Labor power and surplus value

Times have changed. Before capitalism emerged, peasants and artisans engaged in small-scale commodity production, following a straightforward exchange pattern: Commodity (C) – Money (M) – Commodity (C). In this system, the value of the commodity at the end of the exchange was equal to its initial value. The primary focus was on fulfilling personal needs—whether food or clothing—without the concept of surplus value being involved.

With the rise of capitalism, however, a new figure appeared: the capitalist. Unlike peasants and artisans, capitalists held money, or capital, and engaged in exchanges not for personal use but for profit. This shift transformed the exchange dynamic to Money (M) – Commodity (C) – Money (M’), where M’ represents an amount greater than M, signifying the generation of surplus value or profit. The capitalist aims to buy commodities at a lower price, realizing surplus value by selling them at a higher price. Artisans often preferred to sell to traders, saving time and effort in seeking individual customers.

The continuous reinvestment of money into circulation is what keeps capitalists wealthy. They utilize a portion of their surplus value for further investments, adhering to the principle of “we need money to make money.” The formula M-C-M’ encapsulates the general process of capital: the money invested in commodities returns as a greater sum when sold.

Labor power, encompassing both mental and physical capabilities, becomes a crucial element in this system. When workers sell their labor power for wages or salaries, capitalists use the initial M to purchase this labor and the means of production necessary for operations. The resulting goods (C) are produced as a consequence of this labor, leading to M’—the final profit that remains in the hands of the capitalist.

Capitalism inherently emphasizes the exploitation of workers, often lacking compassion. If capitalists were to act reasonably toward their workers, they might reduce their surplus value, jeopardizing their profit margins. Additionally, capitalists must cover costs associated with means of production, such as materials, machinery, and rent.

In conclusion, capitalists maintain and expand their wealth through the systematic exploitation of labor, constantly seeking to increase their relative surplus value. This relentless pursuit underscores the nature of capitalism, where the primary goal is to continually engage in buying and selling to accumulate wealth.

The M-C-M’ diagram outlines a key process in capitalism where capitalists maintain and grow their wealth. Starting with money (M) accumulated from investments or profits, they purchase commodities (C) like raw materials or labor to initiate production. After selling these commodities, they aim to generate more money (M’) than they initially invested, representing profit. This cycle illustrates the capitalist goal of profit maximization. By reinvesting profits, capitalists can purchase more commodities, expand production, and accumulate wealth over time. The process involves converting money into commodities, adding value through labor, and realizing profits upon sale. This highlights how capitalists exploit surplus value from workers to enhance their wealth and solidify their economic position. Overall, the M-C-M’ process emphasizes the relationship between labor, value creation, and wealth accumulation in capitalist economies.

M-C-M’ is a way to explain how capitalists make and grow their money. It starts with M, where capitalists use their money to buy C, like products or services. They then sell these commodities for more money, represented by M’, which is greater than the original amount. This means they make a profit, helping them keep and increase their wealth over time.

Capitalist use M-C-M to maintain and increase their wealth by beginning with “M’ which is used for their original investments such as raw materials, labor, and or production. They then continue to focus on production and value, with “C” capitalist seek to get as much value as possible from their worker’s labor by paying their workers less than what their labor provided, which generates surplus value. Capitalist then reinvests the surplus value back into commodities, laborers, material, or improving their production advancements and methods. All of these M-C-M factors increase he capitalists’ wealth.

The capitalist class’s actions are the main factors governing the dynamics of wealth accumulation in the setting of American capitalism. These people own the means of production and wealth, and it is essential to comprehend how they maintain and grow their riches in order to analyze capitalism systems. The graphic M-C-M’, which summarizes the cycle of money, commodities, and return on investment, is a crucial idea that clarifies this process.

M, the symbol for money, is at the beginning of this cycle. The basis for capitalists’ wealth accumulation is this initial investment. When this money is transformed into commodities, represented by C in the diagram, the capitalist’s trip officially begins. This shift is more than just a transaction; it is making calculated investments in products or services that may be manufactured and then sold on the open market. A commodity can be anything from raw material to a fully produced product, depending on the market and sector. The goal for the capitalist is to return to the money form but with an increased amount, represented as M’. Stated differently, the goal of the capitalist is to sell the goods for more money than was first invested. The change from M to C and back to M’ highlights the pursuit of profit via value creation, which is a major tenet of capitalism.

