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"The common advantages which every empire derives from the provinces subject to its dominion consists, first, in the military force which they furnish for its defence; and, secondly, in the revenue which they furnish for the support of its civil government. — The European colonies of America have never yet furnished any military force for the defence of the mother country. The military force has never yet been sufficient for their own defence; and in the different wars in which the mother-countries have been engaged, the defence of their colonies have generally occasioned a very considerable distraction of the military force of those countries. In this respect, therefore, all the European colonies have, without exception, been a cause rather of weakness than of strength to their respective inother-country."*
This assertion of Adam Smith does not appear quite correct. The provinces subject to the same dominion in general contribute to the support of the military force and civil government of the country by their pecuniary contributions; and the colonies of America pay such contributions, not only for their own defence and their civil government, but also for the defence and civil government of the mother-country. They are not, it is true, direct contributions; and for that reason have not the appearance of contributions. But they are not less so in reality ; and whether it be by taxes on the consumption of the colonies, or by taxes on the produce of the colonies at its importation in the ports of the mother-country, or lastly,
by the monopoly of colonial trade, the wealth of the colonies does effectually contribute to the defence and civil government of the mother-country as all the other wealth of the mother-country does.
Adam Smith asserts, it is true, that the monopoly of colonial trade is of little benefit to the mothercountry : but this circumstance is perfectly indifferent, since the monopoly is not the less burthensome to the colonies; and hence it is not fair to conclude that it ought to count for nothing in the catalogue of the advantages which the mother-country derives from colonies. How many other burthens laid upon the wealth of the mother-country are not more beneficial to the state ; and yet no one ever attempted to maintain that the individuals subject to those burthens do not contribute to the defence and civil government of the empire !
But how far is Adam Smith warranted in asserting that the monopoly of colonial trade, so prejudicial to the colonies, is of no benefit to the mother country? This fact is entitled to an attentive consideration, because it affords instructive information concerning the nature and effects of monopolies.
- The exclusive trade of the colonies,” says Adam Smith, “as it diminishes, or at least keeps down below what they would otherwise rise to, both the enjoyments and the industry of the countries which do not possess it; so it gives an evident advantage to the countries which do possess it over those of other countries. : “ The advantage, however, will perhaps be found
to be rather what may be called a relative than an absolute advantage; and to give a superiority to the country which enjoys it, rather by depressing the industry and produce of other countries, than by raising those of that particular country above what they would naturally rise to in the case of a free trade..
“ In order, however, to obtain this relative advantage in the colony-trade, in order to execute the invidious and malignant project of excluding as much as possible other nations from any share in it, England, there are very probable reasons for believing, has not only sacrificed a part of the absolute advantage which she, as well as every other nation, might have derived from that trade, but has subjected herself both to an absolute and to a relative disadvantage in almost every other branch of trade. .. .
“But in an employment of capital in which the merchant sold very dear and bought very cheap, the profit must have been very great, and much above the ordinary level of profit in other branches of trade. This superiority of profit in the colony-trade could not fail to draw from other branches of trade a part of the capital which had before been employed by them. But this revulsion of capital, as it must have gradually increased the competition of capitals in the colony-trade, so it must have gradually diminished that competition in all those other branches of trade; as it must have gradually lowered the profits of the one, so it must have gradually raised those of the other, till the profits of all came to a new level, different from and somewhat higher than that at which they had been before.
.." This double effect of drawing capital from all other trades, and of raising the rate of profit somea what higher than it otherwise would have been in all trades, was not only produced by this monopoly upon its first establishment, but has continued to be produced by it ever since.
“But whatever raises in any country the ordinary rate of profit higher than it otherwise would be, ne, cessarily subjects that country both to an absolute and to a relative disadvantage in every branch of trade of which she has not the monopoly. · Itsubjects her to an absolute disadvantage: because, - in such branches of trade, her merchants cannot get
this greater profit without selling dearer than they otherwise would do both the goods of foreign countries which they import into their own, and the goods of their own country which they export to foreign countries. Their own country must both buy dearer and sell dearer; must both buy less and sell less ; must both enjoy less and produce less, than she otherwise would do. .
“It subjects her to a relative disadvantage: because, in such branches of trade, it sets other countries, which are not subject to the same absolute disadvantage, either more above her or less below her than they otherwise would be. It enables them both to enjoy more and to produce more in proportion to what she enjoys and produces. It renders their superiority greater or their inferiority less, than it otherwise would be. By raising the price of her produce above what it otherwise would be, it enables the mer
chants of other countries to under-sell her in foreign markets, and thereby to justle her out of almost all those branches of trade of which she has not the mo nopoly."*
These reflections, which are extremely sagacious and uncommonly just, clearly shew the inutility of the efforts of monopolies to make the balance of trade turn to their advantage. The advantages which a monopoly obtains in the branches of trade of which it has possessed itself, are compensated by the disadvantages which it experiences in the other branches which it has been forced to relinquish; the counterpoise of general interest restores the equilibrium which it seeks to destroy; and, after all, if it be malignant, if it stop the progress of wealth, it derives no benefit from the harm it does. May this lamentable result enlighten monopolizing nations concerning the useless crimes of which they render themselves guilly towards other nations, and recall them to sentiments more congenial with their true interests! Were they even to open the ports of their colonies to the commerce of all nations, they still would find numerous advantages in the possession of territories of immense extent, of invaluable fertility, the productions of which cannot answer the demand, and which productions, by their variety and novelty, as well as by their plenty, insure to them infinite advantages in the balance of general commerce.
# Wealth of Nations, vol. ii. pages 449, 450, 452, 453, 457, 468,