Lauren
Berg
Second
Midterm
SOC
420
5/9/12
5. Discuss the
general formula of capital. What does the prime mark on the final C mean
in this formula? What is the dilemma expressed by the increased value at
the end of the formula when money is used as capital? What is the Marxian
response to this question?
The
General Formula of Capital
A key aspect of capitalism is the circulation of
commodities, of which money is the product. Karl Marx thought the relationship
of commodities and money was of great importance and needed to be described.
Marx developed significant ideas and formulas that illustrate this
relationship.
Marx explained that a commodity’s trade value is equivalent
to the labor time and skill that is expended to produce the item. Money is used
as a median to trade commodities and to hold wealth without the ownership of
commodities. When money is used to purchase a commodity to then be sold, it can
be represented by the formula M-C-M, and money is the capital in the circuit.
When a commodity is sold in order to buy another commodity, it can be
represented by the formula C-M-C, in which money is the middleman and is not
capital. These formulas are abstractions of the general formula of capital,
which is denoted as M-C-M’. In this formula M’ is the equivalent of the
original amount of money plus an increment. This extra increment of money is
known as surplus-value, which is added on to the original value and converted
to capital.
It is only worthwhile to buy a commodity in order to sell
it, if a profit will be produced, which can be denoted as M-C-M’. Otherwise the
money would be put into the market for no reason and have the risk of being
lost. A person who is trading for the purpose of accumulating money is a
capitalist. It is however not necessary in the C-M-C circuit to produce a
profit. When a commodity is sold and another one gained, the seller has
something new that is of greater use-value to him. It is also common that the
commodity sold and the one purchased are not of equal trade value, denoted as
C-M-C’. This happens when a commodity is sold or purchased for more or less
than it is worth.
The increased value at the end of the formula when money is
used as capital results in a dilemma. In the C-M-C circuit money is used as a
unit of exchange, which was the purpose of money to begin with. In M-C-M’
money is used as capital and the goal of the circuit is the accumulation of
money. Marx said “the equivalence of [the original M and the resulting M]
values is rather a necessary condition of [M-C-M’s] normal course. The
repetition of the act of selling in order to buy, is kept within bounds, by the
very object it aims at, namely, consumption or the satisfaction of definite
wants, an aim that lies altogether outside the sphere of circulation” (Marx, ). The problem is the people who endlessly seek accumulation of wealth.
Boundlessly seeking enrichment in the form of money is not necessary and has
negative consequences.
Some of these consequences include perpetual growth of the
gap between rich and poor, greater exploitation of the working class, and
corruption. Entrepreneurs go to far lengths to ensure their gain of capital,
even if it pushes their morals to the limit. Many businessmen and corporations
use bribes to meet their business goals. Donating money to political campaigns
is a popular way to bribe in the United States, which makes politicians feel
obligated to pass legislator in favor of the donator. Bribing is done in
different ways throughout the world, and helps propel the system of accumulation
of wealth. The money hog capitalists have caused the depletion of wealth in the
middle and lower classes. Increased poverty levels and the suffering that goes
along with it can be blamed on capitalist. Marx
did not come up with a solution to the problem of boundless accumulation of
wealth of certain people, but predicted that it would lead to downfall of the
capitalist system.
The ideas and formulas that Marx presented in Capital
bring an entirely unique perspective to the discussions of economics. His
systematic logic and analysis of economy has brought to light the problems of
capitalism. The lack of balance in the M-C-M circuit has widened the wealth
disparities throughout our world. The gap between the rich and the poor has
increased while the middle class has begun to vanish. Perhaps this is the
beginning of the capitalist downfall of which Marx wrote.
