First of several posts of the parts of a paper presented at the conference Scotland, Europe and Empire in the Age of Adam Smith and Beyond on 4th July 2013, in the Guizot Ampitheatre of the University of Paris IV: Paris-Sorbonne. The conference was hosted by the Centre Roland Mousnier. It was organised by the Eighteenth Century Scottish Studies Society and the International Adam Smith Society.
Smith’s account of colonialism is in some dimensions an account of republicanism, differentiating between Greek, Roman, and modern models. The Greek model is one of overseas colonies that are independent of the original republic though tied to it by family type relations. The Roman model is one of the extension of the territory of the original republic, so that it is a case of that republic expanding in size rather than founding new republics in a loose family. In both cases, colonialism is a way of dealing with population that appears excessive in relation to the resources of the home republic. The modern model, or that aspect which Smith draws attention to, is the overseas commercial empire where colonies are largely founded to further mercantilist schemes which aim, if misguidedly, for the economic benefits of the home state. Modern colonialism is often undertaken by states of a monarchical character rather than a republican character, but the issues of a republic, and associated concerns with liberty and government by consent of the people arise, even in the most monarchical colonising powers. Smith does not present a clear commitment to republicanism as a principle of government, and certainly does not deny the legitimacy of monarchical governments, or deny the possibility of progress in liberty and prosperity under a monarchy. Nevertheless, there is a preference for republicanism, if more as an underlying assumption than an explicitly argued claim. The preference for republicanism emerges most clearly in his account of modern colonialism, since it is here that the destructive effects of monarchy and of the political power of economic elites (what was classically known as oligarchy) are most clear to the people so governed.
The account of colonialism in An Inquiry into the Nature and Causes of the Wealth of Nations is itself part of an account of mercantilism, which is the product of monarchical and oligarchic distortions of government, which try to reserve economic benefits for the politically privileged parts of the community. Mercantilism in international commerce and colonialism itself has levels of injustice combined with economically self-destructive action. The worst is the Spanish (and Portuguese) colonisation of South and Central America, a form of direct grasping of economic resources by the crown in the colonising country, with economically destructive effects all round except for the crown and those closest to it. The monarchical colonisation of what is now known as Latin America.
The best is the British colonisation of north America, which has allowed the formation of self-governing republics with no hereditary aristocracy, as Smith emphasises with considerable republican enthusiasm (though as we shall see there is a critical aspect in his attitude), and a relatively good deal with regard to trade rights, compared with the inhabitants of India under the domination of the East India Company. Smith certainly deplores the restrictions on trade that Britain imposed on its American colonies, but notes that the terms were more favourable to the colonies exempting them from tariffs imposed on goods imported into Britain from outside the Empire. Danish colonial activities in the Americas are held up as a counter example of the bad that results from restricting the imports and exports of colonies. Smith does not say so, but was presumably aware that Denmark was an absolutist monarchy at that time, and so has a point to make in comparing a republican leaning monarchy as in Britain with a more pure example of monarchy. .
Somewhere the absolutist and republican models of colonialism, there are the regulated companies and the joint stock companies. Regulated companies, like one for trade with ‘Turkey’ (the Ottoman lands) are recognised by the state, have monopolistic power and are dominated by the self-interest of individual traders in the company who are rarely concerned with the good of the company as a whole, which is essentially an aggregate of individual interests licensed by the state. Joint stock companies (not really understood as what we largely think of as joint stock companies now) pool the risks and benefits for individual traders and so are dominated by the common economic good of the enterprise. These work more like states than the regulated companies, and in Smith’s time the East India Company was administering a large part of India, as a kind of junior partner state, or sub-state, of the British state, a situation which prevailed until the mid 19th century. The joint stock company is a more effective economic unit than the regulated company, but is in that case all the more complicit with the injustices and economic disadvantages of mercantilist colonialism. The joint stock companies subject colonised peoples to an alien government which is not concerned with their interests, but with the interests of investors in the home country.