General formula for capital

Normal commodity circulation C-M-C (commodity-money-commodity) does not allow for aggregate growth like that which capitalism is notorious for. The farmer starts out with some number of beets, sells them for money, uses that money to buy a pewter wizard figurine, then goes home no richer than before. Money becomes capital when it manages to grow. The General Formula for Capital is M-C-M’, where M’ or 'money prime' refers to an amount of money M’ > M.

How is this possible, assuming exchange of equivalents? (Remember, Marx is.) The commodity wage workers sell to capitalists is our labor power, our ability to work, or simply our time, fractional parts of our lives. Labor power, like every commodity, has a value (in this case the wage the worker receives, which corresponds to how many hours of abstract labor, on average, are required to reproduce the worker’s ability to work at their expected standard of living) and a use-value (in this case real labor performed, e.g. sewing or typing). This is a very special use-value because labor can create value. As long as capitalists buy and use labor power, it’s possible for them to sell the products of labor and end up with more value than they started with, hence the M’ > M relationship.

The capitalist’s starting capital (M) can be split into two types of expenditure, constant capital (c) and variable capital (v), where

M = c + v

M’ - M = surplus value(s),

so similarly,

M’ = c + v + s

and here in

v + s

is the value produced by the workers who were paid v for their labor power. Hence the two sides of the general formula are related to each other like so,

M’ > M = c + v + s > c + v

Further reading

• Nia Frome's An Extremely Condensed Summary of Capital (2020)

See also

• Labor-power