M–C–M′: How Capitalists Stay Wealthy

M–C–M′ represents the mathematical process Money – Commodity – More Money which describes how capitalist entrepreneurs expand and sustain their financial wealth.

Here’s how it works:

M (Money): A capitalist starts with money. The money used in this context functions as capital investment rather than basic consumption funds. The main purpose of this investment is to produce additional financial value rather than acquiring consumer goods.

C (Commodity): The capitalist utilizes money to acquire essential commodities which include:

Raw materials

Machines

Labor power (this is key—hiring workers)

M′ (More Money): The finished products are sold at a higher value than the initial investment after labor transforms materials into products. The profit that emerges from this process is known as surplus value and it represents the difference between the initial amount of money (M) and the final amount (M′).

The process of wealth generation for capitalists occurs through their acquisition of labor power from workers at costs below the actual production value which they then keep as profit. The generation of wealth happens through controlling business operations and extracting monetary value from the work performed by employees rather than through personal effort.

Why this matters:

The process demonstrates that capitalists sustain their wealth through continuous money circulation in production activities which results in additional financial gains. They perform this process repeatedly in their operations.

The process involves more than mere money generation since it requires using labor to extract surplus value from money. The fundamental mechanism of capitalist operations alongside the reason for ongoing social inequality becomes evident.

M–C–M′: How Capitalists Stay Wealthy

M–C–M′ functions as a model which demonstrates how capitalist wealth expansion occurs through the formula Money – Commodity – More Money.

Here’s how it works:

M (Money): A capitalist starts with money. This isn’t just spending money—it’s investment capital. The goal isn’t to buy things to use, but to make more money.

C (Commodity): The capitalist uses that money to buy commodities, mainly:

Raw materials

Machines

Labor power (this is key—hiring workers)

M′ (More Money): The products resulting from labor transformation become available for sale at prices exceeding their initial acquisition costs. The profit derived from business operations emerges as surplus value between the initial money (M) and the resulting money (M′).

The essence of capitalist wealth accumulation involves purchasing worker abilities at reduced rates than their actual work value while maintaining ownership of the process to capture the excess value. Wealth accumulation occurs through ownership control of operational processes while extracting monetary value from the work of others instead of relying on increased personal effort.

Why this matters:

The cycle demonstrates that wealthy capitalists sustain their fortune through continuous money movement in production to create increasing wealth. The process repeats multiple times.

The main objective extends beyond earning money since it requires using labor to extract An error occurred while processing your request. Please try again.

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.

How does the capitalist maintain and increase their wealth?

In Pierre Jalee’s book, How Capitalism Works, we are introduced with two ways in how money is transacted in society. There is small-scale commodity production, or CMC, and Jalee’s description of it is “both peasant and artisan were selling in order to buy.” Both classes would sell their own produced goods for money in order to buy other goods/necessities that they maybe couldn’t produce themselves. The capitalist does not participate in this commodity production. The capitalist is a capitalist because they already own capital and therefore have money. But, in order to continue having that capital, they must use that money to buy labor and/or capital in order to make a surplus value in their production of goods and services, which would then be known as a profit. This sequence of transactions is called the general formula of capital, or MCM’, where M’ equals M plus the surplus value (m) that is created during production. This surplus value is created from the labor of the capitalist’s workers. Because the workers are paid a fixed value for the time they exchange for their labor, the value of their production is worth more than the cost that the capitalist spend on their labor. The capitalist must pay their workers a wage/salary that is less than the value of their production in order to maintain and increase their wealth, or else there would be no surplus value for them to make a profit from.

There was switch from a fair market, where a commodity was made then sold in order to buy another needed i.e., C-M-C to a capitalist market where money is put into commodity and the commodity is then sold i.e., M-C-M. this switch resulted in a complete flip of access and immediately put the people with money in a place of power. Those with money would then acquire commodities and therefore build capital. They could afford to continue to buy for the purpose of selling without limitation and in doing sos increase their capital and wealth . Those who existed and benefited from the fair market (C-M-C) aka the laborers did not have the same access to the wealth that makes the M-C-M system work so they continued to sell their products to the capitalist. Still, capitalist grew bored of this system as the surplus value of these commodities could only be realized when the laborer surrendered their products at a lower price than their actual value in order to avoid seeking customers and instead finding comfort in the ease of selling to a trader. When this happened capitalist would make a profit because M (the initial amount put in) would get them their product (C) and then they loud sell that product at the price it was actually worth and then receive the profit (M’). Capitalist saw there being as better chance for financial growth if instead of buying commodities that weren’t being made fast enough they became the manufacturers of the goods that they sold. so with M they paid for the raw materials labor and everything else that went in to making their product (C), and then used part of the profit and wealth they accumulated to start this process over and over. Now with this new system set in place the term surplus value now refers to labor and more spefically the extra labor power an individual has after meeting the total value it took to create their labor. This surplus value is where wealth lies for capitalist. Within this system too capitalist work to intensify labor without adding more labor time and without increasing wages so that though a worker may only work 8 hours they are speeding up, operating more machinery and overseeing more responsibilities all of the sake of increasing the absolute labor value.

M-C-M’ is a concept used by capitalists to grow their wealth. The first M(Money) is what the capitalist starts with. The second letter C(Commodity) is what the capitalists invest their money in, and could range from things such as raw materials, machines, and labor power. Lastly, M’(More money) which is essentially the profits made after production with prices being drastically marked up and sold for more than what was initially invested. The difference between the first and second M is surplus value created by workers, which becomes profit for the capitalist. 

I understand M-C-M as the way of capitalism to increase the profit every time money flows in society.

M= stands for money which is the initial investment, used to make purchases such as raw materials, labor and what is needed for production

C= Stands for commodities these are transformed into goods and services that hold value

M= Stands for money but this time (more money) after the profit gotten from the commodities, there must be a profit to meet this one

this way companies and employees keep growing their wealth as inflation keeps going up, but sometimes inflation is rising faster than the growth of money it self

 

The M-C-M’ formula explains how capitalists stay rich and grow their wealth.

M (Money): A capitalist starts with money.

C (Commodity): They use that money to buy something—like materials, factories, or labor—to create a product.

M’ (More Money): They sell the product for more than they spent, making a profit (M’ is greater than M).

The extra money (M’ – M) is called surplus class which mostly comes from paying workers less than the full value of what they produce. By repeating this cycle over and over, capitalists keep increasing their wealth.

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)