The Wealth of Nations_ Books 4-5 - Adam Smith [15]
Taken as a whole, Smith’s argument seems designed to suggest that for a time at least the colonial relationship had contributed to, and proved compatible with, a relatively high rate of growth in both the colonies and the mother country. The relationship between mother country and colonies is represented as beneficial to the two parties, with regard to both the politico-economic objectives of the Navigation Acts and the stimulus given to economic growth.
THE CONTRADICTIONS
But Smith believed that there were contradictions inherent in the colonial relationship which must begin to manifest themselves over time. For example, while he took pains to emphasize the great stimulus given to economic growth in the colonies, he also pointed out that the high and rapid rate of growth they had attained must ultimately conflict with the restrictions imposed on colonial trade and manufactures, restrictions that could be regarded as the ‘principal badge of their dependency’ and as a ‘manifest violation of one of the most sacred rights of mankind’.104He also pointed out, ‘In their present state of improvement, those prohibitions, perhaps, without cramping their industry, or restraining it from any employment to which it would have gone of its own accord, are only impertinent badges of slavery… In a more advanced state they might be really oppressive and insupportable’.105Smith believed that in the long run some change must come in the colonial relationship for the reason just stated, although he did place most emphasis on the more immediate problems faced by Britain itself.
So far as Great Britain was concerned, Smith contended that although ‘the colony trade’ was ‘upon the whole beneficial, and greatly beneficial’,106the rate of growth was necessarily less than it would have been in the absence of the Navigation Acts. He believed that ‘if the manufactures of Great Britain… have been advanced, as they certainly have, by the colony trade, it has not been by means of the monopoly of that trade, but in spite of the monopoly.107
Smith advanced a number of points in support of this contention. First, he suggested that the monopoly of the colony trade had inevitably increased the volume of business to be done by a relatively limited amount of British capital and, therefore, the prevailing rate of profit. He argued that high rates of profit would affect the improvement of land and the frugality of the merchant classes, while also ensuring that available capital would be partly drawn, and partly driven, from those trades where Britain lacked the monopoly (that is, drawn by the higher profits available in the colony trade and driven from them by a poorer competitive position).
Smith especially emphasized that the pattern of British trade had been altered in such a way that its manufactures, ‘instead of being suited, as before the act of navigation, to the neighbouring market of Europe, or to the more distant one of the countries which lie round the Mediterranean sea, have, the greater part of them, been accommodated to the still more distant one of the colonies.’108Smith’s point was that the existing legislation had drawn capital from trades carried on with a near market (Europe) and diverted it to trade carried on with a distant market (America), while forcing a certain amount of capital from a direct to an indirect foreign trade: all with consequent effects on the rate of return, the employment of productive labour and, therefore, the rate of economic growth. He added that the pattern of British trade had been altered in such a way as to make Britain unduly dependent on a single (though large) market.109
In sum, the colonial relationship was compatible with a high rate of growth in America, but also produced a sub-optimal rate of growth as far as Great Britain was concerned. Smith roundly asserted that ‘the present system of management’ ensured that Britain derived nothing but loss from the dominion assumed over