Chapter 4. Examination of two laws
(1)Examination of the first law (= Basic proposition № 5)
"This law of the progressive increase in constant capital, in proportion to the variable, is confirmed at every step by the comparative analysis of the prices of commodities, whether we compare different economic epochs or different nations in the same epoch. The relative magnitude of the element of price, which represents the value of the means of production only, or the constant part of capital consumed, is in direct, the relative magnitude of the other element of price that pays labour (the variable part of capital) is in inverse proportion to the advance of accumulation."(Vol.1, P. 651)
This is the original sentence of "The general law of capitalist accumulation" (the first law here). Examination of the first law begins from now on. First I will begin with introducing recent economic conditions in Britain.
"Though the relative superiority of class struggle went back and forth between workers and employers, total growth of power of the working class decreased industrial profitability (= profit share) greatly." (Increase in Wage and Crisis of Capitalism, P. 37; translation by the author)
"The profit share was reduced almost to half between 1964 and 1970. The steady decline trend existed since the beginning of the 50's. That is: the profit share fell to 21.0 % for 1960-1964 from 25.2 % for 1950-1954. But, after that, the steady fall changed to an avalanche. The profit share fell to 12.1 % in 1970 from 21.2 % in 1964."(ditto, P. 61)
(table 18)
Profit share in net of company 1950－1970 years (％)
| 1950－54 1955－59 1960－64 1965－69 | |
| Wages Profit |
74.8 77.2 79.0 82.6 25.2 22.8 21.0 17.4 |
| 1964 | 1965 | 1966 | 1967 | 1968 | 1969 | 1970 | |
| Wages Profit |
78.9 21.1 |
79.8 20.2 |
82.4 17.6 |
81.9 18.1 |
83.2 16.8 |
85.8 14.2 |
87.9 12.1 |
From "wages rise and crisis of capitalism" (P.61)
"If capitalist can make up for moving up of costs (wage) by increase of price, their profit margin is not injured. But the price can be raised only to the level that rival enterprises of other countries raise if he must not lose market share"(ditto, P. 68)
"Fundamental reason of fall of profit share exists in the squeeze of profit margins between moving up of money wages on one side and progressive intensification of international competition on the other, and economic stagnation has almost nothing to do with it relatively."(ditto, P. 69)
"Though it is difficult to compare profit shares precisely because there is not enough data, this ranking of each nation almost just corresponds to the ranking of profitability. Japan shows resolutely the best profit share, and EEC countries are lower than that, and the United Kingdom and the United States are the lowest in all.
It is impressive that three nations--- Japan, Italy and Germany--- which maintained high profit share in the 1950s, are the countries which were governed by fascist power in prewar and during the war. The destruction of labor movement of these countries made extremely high profit-sharing rate possible until movement of labor after the war recovered. In Italy where labor movement was rebuilt most rapidly, the economic miracle ended first. In Japan where labor movement was the weakest, the economic miracle lasted for the longest time." (ditto, P. 109)
From the above-mentioned report, the real condition of the recent United Kingdom economy is understood from that profit dropped by the growth of working class via labor movement: inflation of wages. Two important facts are contained here. One of them is "inflation of wages by growth of the working class", and this is the result just contrary to the expectations of Karl Marx. Karl Marx predicted the impoverishment of working class in capitalist society. And the other one is "decline of profit due to inflation of wages". This proved that wages were opposed to profit. That is: increase of variable capital means decrease of surplus-value, and decrease of variable capital conversely means increase of surplus-value.
But, between variable capital (wage) and surplus-value (profit), there should be correlative in their increase and decrease conditions even if some changes exist in the rate of surplus-value, when basic proposition № 3-② "surplus-value is born from variable capital, and not from constant capital" is right. That is, increase of variable capital should lead to increase of surplus-value, and decrease of variable capital should bring decrease of surplus-value. Cold-blooded, statistical figures in the United Kingdom which is difficult to be changed prove the mistake of the basic proposition № 3-② in Capital.
