A critique of Marx's two basic laws: The general law of capitalist accumulation and the law of the tendency of the rate of profit to fall

Abstract

Marx's two basic laws are founded on the organic composition of capital becoming higher due to the capitalistic accumulation necessarily accompanying the rise of labor productivity. I think this concept is consistent through the whole of Capital, but do not think Marx's analysis is sufficient. Above all, he does not bring into the laws the diminution of the values of the means of production caused by the same movement. We try to take it into account in the laws. First, we present original formulas for the two laws. Second, we analyze the main factors which affect the total social organic composition theoretically and actually. This is an inquiry into the social reproduction process using schematic analysis employing my technique. We conclude Marx's two laws are not supported.

Keywords:

• rise of labor productivity
• rate of increase of employment
• organic composition of production
• successive diminution of values of means of production
• input–output ratio

Notes

¹When we suppose κ = 1, i.e. no technological progress, Equation (6) can be identified with the formula of the economic growth rate of R.F. Harrod (1973, 17) or E.M. Domar (1957, 88). Domar says his formula implies changes in technology, etc.

²We got this formula from the Japanese translation of her book (Robinson 1963).

³Kumagai Hisao (1957, 246) says ‘“Capital” is fundamentally a stock concept for me’, supporting Robinson's opinion.

⁴See Tamanoi and Kayama (1964, 219). This article compares some definitions of the organic composition of capital.

⁵Marx explained extended reproduction by the formation of a hoard and its conversion to additional capital, i.e. additional constant capital and variable capital (see Marx 1971a, 500, 505). Later the necessity of the additional variable capital was disputed for a long time among Japanese Marxian economists (see Yamada 1983, 209). See a review of the controversy by Tsuchida (1990, 516). Akitaka Hirota makes a comment on the accumulation theory of the Keynesian school (and also of many modern economists), ‘The additional investment of variable capital which is the indispensable moment for the formation of income (V + M) must be omitted from the analysis. But, if we position “new investment”, clearly from the moment of reproduction, as the moment which mediates the process reproducing the social relation of capital and wage-labor on an enlarged scale, variable capital cannot be excluded from the concept of investment’ (Hirota 1990, 400). The elimination of additional variable capital in Keynesian economics and our concept of investment is that it is unnecessary for social accumulation; accordingly we do not deny the capitalistic character of social reproduction and accumulation. In the Marxist school, the rate of accumulation has been presented as (ΔC + ΔV)/M , but this is a mirage arising from Marx's concept of capital.

⁶With our symbols, ΔC/C = Δ−1, β = 1/K, Δβ/β = 1−κ/κ

⁷Later, he revised it to accept the critique (Okishio 1980, 63).

⁸Taniguchi (1981, 2) points out that this is included in Okishio's formula and theory. He is opposed to it as a theory of the automatic collapse of capitalism.

⁹His calculation is done in pence and shillings. We simplify it by omitting the unit.

¹⁰Shinsaburo Koshimura (1956, 12, 10) says ‘We might write the total amount of value in the form of the product of the amount of material and value per unit-amount. Then, when we have investigated a series of changes which occur with the changes of productive power in some industrial sectors or rather all sectors, we could see clearly at a glance the total process of the extension of those changes’. He also says ‘We can develop our theory with mathematics on the basis of the labor theory of value, the character of which is objective and material’. These are my indicators.

¹¹In the controversy between Tomizuka and Kumagai over the general law of capitalist accumulation which occurred in the 1960s and is regarded as a typical controversy between ‘modern economists versus Marxian economists in Japan’, Tomizuka (1965, 382) argued against Kumagai's view which asserted the validity of ‘neutral technological progress’: if technological progress occurs to the same extent in the production of capital goods and the production of consumer goods, why do you say that the original composition of capital will not be changed? Rather in this case I think that logically, if the technical component becomes higher, it should be reflected directly in the value composition. Tomizuka's organic composition is Marx's, but Kumagai's basing his argument on Robinson's is not. The organic composition of capital may become higher with his definition. Tomizuka's opinion is right in terms of words, but is not relevant to employment.

¹²Osamu Hiraishi (1997, 83) asserts that in analysis of the rate of profit ‘constant-capital vis. value-added ratio’ (his original term: in our formula =1/K) becomes lower if x ₂ > 1 (x ₂ is the magnification of labor-means; in our formula A > 1) and higher if x ₂ < 1. Our proof is later than his proof and has another formula.

¹³This was undertaken at the time when Japanese enterprises were actively introducing ‘mechatronic or micro-electronic machinery’ ahead of the enterprises of other countries. The answers to the purpose and effects of the introduction of NC (numerically controlled) machine tools were: improvement of accuracy and quality 65.5%, decrease of time to progress work 41.7%, staff reduction 29.2%, operation for a longer time 20.2%. The writer of that section says these answers are fundamentally the same as those of other research done at the same period (Iwashita et al. 1988, 114–5).

¹⁴Hiraishi (1997, 84) presents this case as follows: ‘with the development of productivity, magnification of constant capital and added value ratio approaches to x ₂<1, raising the lower limit in case of (increase of labor-means per unit product)’.

¹⁵Hiraishi has previously shown this limit (Hiraishi 1997, 84).

¹⁶Lenin's scheme has no diminution of value, and only develops the tendency of the elevation of organic composition. This law still has a great influence especially among the Japanese Marxian economists. Kiyoko Imura (1985, 234) criticizes Lenin for not making clear the difference between this law vs. the uneven development of the first department and the ‘inconsistency between production and consumption’, but her aim is to make clear as theory the preceding development shown in Lenin's scheme. Hiroshi Zukawa (2010, 216) estimates that the discovery of this law is Lenin's achievement. Tsutomu Takahashi (2009, 273) asserts that he wrote his book taking the law of the preceding development of the first department as the premise of whole book, although he admits that Lenin's scheme does not prove the law.

¹⁷Norimichi Kawakami (1991, 72–3) concludes in his analysis of the Japanese economy in 1960–85 that the expanding rate of production of the department of means of production is higher than that of the department of means of consumption, and here the organic composition (in his theory, C/V) becomes rather lower. At this period when the rate of economic growth and also the rate of the rise in labor productivity are very high, a tendency opposite to Lenin's law can indeed be detected. He looks for its cause to the diminution of the value of C (constant capital) such as raw materials and machinery, which is caused by the remarkable rise of productivity in the heavy and chemical industries producing 63.2% of the means of production produced in Japan. We think our reasoning corresponds to his analysis.