Question

Commodity exchange is supposedly premised on the equivalence or equality of values (as in the formula C-M-C). Yet, M-C-M’ is based on a capitalist starting a process with a sum of money and creating more money. Where does the extra M’ come from in the formula M-C-M’. How is M’ generated? What are the various options capitalists have to generate more M’?

Answer 1

The formula M-C-M denotes capital accumulation, where M stands for money investment amount of the individual capitalists in a market to purchase commodities which is denoted by C. M-C in the formula relates to the conversion of money into commodities which is done through the act of buying. Purchase of commodities by the individual capitalists is not primarily for consumption but for profit generation. Profit is generated when the commodity C is placed back in the market for selling with the later M being greater than the initial invested amount. This is how the extra M is generated in the formula. The new M is nothing but the old M plus the change in the value of the old M. As the profit belongs to the individual capitalists, the change in the value of M is nothing but the change in the amount of money held in possession of the individual capitalists after the buying and selling of the commodity is completed as expected. The profit generated from the previous transaction is again placed as an investment amount for a commodity for buying and selling and more profit generation. Thus, the formula of M-C-M is an endless cycle of capital accumulation. The other option for the individual capitalists is generating profit through manufacturing process of commodities.