but I'll make a bigger arrow. The denominator increased even more. So the average cost fell for Honda. So as I said to you before, proportionally the denominator increased proportionally more than did the numerator. But notice something just before I do the next one. We'll come back to this. Any capitalist enterprise or the managers of any capitalist enterprises, those that occupy this subsumed class and get a cut of the surplus for doing what I'm going to describe now, take this average cost and they can do what? They can do what Honda just did, A, B. They can also search the world for cheaper C and cheaper V, as well as raising the productivity of labor in the denominator. So you can see now where this average cost variable becomes an important target for managers in these respective enterprises, because the best defense is to go on the offense and to search the world for cheaper C, cheaper V, higher productivity. And so the average cost becomes an important objective of managers to keep on pushing it down. So let me go now to the next step. And let me examine this famous example of Marx in volume one. And he picks up it again in volume three of capital. And he's going to argue here that in order for GM and Ford to avoid going out of business, they're going to, as I just said, they're going to follow or try to do a parallel kind of strategy as did Honda and to expand the means of production. So let me now erase all this and go back to what is going to happen if General Motors and Ford act in the same way that Honda did. So I understand there's no necessity for this, but suppose they did, which is Marx's question here. So I'll put down here again GM, Honda, Ford. So the C, V, S, W. Suppose GM then expands at C. So they purchase new means of production containing this new technology of robots just like Honda. And that's the only change, OK? So everybody is now producing more cars. So the new price in this system, the new price is $36 over $6. Notice what's happened here. The price of a car has fallen. The supply curve has shifted to the right. Everybody is deploying a higher amount of C. So the only change here, again, is a delta C. The labor force is remaining the same in this industry. We could expand employment, but we haven't. So all we've done here is have a change in C. But under the assumption, you still have four hours of this living labor. It's the embodied labor that has changed in this industry by assumption. The average cost changes. Now we have 10. Everybody now is like Honda. They've all become producers of a lower average cost, because their productivity of labor has risen. Remember, again, what I just said to you. Since we have the same labor force producing more things because we have more tools, more factories, the productivity of labor is steadily rising. The productivity of labor is steadily rising. Labor is becoming, if you will, more productive. The rate of profit, 2 divided by 10 for each. Oh my goodness. The rate of profit has fallen for each and every capitalist as a result of the composition of capital, the composition of capital going up, 8 over 10. So they all look like Honda did before. That is Ford and GM has now successfully expanded their machines. So they have now the same mechanization in place as did Honda when it took its offensive action. So Marx draws just a striking conclusion from this, which is the following. As a result of every single capitalist competitor trying to keep up, and they must do so, otherwise they're going to go out of business. And so the best, again, the best defense against losing your super profit is to go on the offense. That is, the managers go on the offense as directed by the board of directors. The board of directors is getting the appropriate, appropriating the surplus. The messages for each and every set of capitalists in these respective industries mechanize to going out of business and to capture super profits. As they all do that, the rate of profit falls for each and every one of them. If the rate of profit falls in the economy as a result of this tendency of a higher composition of capital, if the rate of profit falls, you have the possibility of a recession. Because when the rate of profit falls, that implies that K star plus lambda, that's what it's equal to, don't forget, is going to fall, demands for labor power, demands for means of production, and so forth, are going to fall. That's a recession. Look what Marx has done. He has given us a second reason why there may be a business cycle.