- 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)
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M – C – M equals Money invested by capitalist (M-)used to purchase commodities (-C-) such as labor, machinery or raw materials. The commodities are then sold, usually at an increased profit for more money (-M).
The way capitalists create and appreciate wealth is through M-C-M’ formula. They start with M(money), invest it in C(commodities) such as materials and labor, use these to produce goods C’ , and then sell them for M’ (more money). In this increase M’, surplus value comes into play: the workers produce more value than they are paid, and the capitalist retains the difference as profit. This investment followed by profit profits is the method through which capitalists grow their wealth.
M C M is money -> commodity -> money. The money that’s initially put in doesn’t equate to the money coming out. The money being put in is being used to operate productive forces. Those forces being material , machinery, buildings, and labor power. The worker( the most powerful commodity ) is then transferring the value of themselves into the commodity that’s being created to produce a final product and then that is being sold. The wealthy stay wealthy because in this process, the employees first have a recognized subsistent rate that usually is fulfilled in 4 hours . After this they remain working for a minimum of 4 extra hours, generating an 8 hour work schedule. Those extra four hours is known as necessary labor time, this has the purpose of generating surplus labor. The capitalist profit off of the labor that isn’t being paid for contributing to the product creation and profit accumulation.