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)

Both Small-scale commodity production and buying in order to sell, involve the exchange of goods for profit, the key distinction lies in the source of those goods to sell.

Small-scale commodity production can be expressed as C-M-C, meaning selling something you made in order to buy something you need. On the other hand, buy in order to sell can be expressed as M-C-M’, which is buying something with the intent of selling for more money. 

In the context of capitalist societies, Karl Marx used the formula M-C-M’ to explain how capitalists maintain and increase their wealth. 

In summary:

• M: Represents the capital that the capitalist invests.
• C: Represents the commodities the capitalist purchases with that money, ie., raw materials, machinery, and labor power.
• M’: Represents the larger amount of money (M + surplus value) the capitalist receives after selling the produced commodities (also known as profit or surplas value). 

An example of M-C-M’ can be found in the real estate industry, where wealthy businessmen or businesswomen buy real estate with the intention of reselling for a profit, also known as “flipping”. This process involves purchasing a property, often renovating it, and then selling it for a higher price, aiming to get a quick profit, often referred to as a surplus value. The seller then puts their surplus value back into circulation and repeats this as often and quickly as possible.

In the property flipping example:

M: Represents the initial investment or capital that the capitalist puts in.

C: The commodity in this case is the property – the property is often in a state that requires renovation or improvement to increase its value.

M’:The capitalist then sells the renovated property for a higher price (M’) than the initial money. The difference between M’ and M represents the surplus value.

The property flipping example  highlights one of the many ways how capitalists use their money to purchase a property (commodity), invest in its improvement, and then sell it for an increased amount of money, thereby increasing the value of their assets and therefore ensuring that wealth continues to grow and expand, creating a self-reinforcing process across generations.