1. M-C-M’ [Money – Commodity – Money’], or as the author Pierre Jalee refers to it in “How Capitalism Works,” the general formula of capital, is the formula by which capitalists maintain and grow their wealth.

In a system without capitalists, markets function on a C-M-C [Commodity – Money – Commodity] formula. That is, the laborer creates a good or “commodity” to sell for money which is then exchanged for other needed commodities. In this case, money exists primarily as a representation of the value of their sold goods. The laborer is not seeking to amass money so much as they are looking to trade their labor for the labor of others; currency simply enables the indirect trade of goods and services.

Capitalists invert the formula, using their existing money (M) to purchase or produce commodities (C) that they then sell for more money than they had previously, recognized as M’. This profit is generated by the exploitation of labor in the production of the commodities. By leveraging their existing wealth to control the means of production, and thereby the livelihood of the worker, they are able to purchase the labor power of the worker at a rate favorable to them. The capitalist then benefits off the surplus value of the worker’s labor power. That is to say, the worker generates more value for the capitalist than they are paid for their labor. M’ can also be expressed as M + m, where m represents the surplus value of the labor generated by their investment of capital.

In order to be successful and maintain their wealth, the capitalist must continuously receive more from their investments than they put in, enough to sustain their own needs and, ideally, to grow the amount of capital available for future investments.