The Colonial System and Its Impact – Part 2 (Giving It All Up)

            In part 1 we began the discussion of colonies and the destructive nature of monopoly powers as discussed in Adam Smith’s Wealth of Nations. Smith is adamant that trade monopoly especially  relating to colonies is destructive. “All the original sources of revenue, the wages of labour, the rent of land, and the profits of stock, the monopoly renders much less abundant than they otherwise would be. To promote the little interest of one little order of men in one country, it hurts the interest of all other orders of men in that county, and of all men in all other countries.” (Wealth of Nations, book IV, chapter 7, paragraph 146) His sentiments are fairly plain even if the sentence structure is a bit mixed. Remember he was writing in the 1770’s.

             Smith finds great potential in colonies and colonial wealth generation possibilities. He suggests there are three things that greatly help a colony to properly prosper by their commerce. One, there needs to be a “general liberty of trade” as Smith describes it. The producers of goods need to have access to markets and the knowledge that those markets will treat them fairly and promptly. They need to be paid for their produce or goods in a consistent, reasonable and as timely a manner as possible. Two, the less interference, constraint or cost of moving goods and produce the better. Profits can quickly be lost with high or frequent duties or tariffs on transportation. Further, limits on exporting will greatly affect the ability to move goods and receive the best price. In France during and just prior to the time of Smith, farmers were barred or greatly hindered from moving grains from one district to another thereby forcing artificial prices and production based on district, not on best production practices. Smith was very aware of the need to move produce and goods easily without hindrance by laws or officials and with a minimum of costs (other than transportation expenses).

Third, and this is the most important, Smith suggests that there must be equal and impartial administration of justice. There needs to be an equality under the law regarding land, land use, selling and producing goods. He suggests that these are the most important things for allowing improvement and prosperity.  The laws must be administered in a fair, reasonable and consistent manner.

             So we return to the initial statement by Smith in Part 1 – “Great Britain derives nothing but loss from the dominion which she assumes over her colonies”. He has a novel solution. He suggests that Great Britain voluntarily give up authority over her colonies. Let them elect their own legislatures and establish their own laws. They can make war or peace as they see fit and trade with whomever they desire on whatever terms they can establish. Let them charge whatever prices for their goods and produce markets will bear. He suggests four advantages to Great Britain. First, she immediately is freed from the cost of providing a standing army and naval support. If the colonies want protection they can contract to provide such at some agreed on payment thus providing a revenue source for Great Britain’s military operations. Second, as a recognized government the colonies could enter into commerce treaties that would be of greater benefit to the majority of Great Britain at the expense of the current monopoly powers. The merchants with monopolies would lose their lucrative contracts but the general populous would benefit from cheaper goods and produce. Third, Great Britain would generate a great deal of good will with the colonists and her own citizens. The prospect of self-government is a potent medicine for the colonists and better and cheaper goods and produce a strong inducement for the citizens of Great Britain. Fourth, the colonies may in fact favor and even support Great Britain in war. Smith suggests that instead of the colonists being “turbulent and factious subjects” they would become “our most faithful, affectionate, and generous allies”. Here then is Smith’s answer to the problem of the colonies, however he suggests that most if not all great powers will not establish colonies just to let them become independent because it goes against the very nature and pride of a nation. He also suggests that the act of freeing a colony is “contrary to the private interest of the governing part of it”. He suggests that those who govern want to control, if only for the chance to build wealth or distinction for themselves or other personal interests. He suggests that keen self-interest is stronger than altruistic nation motives. So, regardless of the potential upside benefit the current status quo no matter how costly will likely prevail.

             Next paper, Part 3. If Great Britain won’t give the colonies their independence how do they get paid for their expenses and costs and just what that might lead to.