The Marxist analysis describes the circulation of a product or commodity as the starting point of capital. Marx cited money as the most important goal in achieving product circulation. In contrasting between C-M-C and M-C-M, Marx noted that the two types of circulation are the starting point of capital. The two circulatory processes measure the relationship between commodity and money. In C-M-C, the first variable is the commodity, it is sold to raise money, and then another commodity is acquired, whereas in M-C-M, money is the first variable and the buyer uses the money to exchange a particular commodity and then sells the product to regain the original capital.
There are important factors that make the two types of circulation similar these include product and money or those who buy and those who sell. This is because, in C-M-C, commodities are transformed into money in a market where there are buyers and sellers. Likewise, M-C-M circulation involves products or commodities that are sold by the sellers to the buyers. This implies that the process of transformation of a commodity involves money.
This proves that the capital’s focal point relates to products circulation. Marx defined capital as the basis for the market, and it influences the circulation flow. Without the two variables interplaying with one another, the cycle chain will not be complete.
In contrasting between M-C-M and C-M-C, Marx pointed out that final phase value in C-M-C circulation process is the commodity. The initial variable is the presence of the commodity and the final phase ends with another commodity. Note that profit is the balance between both circulatory processes. While in M-C-M, the final value is the money used to acquire the commodity. Thus, money and commodity are the major purposes for circulation.
For example, if a businessman buys a dress for $49 and sells to a buyer, and then uses the money to buy another product, say bag, he will have to sell to another buyer. This shows that the exchange tool becomes a commodity. This represents the Marxist analysis of capital in circulation. The most important thing in the two processes of commodity circulation is that both forms involve the use of capital. Capital is used to purchase the commodities and then sold to make a profit.
Another contrasting point is that C-M-C uses money as the “middleman” while M-C-M uses commodity as the “middleman.” In C-M-C, money is utilized in business in exchange for a commodity, while in M-C-M money is not spent but reused or advanced. The mediator in M-C-M, which is money, is moved twice during product circulation, while the commodity is moved twice in C-M-C. When a buyer sells his commodity to a consumer and buys another product, he sells this product to another customer.
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This means that money is transferred from one person to another in C-M-C circulation. While money changes hands to and back from the seller in M-C-M, for example, a businessperson will choose a particular commodity he will invest his money into, to make a profit. He will sell the commodity and then re-invest the capital into the purchase of the same or different commodity.
Marx explained the exchange of a commodity in terms of capital. Also, the overall aim is to maximize profit. The two forms of exchange in a capitalist market have money and the commodity as variables. Capital is thus the beginning point of circulating a commodity.
On page 225, Marx empathized that M-C-M circulating process involved the movement of money into commodity and back to money value. This form of circulation process shows that money is the intermediary in the business. Money is not spent. Instead, it is advanced into another commodity, and this is a continuous process. Money does not lose its value because this process is a continuous one. Commodity and money take different forms of existence.
The value for money can increase or decrease as it regards a particular product. However, the overall significance in this type of circulatory process is that money returns to the owner. This circulatory process shows that money can be reused in buying another product and resold to and another seller. This proves that money is transformed into a commodity and then back into the hands of the owner and the process is a continuous one.
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Marx describes capital as the build-up of money. Marx explained that for capital to be complete, a commodity is sold and exchange into money. Capital forms the pivot for any transaction and it connects two variables, which are commodity and money. Marx termed this as M-C-M. However, there is another form of capital that he termed C-M-C. Marx emphasized that as the commodity is changed into money it forms the basis for capital. The initial value of a product can be measured by how much that particular commodity is sold. Marx noted that money forms the basis of every transaction, and whether used to purchase a particular commodity or exchange with a product, it builds capital.