C-M-C: Small-Scale Commodity Production
This cycle represents the economic activity of small producers, such as artisans and farmers, who create goods (C: commodity) to sell (M: money) in order to buy something they need (C). The primary goal is use-value, meaning production is driven by necessity rather than profit. For example, a shoemaker crafts a pair of shoes (C), sells them for money (M), and then uses that money to purchase food and materials needed for daily life (C).

M-C-M’: The Capitalist Cycle
This cycle represents capitalism, where money (M) is used to buy commodities (C) to sell them for a greater amount of money (M’). Unlike small-scale production, which focuses on personal needs, the primary aim of this process is profit through surplus value. The difference between M’ (the increased money) and M (the initial investment) comes from surplus value, which is extracted from workers as they produce more value than they receive in wages. This cycle enables capitalists to continually accumulate wealth by reinvesting profits and repeating the process.

Surplus Value and the Expansion of Capital
M’ (more money) represents the profit capitalists gain through the process of capitalist exchange, where money (M) is invested in commodities (C) and then sold for a greater amount (M’). This profit comes from surplus value—the gap between what workers produce and what they are paid. The extra, unpaid labor time, known as surplus labor, is the source of surplus value. Money becomes capital when it is invested in labor power and means of production to generate profit, primarily by extracting surplus labor from workers.

Capitalists sustain and expand their wealth by reinvesting profits (M’ – M) into further production. For instance, a business owner invests $500,000 (M) to hire workers and purchase supplies for building furniture. After production, the furniture is sold for $1,000,000 (C), and the company makes $1,000,000 in revenue (M’), resulting in a $500,000 profit. This process continues, generating ongoing surplus value for capitalists while workers remain dependent on wages. Capitalism, therefore, functions through the continuous extraction of surplus value from workers, ensuring that the capitalist class accumulates wealth while the working class sustains the system by selling their labor power.