The Wealth of Nations_ Books 4-5 - Adam Smith [17]
It is interesting to note that Smith viewed the loss of the western empire with regret and that he was able to conclude that his economic analysis of the colonial relationship was vindicated by the peace of 1783. In a new chapter added to the third edition, published in the same year, Smith wrote that ‘It is unnecessary, I apprehend, to say anything further, in order to expose the folly of a system which fatal experience has now sufficiently exposed.’117Although Smith was no doubt correct in his judgement that in the long run the restrictions on American trade and manufactures would become the crucial issue, the regulating acts of trade and navigation were not the immediate cause of the conflict. Neither the Declaration of Colonial Rights and Grievances, nor the Declaration of Independence, which included a comprehensive indictment of British policy, contain any critical reference to the acts whose content and consequences lie at the heart of Smith’s beautifully constructed critique of colonial policy.118
PUBLIC WORKS AND SERVICES
One of the major themes developed in Smith’s Lectures and in The Wealth of Nations was the defence of freedom of economic choice. In a telling passage he called upon the sovereign to discharge ‘himself’ from a duty ‘in the attempting to perform which he must always be exposed to innumerable delusions, and for the proper performance of which no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of the society.’119This theme is illustrated in Book I, where Smith voiced his objection to monopoly powers and to such institutions as the Statute of Apprenticeship (which controlled the supply of labour) and the Laws of Settlement (which made each parish responsible for its own poor and so limited mobility). He believed that the restrictions imposed by these institutions were unjust in the sense that they were a violation of ‘this most sacred property which every man has in his own labour’,120but also that they were ‘impolitic’ in the sense that they artificially constrained the free movement of resources between employments and different geographical areas. Thesametheme is developed in BookII, where Smith was concerned with the macro-economic dimension and the key issue of economic growth. Book IV widens the discussion still further, as we have seen, to include a general critique of economic regulation as manifested in the mercantile system.
Since Smith was very much in favour of dismantling controls which reflected past experience or current policy, he did not of course favour the regulation of markets. Indeed one of the most informative illustrations of this truth is to be found in the ‘Digression Concerning the Corn Trade’.121The argument is part of the logical extension of Smith’s position and is marked by the claim that ‘The unlimited, unrestrained freedom of the corn trade, as it is the only effective preventative of the miseries of a famine, so it is the best palliative of the inconveniences of a dearth.’122But this is not to say that Smith was opposed to all forms of regulation, believing as he did that
those exertions of the natural liberty of a few individuals, which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments; of the most free, as well as of the most despotical.123
The classic examples are provided by Smith’s willingness to regulate the issue of small-denomination banknotes in the interests of a stable banking system.