James Miller jamiller at
Fri Oct 6 06:56:23 MDT 1995


   Steve Keen posted an interesting response to my
commentary on the tendency of the rate of profit to
fall. He quoted from a paper by Elias Khalil to the
effect that:

1. Labor time calculation remains valid in the
socialist economy.

2. Technological innovations continue to take place,
at even a faster rate than before.

3. Therefore the socialist economy would also be
afflicted by the "falling-rate-of-return law."

   What this means is that, since technological
innovations increase the ratio of the mass of
the means of production to the mass of the labor
force functioning in production, the product of
labor will have a growing portion that represents
dead labor passed on from the means of production,
and a shrinking fraction that is attributable to
new labor added.
   Thus whatever is regarded as "return" or
"surplus," in socialist society, will continue
to decline in relation to the mass of the means
of production that are set into motion, since this
"return" or "surplus" is part of the new labor
   I think Khalil's point is valid. But this should
not be seen as an argument against socialism. If,
as he claims, the pace of innovation quickens once
socialism is inaugurated, then the benefits of this
improved labor productivity can be appropriated by
the entire working population on an increasing
   The growth in productivity implies more output
per hour of labor time, and this implies growing
enjoyment of the material benefits of production
by the mass of the people, if you assume that
production is oriented to serve the needs of the
   The fact that new labor added to the means of
production continues to decline in relation to the
mass of means of production already accumulated by
society does not at all imply a declining capacity
to improve the living standards of the world's
population. And this is because the new labor added
is ever more effective in producing more and more
goods and services in less and less time, no matter
how massive the accumulated productive apparatus
becomes in relation to the living labor currently
functioning in production.
   Thanks, Steve, for your interesting comment.

   Jerry Levy also commented on Steve's posting
not long ago. Jerry mentioned the various categories
which express the social relations of capitalist
society: value, capital, profit, etc., and argued
that these are not present in socialist society.
This is true.
   But this, I think, misses Khalil's point, which
only applies to labor time, productivity and the
means of production considered from the technical
standpoint. All these elements are present in
socialist society. I think Khalil would agree with
Jerry that there is no capital or profit in socialist
society. That's why he used the term "return" and
not "profit" in his argument. But I can't be too
sure about that, not having read Khalil's article.

Jim Miller

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