Date:         Sun, 14 May 95 11:15:03 EDT
From: Walter Daum <WGDCC-AT-CUNYVM.CUNY.EDU>
Subject:      value and the falling rate of profit



In response to some recent posts on value and the falling
rate of profit.

Andrew Kliman wrote on May 8 (further argued on May 10):

"the value of constant and variable capital is the labor-time
congealed in the means of production and subsistence (or the
money expression thereof), which can differ from the labor-time
needed to (re)produce them. The labor-time congealed is the
labor-time represented by their money prices. For instance, if
means of production have a price greater than value, this will
raise the value of the constant capital in the next period."

This is true for analyzing how a capital's rate of profit is
figured, and for dealing with the "transformation problem." The
value *for capital* of the elements of constant and variable
capital is in effect what was paid for them -- which includes
pluses or minuses, due to redistribution of value, from the labor
time needed to reproduce them.

But saying that the value of capital is the "labor time
congealed" would seem to undermine our ability to understand the
falling rate of profit tendency. The value of elements of
constant capital is cheapened by advances in productivity (with
the rising organic composition of capital). The owner of such
devalued constant capital then finds that less value is
transferred to the commodities produced through that constant
capital. The rate of profit calculated against the original
investment therefore has to fall.

On a related matter, Steve Keen (May 3) cited Elias Khalil's
argument that "if the LTV is taken as given, then there is
nothing about the LTV per se which makes it specific to
capitalism. Thus, given the premise, socialism should also suffer
from a decline in the rate of profit." I don't know Khalil's
paper but will still briefly respond to the argument quoted.

The falling rate of profit is not simply a consequence of the
rising organic composition of capital. If capitalists did not
have to appropriate profit in proportion to their original costs,
if they could always value their constant capital according to
current production costs, then the falling rate of profit would
not be the dominant tendency. The countervailing tendencies cited
by Marx would balance it out.

The falling rate of profit, then, *is* specific to capitalism
since it depends on the independence of individual capitals, the
need for each to appropriate a share approximately in proportion
to size of capital.

Under "socialism" (more accurately, under a workers' state
transitional to socialism and still burdened to some degree by
value considerations), the rights of individual capitals would
not have to be defended. The labor embodied in the existing means
of production would be irrelevant for future production
decisions, once productive techniques had advanced. The
cheapening of the elements of constant and variable capital (in
terms of labor time needed to produce them) would make it easier
to create new techniques of production. It would contribute to
progress, not crisis.

Walter Daum


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