Technical Change in Canadian Manufacturing

David L. Rigby, McMaster University

Abstract

The rate of profit in Canadian manufacturing fell by almost 37% between 1955 and 1984. Throughout much of this period, the reduction in profitability was accompanied by increasing unemployment of both capital and labour and by a deceleration of economic growth. The impact of this crisis on Canadian regions was markedly uneven.

This thesis explains the crisis and its uneven spatial impact using the Marxist theory of the falling rate of profit. There are two stages to this analysis. Firstly, the relationship between technical change and accumulation is examined using a two-department model of the economy. Secondly, the effect of various types of technical change on regional manufacturing performance in Canada is evaluated.

The theoretical analysis provides the analytical support required by the theory of the falling rate of profit. In particular it shows that viable, labour-saving technical change may cause the aggregate rate of profit in an economy to fall, and it provides a model of the likely direction of technical change that affirms the importance of labour-saving bias in innovation.

A marxist accounting framework is outlined that clarifies the relationship between the labour-value of commodities and their respective prices. Using the accounting framework a set of measures of technical change and economic performance are provided in both value and price terms. These measures are estimated for selected industries in six Canadian regions.

The empirical analysis confirms the theoretical arguments, showing that labor-saving technical change exerted a negative effect on the rate of profit in all regions. The date also reveal that regional variations in economic performance are marked, both at the level of manufacturing as a whole and at the industry level. Little support was found for the "industry-mix" explanation of regional fortunes and the neoclassical arguments of regional convergence.