M-C-M’ stands for Money-Commodity-Money(prime). It is the General Formula of Capital. To take part in it, one uses their money/capital to purchase a product that they then resell for profit. To be able to make it work, the capitalist needs to convince the creator of a product to sell their product for less than it is worth, and the capitalist then resells said product to a costumer at its real value price, therefore creating profit. This is called exploitation and Capitalism cannot exist without it.

This exploitation does not exist in C-M-C, or Commodity-Money-Commodity, where a person creates a product, sells it for money and then uses that money to acquire a good/product they need. The value of commodity1 and commodity2 does not change but remains equal throughout the transaction. This makes C-M-C a much fairer system.

Unfortunately for Capitalists, since they do not create new wealth/value themselves and are instead dependent on other’s creations, they were quite limited in their business potential. To rectify this, they transformed themselves into capitalist manufacturers and industrialists. Essentially, they used their money to buy means of production -including labor- to create a commodity they then sold for more than it took to make.  This allowed them to transform money capital into productive capital.

To better understand how Capitalism works, we need to take a closer look at the second M in the General Formula of Capital; M’ (M-prime). M’ stands for Surplus Value. Mathematically, it can be thought of as M’ = M + m, where capital M equals the amount of money needed to create a product and lower-case m equals the profit the product is sold for. Capitalists are able to create Surplus Value through the exploitation of a workers Labor Power. Labor Power is not necessarily work, but instead is one’s potential/capacity for mental/physical abilities that allow him to create/produce things. Work is the result of using this potential. Capitalists purchase a worker’s commodity of Labor Power with its monetary value which we call “wage”. Wage covers the workers Means of Substance, which are things the worker needs to survive, live, and get to work. The value that is produced by the worker reaches their wage in about half a day, or 4 hours, and the rest of the value that is accrued by the worker for the rest of the day (considered Surplus Labor) goes straight to the capitalist. This extra value -that the worker never gets paid for- is how capitalists are able to create Surplus Value. Surplus value is the product of Surplus Labor and is the product of Capitalist exploitation.

Leave a Reply