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
(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
then we can see that the rate of profit in case of the new machine increases
(a) When the products are the same in quality and quantity:
(b) When wages and machine depreciation are the same:
(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
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."