The same statistical figures indicate that the first law (= Basic proposition № 5) is also mistaken. Namely, Karl Marx predicted that laborers would become poor by "relative increase of constant capital and relative decrease of variable capital", and before long "The expropriators (capitalist) are expropriated." (Capital Vol. 1, Chapter 24, P.791)
But historical facts seem to be tracing a rather reverse course. That is, by "relative increase of variable capital (personnel expenses) and relative decrease of surplus-value (profit)," capitalists (enterprise) become poor, and capitalistic economy will collapse before long. The next table is the increase-decrease conditions of constant capital, variable capital and surplus-value that expectations of Karl Marx and British statistics indicate.
Contradiction of basic proposition № 3-① will be mentioned incidentally now because contradiction of basic proposition № 3-② was pointed out.
"Japan is not an industrial society any longer, and more and more so, today(1980). Now, in the developed nations of the world, jobholders of the tertiary industry occupy majority. The proportion of tertiary-industry employees to all employed persons in Japan, arrived at 53 %, and exceeded greatly 34.9 % of secondary-industry.
Moreover, considerable number of people exist, in the statistics collected by secondary-industry-employed people, engaging in occupation belonging to tertiary industries such as business and research, public relations, finance even in enterprise of manufacturing industry. Therefore, in real numbers, there will be more proportion of those who are in tertiary industry than this.
In addition, in recently employed-person proportion, the growth of tertiary industry is remarkably high. Though proportion of tertiary-industry-employed person increases no less than 7 % in and after 1970, that of secondary industry is leveled out completely.
Such a tendency is found in both investment and amount of production in addition to employed persons. And, as occupation, young men resolutely hope for tertiary industry category of business. Even a person hoping for a company of manufacturing industry, there is much desire for occupations of tertiary industry such as headquarters clerical work, public relations and research.
Tertiary industry is the current central industry as above, and is the front growing industry, and is the industry which demands young men. Naturally the city where many people want to live, is the city where tertiary industry developed. And the tendency will be strengthened increasingly in times of culture of wisdom in the future." Gunka no Kouzu (Structural Outline of District Dispersion) P. 283-4, by Taichi Sakaiya; translation by the author
(table 20)
| Industry | Canada | America | UK | Japan | France | W.Germany |
| Tertiary
Secondary Primary |
66.7 27.6 5.8 |
66.1 30.1 3.7 |
58.7 38.6 2.7 |
53.2 34.9 11.9 |
52.3 37.7 10.0 |
50.0 43.6 6.4 |
From "Gunka no Kozu (A Plan into Grouping)" by Mr. Taichi Sakaiya
I want to compare now this quotation with the next proposition. "Surplus-value is produced in the process of production, and it is not produced in circulation process" (Basic proposition № 3-①).
According to the Capital, "In the course of our investigation, we shall find that both merchants' capital and interest-bearing capital are derivative forms." (Vol. 1, P .179) But the derivative form holds majority of overall industries now, and this is what Karl Marx did not expect, either.
Surplus-value cannot be produced furthermore because there is not a process of production in the derivative form. Then the surplus-value (profit) that came from tertiary industry has to be produced in the secondary industry entirely.
Therefore, according to the example of quotation, tertiary-industry-employed person occupying 53 % of present-day Japanese all laborer does not produce surplus-value at all, and all surplus-value (profit) means what is produced by secondary-industry-employed persons of 34.9 % (accurately less than this).
If much profit comes from secondary industry, employed persons of secondary industry should increase steadily by principle of equalization of profit ratio through free competition. The fact is completely the contrary. Contradiction of basic proposition № 3-① surfaces here.
Basic propositions № 3-① and ② about production of surplus-value are not suitable for present-day society. This means bankruptcy of "surplus-value theory" that is the most important theme in Capital.
(2)Examination of the second law (= basic proposition № 8)
In Capital Vol. 1 and Vol. 2, it was prerequisite that commodity is realized in value or amount as big as what social average abstract labor is cast for the production. But, in the actual capitalist society, individual commodity is realized with price of production namely cost (cost price) plus average profit instead of value.
Karl Marx describes this theory as follows. "Suppose profit is p.ThentheformulaC=c+v+s=k+s turns into the formula C=k+p, or the value of a commodity = cost-price + profit."(Capital Vol.3 Chapter 1, p.46) And the Karl Marx reached "The law of the tendency of the rate of profit to fall" (the second law) successively from the theory.
