A domain focused interpretation of the Doux-commerce thesis: is commerce universally beneficial or does it, as Marx argues, just lead to exploitation? – Sam Altmann

Sam Altmann is a former philosophy student, now an economics student at Oxford interested in the economics of healthcare.

london-stock-exchange

London Stock Exchange via flickr.

A domain focused interpretation of the Doux-commerce thesis: is commerce universally beneficial or does it, as Marx argues, just lead to exploitation?

Introduction

The Doux-commerce thesis is the notion that commerce, and capitalism more generally, is good for every member of society because it forces individuals to work together to achieve mutually beneficial gains. The thesis has a number of critiques, given that it also seems commerce leads to greed and selfishness; individuals try to get richer, often at the expense of others. In some of his earlier work Marx provides various examples of occasions when commerce leads to massive exploitation. These counter-examples appear to weaken the Doux-commerce thesis.

In this essay I will argue that the thesis is not weakened by Marx’s counter-examples. This is because the thesis employs a specific domain assumption –  a somewhat equal balance of power – therefore we should not be surprised if the thesis does not work outside its specified domain. However this domain is rare enough to weaken the Doux-commerce thesis, as it means there are few occasions, if any, when the thesis can actually be applied. This criticism of the Doux-commerce thesis is nothing new – Marx is known for his arguments against capitalism on the grounds of pre-existing power inequalities. It is, however, useful for us to think of this criticism in terms of domain assumptions as it helps us explain why Marx’s counterexamples fail to weaken the Doux-commerce thesis.

I shall begin by outlining the Doux-commerce thesis. Marx criticises this thesis using counter-examples to argue that commerce leads to exploitation. However, I will then demonstrate that the thesis is based on a specific domain assumption. This domain assumption effectively skirts Marx’s counter-examples. Finally I shall argue that the thesis is inherently weak because the required domain is so rare, given that the remnants of colonialism (among other things) have led to widespread power inequality.

The Doux-commerce Thesis

Montesquieu (1749) introduces the thesis by arguing that commerce has a civilizing effect on people by creating an incentive for them to cooperate.[1]  Incentives to create profit make individuals useful to each other. This means that by respecting each other’s property rights and promises, being tolerant and by generally working well together people can achieve mutually beneficial gains.

Voltaire (1734) considers how this mechanism led to cooperation between typically warring groups such as Jews, Protestants and Catholics.[2] The spirit of commerce, he suggests, brought these different people together at the London Stock Exchange, where people of different backgrounds were willing to do business together. The profit incentive meant that refusing to do business with someone because of their religion was a financial liability.

According to the thesis each group of traders knew that each other group would respect their promises and property rights because, otherwise, no one would be willing to trade with them again.[3] The profit motive meant there was no incentive to double-cross or exploit people, because of the threat of punishment. According to the Doux-commerce thesis, the spirit of commerce is beneficial for everyone involved.

Marx’s Criticism

Marx disputes the thesis using various counterexamples.[4] He uses these examples to demonstrate that commerce is not beneficial for everyone involved as it regularly leads to the exploitation of one group of people by another. He points out that the profit incentive caused people to commit horrific crimes in the colonies. For example, Dutch sailors committed atrocities on the Banda islands in an attempt to control the lucrative trade in nutmeg.[5]  The spirit of commerce, and this profit incentive, caused the Dutch to disrespect the property rights of the islanders over their crops. The islanders were not permitted to do whatever they liked with their property (such as trade with other nations).

Marx points out that this also happened in England. Children, often orphans, were regularly used like slave labourers in factories. They worked long hours in bad conditions. These would be the same factories whose equity was traded on the London Stock Exchange. Therefore Voltaire’s example of commerce supposedly making everyone better off is just another example of commerce making some worse off. Greed and profit incentives led to great harm and exploitation for some parties, even if it lead to cooperation among their exploiters.

Exploitation, a clear example of people not working well together, should not arise from commerce under the Doux-commerce thesis. Therefore commerce, it seems, cannot always lead to mutually beneficial gains for everyone involved.

Different Domains

However Voltaire recognises that, if there had been one monopolising religion, commerce and the profit incentive would not have led to peace and cooperation. No individual religion was powerful enough to get away with exploiting another group. He effectively argues that the thesis makes a specific domain assumption.

A theory employs a domain assumption when it makes an assumption that is only true in certain situations (Musgrave, 1981).[6] A domain assumption means acknowledging that the theory will not always be correct, but will be correct in its specified domain.

Smith (1776) indirectly specifies the domain assumption in more detail.[7] He suggests that commerce is beneficial so long as nobody has sufficient power to disturb the peace or interrupt the regular execution of justice. Smith’s comment is focused on the workings of the government, requiring that corporations don’t have the power to influence government decisions. However we can interpret this domain more broadly.

For the sake of argument I interpret the domain to be that there cannot be such an imbalance of power that powerful bodies are able to disturb the peace by exploiting powerless bodies without repercussions.

There may be other necessary conditions for this domain, however I focus only on these two components for the domain. This is because they are sufficient for showing when the domain assumption does not hold in a particular situation. Consequently I will conclude that a situation lies outside the thesis’ domain when one party has sufficient power to exploit another and this exploitation remains profitable (it is not punished).

