askchapo

That is a really good way to summarize it. Just adding a little more detail since it is not directly wages which are the deciding factor, but the rate of exploitation. The rate of exploitation depends on wages but also intensity of labor, duration of the working day, etc. so there can be rising exploitation even as wages remain constant.

As an industry develops its technology, the amount of constant capital (machines, robots, AI…) increases over time. Even with fixed wages, the organic composition of capital c/v increases. And from the rate of profit equation p = s/(c+v) = (s/v)/[(c/v)+1] one can see how the rate of profit varies inversely with this organic composition c/v and directly with the rate of exploitation s/v. If c/v goes up over time, then profit falls unless there is a compensating increase in the rate of exploitation.

It gets to a point where in order to open a lemonade stand, you have to borrow $100k to license some bazingamachine that squeezes lemons super fast, so that you can compete with the other lemonade stands. Of course, borrowing $100k to earn $30/day is an abysmal rate of profit, so no one would do that. Yet that is the direction the economy goes in all industries. You see it even now with how difficult it was for mega-corporation Alphabet to break into the broadband internet with Google Fiber.

I'm actually reading Book 1 of Capital now, and chapter 6 discusses this.