Now let's turn to the very lengthy book 4, chapter 7 of
This chapter is called "of colonies," it's divided into three parts, and it's quite
far ranging.
Overall, Smith is setting out to debunk most of the economic reasons given for
holding colonies. For instance, Smith notes that precious metals are a reason
for some colonies, especially in the Spanish Empire, but in his view, this
reason is based upon mercantilist fallacies.
Overall, Smith is more favorably inclined to how colonies are being run in the new
world, and for Smith, the key difference here really is free land. When there's
free land, or relatively easy to acquire land, economic growth is more rapid, and
it also means that workers will be treated better, because labor is relatively scarce
and land is relatively plentiful, and this makes for more pleasant societies.
At home, Smith sees the English as having enclosed less land than most other
European nations, and when it comes to their colonies, Smith also argues that
there is more easily free land to be had. Again, this leading to favorable results.
He continues his critique of Spanish colonial government, and he notes that
it's more expensive, and more likely to involve arbitrary taxes. There's a well
known passage where Smith writes, quote, "England has dealt with their colonies
more liberally than any other nation."
In fact, Smith goes so far as to argue that the British colonies in North
America have liberty in pretty much everything but trade relations.
Obviously, the founding fathers didn't quite see things this way.
Overall, Smith keeps on returning to this theme, that there is no real advantage for
a mother country in having colonies. For instance, he argues that free trade would
suffice, to bring the benefits of trading with colonies and in fact, free trade
would do better, he argues that having colonies distorts economic relationships
in the home country, because so much buying and selling becomes concentrated,
or directed toward that colony, rather than dispersed around the world more
generally, and in a safer, and more diversified manner, and Smith even
suggests that over time, perhaps Great Britain should think about releasing its
colonies, although he also states he doesn't expect this to happen.
Reading Smith, one also receives the impression that he can well imagine
that the North Americans, for their own reasons, will someday want independence.
Smith of course was writing in 1777, and the American Revolution was, essentially,
starting just that year.
That said, Smith really doesn't seem to realize that American independence really
is just right around the corner.
Here is a good passage from Smith about the illusory benefits of creating a
colonial empire, and this will take up two slides. I quote, "To found a great empire
for the sole purpose of raising up a people of customers, may at first appear
a project fit only for a nation of shopkeepers." (That's Great Britain,
of course.) "It is, however, a project altogether unfit for a nation of
shopkeepers, but extremely fit for a nation whose government is influenced by
shopkeepers. Such statesmen, and statesmen only are capable of fancying that they
will find some great advantage in employing the blood and treasure of their
fellow citizens, to found and maintain such an empire. Say to a shopkeeper,
buy me a good estate, and I will always buy my clothes at your shop, and you will
not find him very forward to embrace your proposal."
What Smith is saying here is that on economic reasons alone, colonies do not
pay for themselves, they may benefit merchants, but they do not in general
benefit nations.
In addition to pondering independence for the colonies, Smith goes so far to suggest
an explicit political union between Great Britain and North America, and he devotes
a good deal of space to arguing, such a union would in fact be quite practical.
Of course, that's not the way things ended up going.
Overall, this chapter offers some of Smith's most interesting discussions on
the history of this time and also the politics. I think what it shows is just
how much, in his mind, the colonies were essentially a mercantilist project, and
that to argue against mercantilism, it was necessary to make strong and convincing
arguments against the economic benefits of having colonies.
Overall, you can think of Smith as being a really quite early critic of the
economics of empire.