- 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’ is the “general formula of capital” (Jalee, 24). Before capitalism existed, people would trade goods and services (C) for each other or for money which was a direct representation of the value of the product(M). They would then use that money to buy products of the same value as M (C). When someone starts with money (M), they can then purchase a commodity (C), and transform it into something worth more than the original value of that commodity (M’). At the end of these transactions, the seller ends up with a surplus of value (m). This surplus of value is labor power that has gone into the creation of the new commodity.
In order to transform money into “productive capital”(26), capitalists must accumulate tools, materials, and labor to produce a commodity. They then must create a surplus of value so they can continue to acquire these three factors, which they do by undervaluing the labor required to produce the commodity, since labor doesn’t have the same quantifiable price as the commodities required as tools or materials. The labor that has been undervalued creates surplus value, which doesn’t return to the worker who created the value, but to the capitalist to continue their cyclical investing and profiting.
So since the only variable in the cost of production is the value going back to the worker, capitalists must find a point at which they can maintain exploitation of the worker while still accumulating surplus value from them. In this way, capitalists maintain and increase their wealth.