The discovery of America and
that of a passage to the East Indies ... are the two greatest and most
important events recorded in the history of Mankind. (Wealth
of Nations, Bk IV, chapter 7, paragraph 166)
I have been discussing the impact
of colonization on the home country and on the colonies themselves. In Part 1 of
this series we looked at why nations establish colonies. Colonial expansion
traditionally had three benefits to offer. First, raw land and its vegetable
production. Second, animal production which is different yet linked to the
first benefit. And third, mineral production which in the time of Smith and the
colonization of South America by the Spanish and Portuguese was specifically for
silver and other precious metals. Mother nations kept a tight rein on colonies
to protect their markets and so tended to develop monopolies in trade and
goods.
In Part 2 we looked further at
trade and monopolies particularly as they related to Great Britain and saw the
other costs and expenses associated with colonies. The British people were
bearing a tremendous cost to keep the colonies (America) in line and producing
for the home markets as well as selling finished goods to them from the English
side of the pond. It was costing England a very pretty penny to have a captive
source of raw materials and a captive market for finished goods.
So, if all this colonization was
such a good thing why were so many, especially those ungrateful American
colonies so unhappy? The idea of a fair deal and the ability to make a pound
sterling at a reasonable expenditure of labor and materials was making many
colonists very unhappy as they felt they were not getting what they wanted or
deserved. This is where taxation comes to the forefront. As we saw in Part 2,
Britain needed to be compensated for its costs of providing government including
a stable courts system and for its protection against other nations (standing
army and navy). Additionally, the colonies were expected t0 pay something
towards the total cost of being a great nation since the colonies received the
benefits of this umbrella coverage. However, as Smith points out, “colony
assemblies... [will not] levy upon their constituents a public revenue
sufficient not only to maintain... their own civil and military establishments,
but to pay their proper portion of the expense of the general government of the
British Empire seems not very probable.” (Wealth of Nations, Bk IV, ch. 7, para
155) Britain felt it had every right to establish the taxes necessary to cover
the costs. How were the colonies who did not see or know the big picture going
to have any idea what were necessary expenses for the defense and support of the
whole empire. Smith assumes that Britain would be fair and reasonable because
it is in the best interest of the Empire. Something that may or may not have
been believed by the colonists. And the colonies had a firsthand example of Britain’s
assumed altruistic nature in the monopoly
powers granted to various British trades and industries. Such monopoly powers
were not fair and definitely not reasonable in the colonists eyes.
What then could be done. The colonies
were up in arms over taxes which were a symptom of the bigger problem that they
felt they couldn’t get a fair deal (think monopolies). There needed to be
another way of allocating costs of government. Smith suggests that there could
be an assembly comprised of representatives from every part of the Empire. Such
representation could be based on some measure of involvement in the Empire. He
suggests the allocation of representatives could be based on the proportion of the
produce of taxation. Where more taxes are generated, more representation is given.
Produce or finished goods would be taxed consistently throughout the Empire so
the area that is more efficient or larger for that matter, all other things
being equal, has better representation. Let me let Smith summarize the possible
outcome. Remember this is in the 1770’s. “Such has hitherto been the rapid
progress of that county [America] in wealth, population and improvement, that
in the course of little more than a century, perhaps, the produce of America
might exceed that of British taxation.” “ The seat of government would
naturally remove itself to that part of the empire which contributed most to
the general defense and support of the whole.” (Wealth of Nations, Bk. IV, ch..
7, para. 165)
If the revolutionary war hadn’t
happened, would we be speaking British English and governing the British Empire
from somewhere along the East Coast of America? Who knows.
Reference:
An Inquiry into the Nature
and Causes of the Wealth of Nations
Adam
Smith (1723-1790)
http://www.econlib.org/library/Smith/smWN.html