M-C-M’ (G-W-G’)– general formula for capital

M refers to money, C refers to commodities, M’ refers to increased currency (surplus value)

Capitalists use their own currency to buy the means of production and hire labor for production and sell the produced goods for more currency. In this process, money realizes the increase in value and thus becomes capital.

The formula M-C-M’ (G-W-G’)reflects the most general form of movement of all capital. First, it directly reflects the form of movement of commercial capital. Secondly, it also reflects the movement form of industrial capital. Industrial capital also starts from currency, which is converted into commodities, and then converted into more currency through the sale of commodities. Although it also includes a production process, it is only a supplement to the formula G—W—G’. G-W-G’ comprehensively reflects the most general form of movement of commercial capital, industrial capital, and interest-bearing capital. Therefore, Marx called it the general formula of capital. The value of capital has increased in movement and circulation. Value appreciation is certainly the essential attribute of capital. However, the increase in value generated by capital in circulation is in contradiction with the nature of commodities, value, and currency, and with the value law of the commodity economy. At the same time, the capital general formula also shows that capital not only preserves its own value in circulation, but also realizes value proliferation. This is the contradiction of the capital formula. How should this contradiction be resolved?

First, the value increase will not occur in the currency of the G-W stage of circulation, because the currency here as a means of purchase or payment, only realizes the price of the goods it buys or pays, and its value will not change in any way.

Second, the increase in value cannot occur in the W-G’ stage of circulation, because the re-selling of commodities is only the conversion of commodities from natural forms to currency forms. Under the conditions of equivalent exchange, this value will not change of.

Therefore, the proliferation of value must occur on goods in the G-W stage, but not on the value of this kind of goods. Because of the inherent law of equivalent exchange, the proliferation of value can only occur in the use-value of the purchased commodity. That is to say, in order to increase the value, the money owner must buy a special commodity in the circulation field. The use-value of this commodity itself has the special attribute of becoming a greater source of value, that is, it can create value, and it can create a greater value than its own value. This special commodity is the labor force. Therefore, the labor force as a commodity is the key to the problem and the fundamental condition for resolving the contradiction in the general formula of capital. It’s also the key to capitalists to stay wealthy.

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