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Marxist Communism Myth #10: 

Capitalism will inevitably collapse.


According to Marx, capitalism will inevitably lead to ruin in accordance with certain laws of economic movement. These laws are "the Law of the Tendency of the Rate of Profit to Fall," "the Law of Increasing Poverty," and "the Law of Centralization of Capital."

(1) The Law of the Tendency of the Rate of Profit to Fall

In order to gain as much profit as possible, capitalists compete for introducing new machinery.  Consequently, because of excessive accumulation of capital, profit is gradually reduced.  Weak capitalists go bankrupt.  Therefore, the capitalist production method will be destroyed because of profit itself. Marx explained this by means of the formula of the rate of profit:

This formula means that if the rate of surplus value (m/v) is constant, the rate of profit

automatically diminishes as constant capital increases.

In other words, if C < C', then

(2) The Law of Increasing Poverty

Since capitalists intend to increase profit, they always intend to reduce wages.  Because machinery is constant capital, and labor power alone produces profit, they try to increase profit by keeping wages down and strengthening labor power.  At the same time, because of the introduction of new machinery, many laborers are dismissed and become the unemployed.

In this manner, the increase of profit and the increase of wages are mutually contradictory.  Therefore, in the capitalist society the increasing of poverty is inevitable.

(3) The Law of Centralization of Capital

In order to gain as much profit as possible, capitalists compete with each other and introduce new machinery.  Thus, the capital invested for machinery increases, and capital accumulation is unavoidably required.  Small capitalists go bankrupt, and their production means are absorbed by large capitalists.  During the process of bankruptcy and absorption, capital is gradually centralized by a few large capitalists, and the entire middle class declines.  Thus, two major classes, a small minority of large capitalists, and a large proletarian majority are formed.  The proletarian masses, however, will finally unite and overthrow capitalist society.

Criticism of the Theory of Collapse of Capitalism

(1) Critique of ''The Law of the Tendency of the Rate of Profit to Fall.''

Today, automatic production machinery has appeared and is producing enormous profit.  Machinery is undeniably variable capital.  On the contrary, labor power is relatively becoming constant capital.  So, if machine depreciation is d, then the formula of the rate of profit becomes:

If the rates of profit in case of old machine and in case of new machine are respectively:

then we can see that the rate of profit in case of the new machine increases as follows:

(a) When the products are the same in quality and quantity:

(b) When wages and machine depreciation are the same:

cncc-5-49e.GIF (1719 bytes)

(c) When the above-mentioned two cases are simultaneous:

In this case the rate of profit increases even more as follows:

In this way as capital develops, the rate of profit increases.  But because of the increase of wages and the rate of progressive taxation, the individual income of a capitalist tends to diminish.  These outflows are not used for investment, but for distribution of increasing profit to laborers (increasing wages) and government, i.e. society (progressive taxation).

But even though the rate of profit increases, a proper economic policy and also a great spiritual reformation are required to prevent the improper distribution of profit.

(2) Critique of "the Law of Increasing Poverty."

History after Marx plainly proves that this law is erroneous.  The economy of advanced capitalism has made great progress, and national income has increased tremendously.  The increase of wealth has come about instead of the increase of poverty.  This is because all production elements, especially machinery, are variable capital and capitalists can gain much profit, even though they raise wages.  The problem left unsolved is whether or not proper distribution of profit is performed.  For this purpose, enterprise ethics should be established as a part of the spiritual reformation.

(3) Critique of "the Law of Centralization of Capital."

It is true that today there are monopolistic practices of capital such as "cartels," "trusts" and "concerns," as Marx pointed out.  But most of them take the form of a joint stock corporation.  So, as a matter of fact, capital is not being centralized but scattered. Moreover, because of the remarkable progress of the third industry, especially service industry, the number of small enterprises has increased remarkably.  This means the wide distribution of capital. Therefore, in the strict sense, monopolies have decreased, and small enterprises based upon joint stock corporations are characteristics of today's capitalist society.

The problems left, however, are: the enormous waste of men and materials in competition, degeneration of enterprise ethics, and expansion of materialism.

(4) From the preceding, we can know that, contrary to the three laws of Marx, "the Law of the Tendency of the Rate of Profit to Increase ... .. the Law of Increasing Wealth," and "the Law of Distribution of Capital" have been working up to today.  It is true that capitalism has contradictions, but these contradictions come from man's attitude, resulting in the increase of confusion and social evils.

All these phenomena are attributed to materialism.  What should be destroyed is not the capitalist social structure, but the attitude of materialism itself.  Therefore, Unification Thought advocates the "theory of extinction of materialism" rather than the "theory of extinction of capitalism."


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