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.

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.

C-M-C: Small-Scale Commodity Production: This represents the economic activity of artisans, farmers, and small producers who create goods (C: commodity) to sell (M: Money) to buy something they need (C). The main goal is use-value, meaning production is driven by necessity rather than profit. for example, A farmer works on his farm to produce vegetables (C), sells them for money (M), and then uses that money to buy food or other necessities (C). 

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

M’ (More Money) represents the profit capitalists gain through the cycle of capitalist exchange, where money (M) is invested to buy commodities (C), and these commodities are then sold for a greater sum (M’). This profit comes from the surplus value, which is the difference between what workers produce and what they are paid. Workers generate more value than their wages, and this extra, unpaid labor time, called 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, with the key being the extraction of surplus labor from workers. Capitalists maintain and increase their wealth by using the profits (M’ – M) to reinvest in more production, expanding their wealth over time while paying workers only a portion of the value they create. For example, a company might invest $100,000 (M) to hire workers and buy materials, and after workers produce goods worth $200,000 (C), the company sells them for $200,000 (M’), making a $100,000 profit. This process repeats, continually generating surplus value for capitalists while workers remain dependent on their wages. Thus, capitalism relies on the continuous extraction of surplus value from workers, ensuring that the capitalist class remains wealthy while the working class sustains the system by selling their labor power. 

1) The M-C-M cycle, which stands for Money – Commodity – More Money, explains how capitalists maintain and increase their wealth. They start with money (M), use it to buy commodities (C) like labor and raw materials, and then produce goods or services that are sold for more money (M’). This process generates surplus value, or profit, which they reinvest into the cycle. By continually turning money into commodities and back into more money, capitalists are able to accumulate and grow their wealth over time.

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)