Discussion Board 5.2

  1. 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-assessment exercise question 1-7)

Self-Assessment Kayla Zagal

C-M-C the meaning is the value of (C) in the third and last stage was the same as the value of (C) in the first stage. The peasant and the artisan would go to the market and get money in exchange for commodities. The difference between the two diagrams is money we have, we don’t use it but we sell it to make more money. Reselling something to earn more. The aim is no longer to sell in order to buy but to buy in order to sell.

M-C-M’- The M’ is money at the end, M’ is greater than M: M’ equals M plus m. M’ is money at the end of the transaction. The productive forces of the factory. Labor power is described as “the aggregate of these mental and physical capabilities. Labor power is a capacity, a potential which can be used more or less intensely. Work is the act of working.

D.B 5.2 – Justine Lazdina

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.

Zhongquan

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.

Ignacio on M-C-M’

Let us set the capitalist at a starting point where he is a trader. He starts buying commodities from the people who produce them at a bargained price, then the trader resells this commodities following M-C-M’, where M’=M+m, and m is the gain from each time the trader follows M-C-M’, the more the capitalist follows this formula the easier it gets to make profits and increase his wealth, this is because, in comparison to someone who is following C-M-C, he doesn’t have to invest time into producing a commodity. There is an inflexion point where the trader sees his wealth being too big and realizes that if he buys more of what is being produced, he could not be able to grow his wealth anymore, therefore he decides to transform into a capitalist industrialist, where they can keep buying and selling commodities buy these ones now come in different forms, like means of production, labor, and raw materials. When the capitalist now has the power to rent the labor power of workers, he implements a certain set of rules through the means of production, setting working hours where the workers agree a price for their labor. These hours are created to make the most of the money initially invested, exploiting employees, and getting from them a surplus value due to a surplus of labor after the employees covered their means of subsistence even though it took them half of the time that they had previously agreed with the capitalist. The Capitalist knows that to maintain wealth and increase it, he not only has to buy commodities to resell them later, but to buy commodities like labor, to produce more commodities, to have gains from the labor of the workers and gains from the products when sold.

Discussion Board 5.2 Hongtao Fu

The capitalist formula of M-C-M’ differs from the traditional C-M-C formula where there is no profit made. Capitalists take their capital, which is the first M(money). and trade it into C(community) at the value of said community, this part is somewhat similar to the M-C part of the traditional C-M-C formula. And then the capitalists will trade the community they bought for M’. The M’ is equal to M+m, which is a bigger amount of the original M. The lower case m is the profit gained as know as the surplus value. Once the cycle is done, the profit has been made and capitalists can proceed to use the profit to upscale the operation. This is how captialists are able to maintain and increase their wealth, As long as the m(profit) is to be made in this process, the captialists can continuiously increase the volume of their trade.

Maintaining and Increasing Wealth

  1. 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.

5.2

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-assessment exercise question 1-7)

Jalee outlines how capitalists increase their money in the text “How Capitalism Works.” Capitalists remain wealthy because Capitalism is an economic system in which private individuals own the means of production, and production levels are determined by free-market competition. Capitalism can cause inequality, failure to markets, resulting in busting their economic cycles. Capitalists gain a lot of money from doing this, while their vendors don’t earn as much.

M-C-M model

In a capitalistic economy, the MCM model seems to work sell for creating and maintain wealth. (MCM’) would mean the buyer (or capitalist) purchases a product with the intention to re-sell and turn a profit, therefor create wealth. M’ at the end of the MCM’ formula means the money at the end of the transaction would be greater than the beginning amount. Once again referring to a capitalistic business transaction, the buyer will purchase a commodity at a lower value and plan to resell that same product for a higher value. Thus creating more profit and opportunities to build capital.

Businesses may purchase commodities or assets (loyal, skilled workers). Those commodities then become capital to further business profits by utilizing their value by reselling them (commodities) or selling their skills, respectfully. Also, with employing people, business must provide way for laborers to support their labor power. The laborer (or working-class person) sells their product or skills to obtain money (wage) which is used to tend to their personal needs, therefor reinforcing their labor power.

 But how do businesses stay afloat if they have to pay their workers? That’s where surpluses labor comes in. Surplus labor is the money made after the worker has recouped what the company has paid them for a work day. If a cashier is paid $12/hour and within 4 hours of their shift they rang up $500 in sales, well the company has made $404 plus whatever the cashier will ring up during the last 4 hours of their shift. The company will only pay the wage agreed on between them and the worker. Therefore the company is getting free (surplus) labor with 100% profits. 

Discussion 5.2- Jasmin Amigon

  1. 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-assessment exercise question 1-7)

M-C-M stands for Money- Commodity- Money and is the general formula of capital. In M-C-M  the seller gets their money back again and the money is not spent, but rather increased. The owners of capital maintain and increase their wealth by putting their money back into circulation, buying to sell, and starting more money to acquire more. The surplus value doesn’t go to the worker but to the capitalist, they can sell the commodities produced for a greater amount than that paid to the worker in the form of wages. This makes it possible for capitalists to benefit from profit.

Nikita Vasilyev – D.B. 5.2

  1. To answer a question “How does a capitalist remain wealthy” we must look at the general formula of capital: M-C-M`. In this formula, a capitalist starts from a very comfortable position of having an abundance of money that is not necessary for their survival. That money (M) could buy a commodity (C) which will later bring more capital by profiteering from surplus labor and, naturally, from surplus value (M`). Since money is never a question for a capitalist when there is profit to be made, the reasonable thing to do is to acquire as many commodities as possible and abuse the concept of surplus value while providing people with commodities without having to work for it. Taking into consideration the fact that there is an interdependent relationship between the capitalists and the workers and that most media are owned by the wealthy, the capitalists have managed to keep their favorable reputation and, when the worst happens, have figured out the ways to shift the responsibility onto others.