- 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 M – Money, C – Commodity, M’ – More Money. This formula explains how capitalists maintain and increase their wealth through a cycle of investment and profit. It starts with M (money), which the capitalist uses to purchase C (commodities), including raw materials, machinery, and, most importantly, labor power. These commodities are then used in production to create new commodities that are sold for M’ (more money). The key to this formula is that M’ is greater than M. This increase in money comes from the surplus value created by the workers. The capitalist pays the workers a wage, but the value they produce is higher than that wage. The capitalist keeps the difference, reinvesting some of it to start the cycle again with even more money (M), leading to further accumulation of wealth. This repeated process of investment is how capitalists not only maintain but also increase their wealth.
