Question

Explain the difference between the two circuits, C-M-C and M-C-M.

Answer 1

Marx has talked about two kinds of circulation.

C-M-C.

It means that firstly commodities are exchanged for money and that money are converted back into commodities. It is the direct form of circulation. In this case commodities are sold for purchasing more, and money acts as a kind of middle-man.

There is also another form, M-C-M.

In this form firstly money are used for purchasing commodity C and these commodities are exchanged back into money. Last M is greater than the initial M, otherwise there will be no incentive for a capitalist to engage in this circuit.

M-C- production process- C'- M'

It means a capitalist goes in the market with money M purchases some means of production (labor, inputs and raw materials for the production) and put it into a process and produces C' which is different from C. He sells C' at M' and earn surplus value which is the difference between M' and M.

Here a capitalist will put his money into the circulation only if M'>M. This is main reason emerging of the capitalist. The surplus value is derived from the unpaid labor.