This is rather fanciful. Of course there needs to be "effective demand", that is to say potential customers who would be willing to and have the means to purchase the product. However that isn't enough.
If the market is already saturated, if there is already excess capacity in that market, too many competitors, then unless you have a viable strategy for profitably entering the market it would be unlikely you would throw your capital away doing so.
>> "I have x-million dollars. If I invest it in
>>Project A, how much more money am I likely to get back? Are there enough
>>potential buyers of the goods/services we'll make to make this bet? What
>>returns have other recent investors been getting from this firm?"
This sort of thinking assumes infinite demand. The thinking behind the falling rate of profit theory is premised on the more rational assumption that market demand is finite.
Once we accept the inevitability that no market is infinite, then the falling rate of profit follows as surely as night follows day. Its simple market forces, if supply exceeds demand, then prices fall, if prices fall then profits are squeezed.
Quite simply, profitability is dependent on demand exceeding supply. Under conditions of scarcity, capitalism works extremely well. Capitalism won't work under conditions where scarcity ceases to exist, because saturated markets are not profitable markets. This is a problem because capitalism tends to ramp up productive capacity to the point where it saturates markets.
However, to respond to Doug's quip that it hasn't happened yet, it is possible to artificially create hunger and want by various means. Destructive war is one (but not the only) means. This is the main objective of modern political government, to maintain an artificial environment of scarcity, despite the immense productive capacity of society, so that capitalism can keep functioning.
Maintaining of capitalism on life-support system, through the strategy of artificially keeping human beings in misery and want, seems extremely perverse. But so long as there is no alternative, it must be done.
Bill Bartlett Bracknell Tas