In capitalist economies, the process known as M-C-M’ (Money–Commodity–More Money) illustrates how capitalists create and grow their wealth. This idea, introduced by Karl Marx in his book Capital, is key to understanding how wealth is built in a capitalist system. Unlike the simpler exchange of C-M-C, where people sell something to get money and then use that money to buy something else (like a worker selling their labor to buy food), M-C-M’ focuses on making a profit.
The M-C-M’ cycle starts with M, which stands for Money. It begins when capitalists invest their money not for personal use but to make even more money. They strategically spend this money to buy things like raw materials, machines, and, most importantly, labor. Next comes C, or Commodities. The items that are bought are used in making products. Labor is essential here because workers use their skills and effort to turn raw materials into goods or services. However, workers don’t get paid for the full value of what they create; they receive wages that only meet their basic needs, while the extra value they produce becomes profit for the capitalist. Finally, we have M’, which means More Money. After the goods or services are made, they are sold for a price that is higher than what it cost to produce them. The profit, which is the difference between the initial investment and the final sales revenue, is then reinvested by the capitalist to buy more materials, expand production, or hire more workers, allowing the cycle to continue and grow.
To keep making more money and ensure their wealth keeps increasing, capitalists use various strategies. One major method is exploiting labor, as the main source of extra value comes from the workers. Capitalists try to boost productivity while keeping wages as low as possible, which helps them maximize their profits.