For capitalists, investment in commodities is essential since it establishes the foundation for earning income. When capitalists put their first money into commodities, they are entering an endless cycle where their capacity to meet demand from the market and produce effectively is crucial. The goal of capitalists is to maximize value, which is determined by several variables such as labor, raw materials, and production skills. Capitalists are able to ensure a higher profit when they eventually sell their commodities by streamlining production procedures and cutting expenses.

A major factor in the M-C-M’ cycle’s success is market dynamics. The changing dynamics of supply and demand must be navigated by capitalists in order to establish price strategies for their products. When demand is strong, capitalists can charge more for their goods and yet make a healthy profit, or M’. On the other hand, a market that is overcrowded or where customer demand is declining may make it more difficult for the capitalist to recover their investment, which could result in losses.

The cycle continues after capitalists have effectively made the move from M to C and back to M’. To maintain and improve their operations, many capitalists return a percentage of their profits to the company. This reinvestment could take the form of increasing production capabilities, obtaining new technologies, or investigating untapped markets. Capitalists preserve their riches and seek for opportunities for expansion by consistently adding money to the M-C-M’ cycle. This helps to fortify their standing in the capitalist class.

In summary, the M-C-M’ cycle provides a basic framework for understanding how capitalists in a capitalist society preserve and grow their wealth. To attain profitability, this process entails the strategic initial capital investment in commodities, value creation through effective production, and navigation through market dynamics.

Capitalists can influence prices by generating interest, in their products to maximize profits through strategies, like advertising and branding while potentially employing tactics.In the world of work and economics business owners sometimes try to cut costs by compensating employees less, than the worth of the products they create effectively gaining value in the process. A lot of investors who are into capitalism put their money in industries or sectors to lower risks and generate multiple sources of income. Individuals can also utilize markets to invest in stocks or bonds and even real estate to enhance their wealth by earning interest and capital gains. This process of M → C → M’ demonstrates how capitalists consistently earn profits and increase their wealth by utilizing their capital in investments and market activities. Capitalists start with money, which they invest in the production process. The money is used to purchase commodities, which can include raw materials, labor, and machinery. The key here is that the capitalists buy these commodities to produce goods. After the production process, the commodities are sold for money, ideally resulting in more money than initially invested. Afterwards surplus represents profit.

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-assesment exercise question 1-7)

Capitalists remains wealthy by counting to make profits and investing in stocks and bonds. With M-C-M meaning for Money Commodity Money, capitalists use their very own money to buy resources such as machines, fuel to be able to provide their employees to labor. Capitalists continue to invest into business and profits that they know they would benefit from and many capitalists already are wealthy from being born into the family wealth.

The M-C-M’ diagram explains how capitalists maintain and increase their wealth by describing the flow of capital in a continuous cycle. Here’s a breakdown of the process:

• M (Money): The capitalist starts with money (M), which they use to invest in commodities, including raw materials, machinery, and labor.
• C (Commodity): The money is used to purchase commodities, which are then transformed through production. This stage involves the use of labor to create a new product that has greater value than the sum of its inputs.
• M’ (Money Prime): The newly created commodities are then sold for more money than the initial investment (M’). The increase in money, represented as M’ (M plus surplus value), comes from the added value created during production, primarily through the exploitation of labor.

In essence, the M-C-M’ cycle shows that the capitalist does not simply buy to consume but rather buys to sell at a profit. By continuously reinvesting and repeating this cycle, capitalists can accumulate more wealth. The key to this process is the surplus value. The difference between what workers are paid and the value of what they produce, which is then accumulated for the capitalists. This cycle allows capitalists to maintain their position in the wealth hierarchy and continuously expand their capital​.

1. To my understanding how the wealthy stay wealthy is by continuing to the structure they have in place (m-c-m)The wealthy buy product and then resell the same product for more money then what they bought it for, making more profits. The wealthy well continue to do this over and over and have the working labor and sell it for them. In the end the working class is working and not being given what the labor is actually worth.