Goods are priced based on cost of inputs to make those goods. Labor is generally the most expensive input and Marx theorized that labor is the primary way goods get value. You need someone to make something. Raw iron has no value if you have nobody to smelt it. Cotton has no value with nobody to weave it.
Capitalists get profit by selling goods at a higher cost than they pay to make goods. So capitalists generally like to reinvest their profit into labor saving machinery. Labor is the highest cost usually, so saving money on labor is always good.
In the short run, buying a machine that makes 10 t-shirts an hour and paying one person to operate it is more profitable than paying 10 people to make 10 t-shirts an hour by hand.
So the first capitalist to invent this t-shirt making machine will reap enormous profits because now they don't have to pay 10 people to make those t-shirts. They buy one machine once and it does all the work. They can sell the shirts at 1/10th of the price and blow their competitors out of the water.
But wait I thought you said value is derived from labor, this example shows a capitalist making more money by reducing labor. Here's where it gets tricky.
Other t-shirt making capitalists will see the profits to be made and will eventually get their own t-shirt making machine. If they don't, they'll have to continue paying 10 people to make 10 shirts and will eventually get beaten by the t-shirt machine. So while the inventor of the t-shirt machine made enormous profits in the short run, eventually the rest of the t-shirt making industry will adapt with their own machines or will get priced out.
So now everyone in the t-shirt business has these machines, so they have to continue lowering prices to be competitive. Eventually, all the t-shirt sellers will settle on one price, which is the bare minimum cost of paying one person to operate the t-shirt machine. Each time a seller lowers their prices, they reduce their profits. Before the t-shirt machine was invented, paying workers to make a t-shirt was relatively expensive. Now that EVERYONE has a t-shirt machine, the cost of making a t-shirt is very cheap (once you have the machine that is).
Since the t-shirt is so cheap to make and anyone with upfront capital can get their hands on a t-shirt machine, t-shirts have to be sold for cheap. Which means the industry as a whole isn't making as much profit as they were when humans made the t-shirts. Production of t-shirts are more efficient with the t-shirt machine, but because capitalists always try to undercut eachother they will get sold for cheaper.
If all the capitalists in one industry agree to to not undercut eachother, it's an oligopoly and those are "technically" illegal. Oligopolies and monopolies are one way that capitalists try to keep onto profit. Otherwise, they have to make more cuts on the production side. Cutting wages is one way to save money on inputs. Securing a cheaper raw material is another way. But you can only find so many cheap raw materials, you can only cut wages so many times before you can't make anymore cuts. So assuming the industry doesn't form a monopoly or oligopoly, the profit will always fall in the long term, even if capitalists make massive short term profits.
Goods are priced based on cost of inputs to make those goods. Labor is generally the most expensive input and Marx theorized that labor is the primary way goods get value. You need someone to make something. Raw iron has no value if you have nobody to smelt it. Cotton has no value with nobody to weave it.
Capitalists get profit by selling goods at a higher cost than they pay to make goods. So capitalists generally like to reinvest their profit into labor saving machinery. Labor is the highest cost usually, so saving money on labor is always good.
In the short run, buying a machine that makes 10 t-shirts an hour and paying one person to operate it is more profitable than paying 10 people to make 10 t-shirts an hour by hand.
So the first capitalist to invent this t-shirt making machine will reap enormous profits because now they don't have to pay 10 people to make those t-shirts. They buy one machine once and it does all the work. They can sell the shirts at 1/10th of the price and blow their competitors out of the water.
But wait I thought you said value is derived from labor, this example shows a capitalist making more money by reducing labor. Here's where it gets tricky.
Other t-shirt making capitalists will see the profits to be made and will eventually get their own t-shirt making machine. If they don't, they'll have to continue paying 10 people to make 10 shirts and will eventually get beaten by the t-shirt machine. So while the inventor of the t-shirt machine made enormous profits in the short run, eventually the rest of the t-shirt making industry will adapt with their own machines or will get priced out.
So now everyone in the t-shirt business has these machines, so they have to continue lowering prices to be competitive. Eventually, all the t-shirt sellers will settle on one price, which is the bare minimum cost of paying one person to operate the t-shirt machine. Each time a seller lowers their prices, they reduce their profits. Before the t-shirt machine was invented, paying workers to make a t-shirt was relatively expensive. Now that EVERYONE has a t-shirt machine, the cost of making a t-shirt is very cheap (once you have the machine that is).
Since the t-shirt is so cheap to make and anyone with upfront capital can get their hands on a t-shirt machine, t-shirts have to be sold for cheap. Which means the industry as a whole isn't making as much profit as they were when humans made the t-shirts. Production of t-shirts are more efficient with the t-shirt machine, but because capitalists always try to undercut eachother they will get sold for cheaper.
If all the capitalists in one industry agree to to not undercut eachother, it's an oligopoly and those are "technically" illegal. Oligopolies and monopolies are one way that capitalists try to keep onto profit. Otherwise, they have to make more cuts on the production side. Cutting wages is one way to save money on inputs. Securing a cheaper raw material is another way. But you can only find so many cheap raw materials, you can only cut wages so many times before you can't make anymore cuts. So assuming the industry doesn't form a monopoly or oligopoly, the profit will always fall in the long term, even if capitalists make massive short term profits.