Under the present system of management,
therefore, Great Britain derives nothing but loss from the dominion which she
assumes over her colonies. (Wealth of Nations, Book IV, Chapter 7,
paragraph 151)
Adam Smith in his seminal work on
economic theory, The Wealth of Nations,
wrote the above in the 1770’s. He was referring to the cost of nations
supporting colonies in general and the American Colonies costs to Great Britain
specifically. So why was the British government willing to support the American
colonies in such a situation? Colonial expansion traditionally has three things
to offer the state (as Smith calls the home country) first, raw land and what
it could produce. Second, animal production which he distinguishes from vegetable
production but could still in some sense be considered supported from the land.
And third, mineral production.
Smith discusses this three legged
stool for supporting colonization in his review of Columbus’s discovery of the
new world. He suggests that Columbus entertained the notion that he had
discovered the lands of Marco Polo’s travels and all the rich trade long after
it became evident that was not the case. Columbus needed to show that his
discovery of the America’s, if not the vast hoped for lands did have some
considerable value. Columbus could not show vegetable or animal produce that
was exceptional at the time so he flattered himself that he had found exception
mineral wealth, namely gold and silver. Smith suggests that in consequence of
this representation “the Castile determined to take possession of countries of
which the inhabitant were plainly incapable of defending themselves. The pious
purpose of converting them to Christianity sanctified the injustice of the
project. But the hope of finding treasures of gold [or silver] there, was the
sole motive which prompted to undertake it.” (Wealth of Nations, chapter VII,
prt 1, page 72)
Spain and Portugal scoured most the lands of the Western Hemisphere
looking for the mineral wealth and in most cases initially ignored possible
land wealth. There were some that were interested in non-mineral opportunities
and these people saw early the potential of land. This allowed an opportunity
to get something that was not available in populated Europe or Great Britain
where serfdom and lifelong servitude with little chance for improvement was much
more normal. But land with its possibilities was available in the new colonies
of America, especially for British subjects. Smith suggests that agriculture is
the proper business of all new colonies because the cheapness of the land gives
strong advantages. Cheap land allows the production and sale of cheap produce
which, because of the cheapness makes it possible to export. The colonies need
manufactured goods which can be imported. So why Smith’s opening statement? He
suggests that granted monopolies were a significant problem and one that lead
to problems of cost and eventually revolution.
The shopkeepers and other traders of England wanted to control the power of providing all manufactured and other goods to the colonies so as to capture what they saw as the wealth being generated. If the colonists could only spend their money on England’s goods then all the benefit would flow to England. Further, they enacted that the colonies could only sell their produce to England except in certain rare cases where they had to sell it to faraway lands that British merchants didn’t care about. Thus began early price control. Smith states that the maintenance of this monopoly was perhaps the sole purpose of the control by Great Britain over the colonies. He further suggests that any cost paid to maintain this control has been to maintain the monopoly for British shopkeepers and manufacturing. To support the monopoly, Smith states that the state was willing to cover the costs of 20 regiments of soldiers and the expense of food, pay and military provisions, the cost of maintaining a naval force sufficient to discourage smuggling along the entire American and West Indies coasts.
Additionally, there was the cost of various conflicts with other
nations including the Spanish war of 1739 which should also be included in the
tab charged to colonial protection. So, Smith argues that all these costs are
not offset by the benefits of monopolized trade gathered from the colonies and including
any taxes collected. That is why Smith suggests that the colonies are a loss to
Great Britain.
In following papers I will explore Smith’s comments on alternatives to keeping colonies (and the benefits possible) and the motives of politicians. I think you will find them interesting and provocative.
The shopkeepers and other traders of England wanted to control the power of providing all manufactured and other goods to the colonies so as to capture what they saw as the wealth being generated. If the colonists could only spend their money on England’s goods then all the benefit would flow to England. Further, they enacted that the colonies could only sell their produce to England except in certain rare cases where they had to sell it to faraway lands that British merchants didn’t care about. Thus began early price control. Smith states that the maintenance of this monopoly was perhaps the sole purpose of the control by Great Britain over the colonies. He further suggests that any cost paid to maintain this control has been to maintain the monopoly for British shopkeepers and manufacturing. To support the monopoly, Smith states that the state was willing to cover the costs of 20 regiments of soldiers and the expense of food, pay and military provisions, the cost of maintaining a naval force sufficient to discourage smuggling along the entire American and West Indies coasts.
In following papers I will explore Smith’s comments on alternatives to keeping colonies (and the benefits possible) and the motives of politicians. I think you will find them interesting and provocative.
