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 is a system or cycle the capitalists use to create or preserve wealth by constantly developing new ways to make money. The capitalist starts with an initial investment, which is represented by the letter M(money). After that, this money is used to purchase C (Commodities), which include labor power—the people who make things—as well as raw materials and equipment. last M represents (More Money), or profit, results from the capitalists selling these commodities for more money than they initially invested after production is finished. One of the main tactic the capitalist use and it helps with their M-C-M cycle is the surplus value because surplus value is the value some workers bring when they go above and beyond for their work and is always paid less the the value they bring to work place. with their help the capitalists bring unending cycle for their wealth and profits.

The formula M-C-M represents how capitalists gain and increase their wealth. It begins with money (M) which is used to purchase (C) commodities, like raw materials and labor. After producing said commodities, they are then sold in turn for more money (M’). The surplus value (profit) is what distinguishes (M) from (M’). Surplus value is the extra work that workers produce, which stems beyond the wages they earn and capitalist turn a profit from. Those profits are then reinvested by the capitalist to develop more production and increase their wealth. This process of making profits and pour back it into the business is what helps keep the cycle of wealth exponentially growing in capitalist economy.

M (Money) → C (Commodity) is the first step where the capitalist starts with money (M) and buys a commodity (C). This commodity could be raw materials, tools, or labor power. The capitalist does not buy commodities for personal consumption, but to resell them later at a profit. The capitalist sells the commodity they bought (C) to someone else for more money, resulting in M.’ A small-scale commodity production is represented by C (Commodity) → M (Money) → C (Commodity). The value of what they sell is the same as what they buy. This is about meeting personal needs and not about making a profit. In C-M-C, you are just exchanging goods for what you need. No profit is made. In M-C-M,’ the goal is to make a profit. The capitalist buys something and sells it for more money than they spent. In M-C-M,’ the profit or surplus value comes from the workers who produce more value than they are paid for. The capitalist makes money by paying workers less than what their work is worth. Money turns into capital when it is used to buy things that will generate more money. The capitalist buys workers and materials, and through the production process, they sell what they made for more money than they spent. This is how they get richer. Workers create surplus value through surplus labor. The time workers spend to produce goods equal to their wages. Surplus labor is the extra time workers spend working beyond what they are paid for. This extra work creates more value, which the capitalist takes as profit. The difference between C-M-C and M-C-M’ is that in capitalism, the goal is to make a profit. The capitalist buys labor and materials, and through surplus labor, they make more money than they spent. This is how they keep increasing their wealth.

In the M-C-M’ cycle, the capitalists reproduce and amplify their wealth by investing money (M) in purchasing commodities (C), such as raw materials and labor, and selling the produced goods for a greater amount of money (M’). This cycle varies from C-M-C, which dominates in the working class where satisfy personal needs and not for profit. In C-M-C, a working class member can offers their labour as a commodity (C), receive money (M), and use the money to buy another thing they need (C). The reason for this is not profit but exchange of commodities for personal consumption according to the use-value of commodities. On the other hand, M-C-M’ is a capitalist circuit precisely aimed at the production of profits, where money is invested in buying commodities and sold for more money, thus generating surplus value.

M’ in the M-C-M’ circuit represents the surplus value or profit gained by the capitalists upon selling the commodities at a higher price than the cost of production. This profit is a result of surplus labor, in which the laborers produce more value than they receive in the form of wages. From the example of FashionThreads Inc., a producer of clothes, the laborers can be paid for 40 hours of labor but end up producing the equivalent of 60 hours of labor. The extra 20 hours of unpaid work provide surplus value, which the capitalist owner keeps for himself. The profit of the capitalist is the difference between money invested (M) and money received from the sale of commodities (M’). This is how money is transformed into capital: it is invested in labor and means of production, which, through the exploitation of surplus labor, produces added value.

The creation of surplus value relies to a great degree on surplus labor, where workers expend more labor time than that required to simply reproduce their wages. For instance, workers might labor 40 hours a week in the factory but only get paid for 30 hours of work. The remaining 10 hours of work, for which they do not get paid, are the surplus value appropriated by the capitalist owner in the form of profit. This surplus labor is necessary for the capitalists to maintain and increase their wealth because it leads directly to the generation of profits, which are reinvested in the cycle. As the capitalist reinvests the profits into production—buying more materials, more labor, and increasing operations—this cycle repeats to earn more money for the capitalist, while workers remain dependent on wages to survive.

Through this continuous cycle of M-C-M’, capitalists not only maintain their wealth but even increase it over time. The accumulation of wealth comes from the continuous extraction of surplus value from workers’ labor. By investing profit in more production, the capitalists secure the continual creation of surplus value, which allows their wealth to continue expanding. Through this, the capitalist class continues its financial supremacy, while the working class has no choice but to sell its labor power to ensure survival, in effect continuing the class divide. Thus, the capitalist mode of production relies on the exploitation of labor through the extraction of surplus labor to enable the accumulation of wealth by the capitalists.

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.