M-C-M’ is the original capital formula, illustrating how capitalists accumulate and maintain their wealth. It begins with M (Money), which the capitalists use to purchase C (Commodities) in the form of raw materials and labor power. These commodities are used for production, and the produced commodities are sold at a higher price, thereby generating M’ (Money with surplus value), which is greater than the initial M.

Surplus value is the key to this process. It is obtained through labor. Labor power is purchased by capitalists from workers for wages. Workers produce value, though, more than their wages. The remainder, or surplus value, is what causes capitalist profit to arise. It is due to surplus labor that workers labor more than what it takes to produce value equivalent to their wages. For example, if a worker’s wage covers four hours of labor, but he works eight, then the other four hours yield excess value which the capitalist retains as profit.

This process turns money into capital. Money in itself is not money-making, but if invested in production by purchasing labor power and means of production becomes capital, which generates surplus value. Capitalists invest this surplus once more into production, purchasing more labor power and raw materials, always making money.

Unlike C-M-C, in which producers sell a commodity to buy what they need, capitalists operate with M-C-M, in which money is invested not for use but to generate even more money. Through the mechanism of reinvestment, the capitalist class is guaranteed to always accumulate more wealth while workers are trapped relying on wages. It is through this that the capitalist class can consolidate and expand its economic power.