The Wealth of Nations_ Books 4-5 - Adam Smith [16]
Smith’s account of the problem currently facing Great Britain was largely dominated by fiscal need. In Smith’s opinion, Britain’s needs seemed to be growing more rapidly than her resources, and he noted in this connection that by January 1775 the national debt had reached the then astronomical figure of £130 million (absorbing £4.5 million in interest charges), much of which was due to the acquisition of the colonial territories. This was a matter of some moment. It meant that a country whose rate of growth had been adversely affected by the colonial relationship had to face a large and probably growing tax burden, which would itself affect the rate of economic expansion, and thus compound the problem. In Smith’s view,
The rulers of Great Britain have, for more than a century past, amused the people with the imagination that they possessed a great empire on the west side of the Atlantic. This empire, however, has hitherto existed in imagination only. It has hitherto been, not an empire, but the project of an empire… If the project cannot be completed, it ought to be given up. If any of the provinces of the British empire cannot be made to contribute towards the support of the whole empire, it is surely time that Great Britain should… endeavour to accommodate her future views and designs to the real mediocrity of her circumstances.111
THE SOLUTION
Yet Smith believed that the project of empire could be completed. He also believed that Britain both could and should tax the colonies, partly as a means of relief from the growing burden of the national debt and partly as a means of making the colonies pay for the benefits received from the imperial connection.112He concluded that the British Government should extend the British system of taxation to all the colonies. The concluding sections of The Wealth of Nations are largely concerned with the technical problems of this aspect of harmonization. Smith saw no reason to suppose that the major British taxes (land tax, stamp duties, customs and excise) could not be successfully applied to both America and Ireland. He added that such a change of policy should be accompanied by freedom of trade between all parts of the [western] empire and, most dramatically, that it would require a form of union which would give the colonies representation in the British Parliament and in effect create a single state.113Indeed, Smith believed that
there is not the least probability that the British constitution would be hurt by the union of Great Britain with her colonies. That constitution, on the contrary, would be completed by it, and seems to be imperfect without it. The assembly which deliberates and decides concerning the affairs of every part of the empire, in order to be properly informed, ought certainly to have representatives from every part of it.114
The case for union depended on Smith’s acceptance of the constitutional ‘rule’ that there should be no taxation without representation, but it is chiefly remarkable for its basis in economic factors. This emphasis also affected Smith’s judgement as to the future course of events. In his view, the progress of the colonies had been, and would continue to be, such that
in the course of little more than a century, perhaps, the produce of American might exceed that of British taxation. The seat of the empire would then naturally remove itself to that part of the empire which contributed most to the general defence and support of the whole.115
The idea of union was quite widely supported and dates back at least to Benjamin Franklin’s Albany Plan of 1754. But by the time The Wealth of Nations was published, the opportunity had been lost. Smith’s tone had further hardened by the time he wrote his ‘Memorandum on the American War’ for the benefit of the Solicitor-General, Alexander