1. As we learned thus far, the capitalist class consists of people who own wealth, as well as the means of production in American society. An important question in understanding how this class works is to ask: how does a capitalist remain wealthy? The answer to this question depends largely on understanding the diagram M-C-M’. So, let’s practice by explaining what happens in this diagram in our own words (but basing our ideas on Reading 5.1). Respond to the following question: Explain M-C-M’ to show how capitalists maintain and increase their wealth. (hint: your answer should weave a summary that includes what you reviewed in the self-assessment exercise question 1-7)
M-C-M’ means Money is exchanged for Commodities, which are then sold for their original value, M, plus their surplus value, m, which together create M’. In the case of capitalists, the first M stands for the money that is invested into a production. This includes, but is not limited to, the buildings, tools and equipment, raw materials and other supplies, and labor power that is paid for in order to create goods or services, in this case called a commodity. A commodity is the good or service that is produced by the workers through their labor power and is what the middle C stands for. For the system to function properly, the worker needs to labor for longer than it takes to create a value equal to their necessary labor time, which creates surplus labor that becomes surplus value. The commodities created by the workers are then sold by the capitalist in order to make M’, or the money they invested initially to produce the commodity plus the surplus value created from the worker’s surplus labor power. This process allows capitalists to maintain and increase their wealth as the money they make at the end of the diagram is always more than the initial money invested, meaning that the capitalist leaves with a profit.