The second law is examined from now on. First, let's pay attention to the next two formulas.
Value of commodity C = constant capital (c) + variable capital (v) + surplus-value (s)… (P)(Vol.1, p.226)
Profit ratio P' = surplus-value (s) / {constant capital (c) + variable capital (v)} … … … (Q)(Vol.3, p.52)
In the formulas, variable capital (v) means wages in a process of production. Prospective wages in the future are not contained in (v). But the contents varies in formula (P) and formula (Q) in case of constant capital (c). The difference will be shown below.
Constant capital of formula (P):
"Throughout this Book therefore, by constant capital advanced for the production of value, we always mean, unless the context is repugnant thereto, the value of the means of production actually consumed in the process, and that value alone."(Vol.1, P.227)
Constant capital of formula(Q):
"The rate of profit must be calculated by measuring the mass of produced and realized surplus-value not only in relation to the consumed portion of capital reappearing in the commodities, but also to this part plus that portion of unconsumed but applied capital which continues to operate in production."(Vol.3, P.239)
That is:
Constant capital (c) of formula (P) … … Consumed portion alone.
Constant capital (c) of formula (Q) … … Consumed portion + unconsumed portion.
Difference exists in the contents of constant capital between formula (P) and formula (Q) obviously.
Basic proposition № 8 "The law of the tendency of the rate of profit to fall" was proven by transforming formula of profit ratio as below, and applying the basic proposition № 5 "general law of capitalist accumulation" to formula(C).
Profit ratio P' = s / C … … … … … … (A)
= s' v / (c+v) … … … … (B)
= s' / (c/v+1) … … … … (C)
Contradictions of basic proposition №8 will be pointed out next.
① Constant capital in basic proposition № 5 (relative increase of constant capital and relative decrease of variable capital) is the "value of means of production consumed", and unconsumed portion is not contained. This was confirmed by "explanation of basic proposition № 5" of Chapter 2. However, basic proposition № 5 cannot apply to formula (C) as value of means of production of unconsumed portion is contained in constant capital of formula of profit ratio. Therefore at this stage, it is indistinct whether the second law is right or not.
② By the way, why is unconsumed portion contained in addition to the consumed portion in formula(Q)? Judging from accounting theory, this unconsumed portion is the assets item of balance sheet obviously, and has a property to turn into expenses in the future. Prospective expenses and expenses of present period must completely be distinguished as was described in detail in the previous chapter.
Expenses of the present period is the profit-and-loss-statement item, and is different from prospective expenses in quality. Unfortunately the formula of profit ratio confused assets and expenses. In other words, it is expenses only that is contained in variable capital, but expenses and assets are contained in constant capital.
It is impossible to make addition, subtraction, multiplication and division, mixing figures of expenses and figures of assets. It is just like impossible for addition, subtraction, multiplication or division if figures of cubic contents were mixed with figures of plane measures. Therefore that formula of profit ratio is recognized to contain theoretical contradictions when coming to the second grade.
③ Still more, in the previous paragraph of "examination of the first law (= basic proposition № 5)," it is proved from historical facts that both of basic propositions № 3 and № 5 are mistaken.
Therefore basic proposition № 8, that were premised on these two basic propositions, has failed in the stage of the previous paragraph, too.
It is a fatal injury for Capital that basic proposition № 8 (the second law) reached such a conclusion. In other words, it was proved that there was not the necessity to communism of the capitalist society which Karl Marx had predicted.
The main theme of this work is completed here.
By the way, it is not from relative decrease of variable capital (personnel expenses) but from relative increase of personnel expenses conversely, as British statistics indicates, that profit share falls and the duration itself of enterprise and capitalist society is on the verge which will deserve special attention.
This fact tells us the next thing. In other words "there is not the necessity of shift from capitalism to communism passing through the historical stage that Karl Marx predicted, but there is a probability of shifting passing through otherstages."
If communist society is shifted to from capitalist society by revolution peaceful or violent, how will the society change?
Next, communist society will be compared with capitalist society, considering a probability to communism.
Next page (Chapter 5)