Importantly, the Doux-commerce thesis is not weakened because it doesn’t work when the domain assumption doesn’t hold. As Musgrave argues:

We do not falsify a theory containing a domain assumption by showing that this assumption is not true of some situation… we merely show that the theory is not applicable to that situation in the first place[8]

Consider examples from the previous section. The Dutch were the powerful party able to subdue and oppress the islanders, powerful enough to disturb the peace. Furthermore, they knew that the rest of the world was not watching, meaning no one would refuse to trade with them because they disrespected the islander’s property rights over their produce. If they had not been powerful enough to subdue and oppress the islanders, they would have had an incentive to work with the islanders for mutual profit.

In the child labour example, the children were powerless and easily exploitable because they lacked bargaining power; they would have starved if they had turned down the offer. If the children had been in a less vulnerable position, they could have demanded a better standard of living. Clearly both these examples lie outside the thesis’ domain.

The rest of Marx’s examples also lie outside this domain. Marx describes occasions when there are large imbalances of power. His examples all involve powerful actors, able to exploit the powerless. The imbalance of power situates them squarely outside of the thesis’ domain. Therefore, his examples do not weaken the Doux-commerce thesis.

Restricted Domain

Musgrave points out that for a theory requiring a domain assumption to hold weight there must be situations in which the domain holds.[9] Otherwise the theory can never be applied – it is untestable and therefore weak. I will now argue that the domain required for the Doux-commerce thesis is so rare as to make it a weak theory. I use the ‘Feudal Shackles’ thesis to argue that the domain rarely holds.

The Feudal Shackles thesis suggests that one reason commerce has not had universally beneficial consequences is because of the remnants of structures that came before. [10] Pre-existing inequalities of wealth and power prevent capitalist structures from working the way they are supposed to, hindering the beneficial effects of commerce.

For example, a capitalist utopia was arguably never possible in England owing to the remnants of the British class system. Poorer classes could not benefit from commerce the same way the rich could. Former aristocrats and bourgeoisie had wealth they could invest, while the poor only had the option of becoming the workers that commerce is built on. The same story is seen throughout the world. America, though it had no ‘Feudal past’, suffers from the remnants of slavery – a reason white people are still at the top of American society.

The Feudal Shackles thesis suggests that the domain assumption of the Doux-commerce thesis rarely holds. Because of historic inequalities there are many people throughout the world who are effectively powerless and easily exploitable, meaning the Doux-commerce thesis’ domain assumption does not hold. Affluent western companies are able to exploit cheap labour in former colonies (such as Bangladesh or Malaysia) because people lack the bargaining power to demand a fair wage.

Conquest, colonialism, and slavery have left a legacy of power imbalances in both local and international settings. We have already seen convincing evidence that these sorts of inequalities mean that the domain assumption of the Doux-commerce thesis does not hold. This provides evidence that there are few occasions when the assumption does hold, giving us reason to conclude that the Doux-commerce thesis is inherently weak. If there are few occasions we can actually apply the Doux-commerce thesis then the thesis does not tell us much. We certainly cannot rely on it for an argument that commerce will be universally beneficial, given that all it tells us is that commerce will be beneficial under very specific, and rare conditions.[11]

Conclusion

I began by describing the Doux-commerce thesis and Marx’s criticism of it. I argued that Marx’s counter-examples lie outside the domain in which the Doux-commerce thesis works, and so they fail to weaken the thesis. Finally, I considered the ‘Feudal Shackles’ thesis as an argument that there are few, if any, occasions when the Doux-commerce thesis’ domain assumption holds. This gave us reason to accept that the Doux-commerce thesis is inherently weak.

The purpose of this paper was to demonstrate how a domain focused interpretation of the Doux-commerce thesis allows us to explain why Marx’s counterexamples fail to weaken the thesis, yet also why the thesis is still inherently weak. I believe I have made clear how specifying the domain assumption underlying the Doux-commerce thesis skirts Marx’s counterexamples. I also believe it is clear that the domain assumption of the thesis rarely holds, and how this weakens the thesis.

Endnotes

[1] C. de S. Montesquieu, “The Spirits of the Laws”. Cambridge University Press. (1748) [2013] p.81.

[2] Voltaire, “On the Presbyterians”. Philosophical Letters, Literary Licensing. (1734) [2011].

[3] Samuel Ricard, “Traité général du commerce”. Amsterdam: Chez E. van Harrevelt et Soeters, (1781). p.463.

[4] Karl Marx, Chapter 31 “Genesis of the Industrial Capitalist”. Capital: Volume One – A Critique of Political Economy. Penguin Classics. (1867) [1992].

[5] As detailed in A. D. Robinson, and R. Acemoglu, “Why nations fail.” The Origins of Power, Prosperity and Poverty, Nueva York. (2012) p.139.

[6] Alan Musgrave, “UNREAL ASSUMPTIONS’IN ECONOMIC THEORY: THE F‐TWIST UNTWISTED.” Kyklos 34.3 (1981) p.381.

[7] Adam Smith, “An inquiry into the nature and causes of the wealth of nations: Volume Three.” (1776) 3.4.15.

[8] Musgrave p.381

[9] Musgrave p.381.

[10] Albert O. Hirschman, “Rival interpretations of market society: civilizing, destructive, or feeble?” Journal of economic literature 20.4 (1982) pp.1475-1475.

[11] It is worth noting that one could also argue that commerce, even when initially in its domain, breeds inequalities of wealth and power – effectively shifting it out of the domain. This argument, often termed the ‘Self-destruction Thesis’, implies the Doux-commerce Thesis is somewhat self-contradictory. See Hirschman (1982) for further discussion of this argument.

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