Adam Smith's Simplified Wealth of Nations, Book 4, Chapter 7h: The Effects of Monopoly -- Spain and Portugal

Chapter 7h: The Effects of Monopoly -- Spain and Portugal

127 The monopoly of the colony trade forced some British capital from all foreign trade of consumption to a carrying trade. 128 For example, the goods purchased with the great tobacco surplus of 82,000 hogsheads are not all consumed in Great Britain.

129 The monopoly of the colony trade broke that natural balance of British industry.

130 A moderate and gradual relaxation of the British exclusive trade to the colonies, until it is rendered free, is the only expedient which can deliver her from this danger in the future.

131 Great Britain has now been excluded from the trade with the 12 North American provinces for more than a year (from December 1, 1774).
  1. The North American colonies prepared themselves for their non-importation agreement.
    • They drained Great Britain completely of all the commodities fit for their market
  2. This year, the extraordinary demand of the Spanish Flota drained Germany and the North of many commodities which competed with British manufactures.
    • Linen was one of such commodities
  3. The peace between Russia and Turkey created an extraordinary demand from the Turkey market
    • Turkey was very poorly supplied during its distress while a Russian fleet was cruising in the Archipelago
  4. The rising year on year demand of Northern Europe for British manufactures
  5. The late partition and consequential pacification of Poland.
    • It opened the market of that great country
    • This year it added an extraordinary demand for British manufactures.
132 In all cases, the colony trade monopoly turned British capital from a foreign trade of consumption with a neighbouring country to a more distant country.

133 "We must carefully distinguish between the effects of the colony trade and those of the monopoly of that trade."

134 The effect of the colony trade in its natural and free state is to open a great, distant market for British industry which may exceed the demand at home, Europe, and the Mediterranean. 135 The colony trade monopoly, on the contrary, excludes foreign competition.

136 The natural good effects of the colony trade more than counterbalance the bad effects of the monopoly on Great Britain.

137 It for the manufactured than for the rude produce of Europe that the colony trade opens a new market. 138 The monopoly of the trade of populous and thriving colonies is not alone sufficient to establish or maintain manufactures in any country. 139 The bad effects of the monopoly in Spain and Portugal were aggravated by other causes. 140 In England, on the contrary, the natural good effects of the colony trade are assisted by other causes which conquered the bad effects of the monopoly. 141 If British manufactures were advanced by the colony trade, it was not by its monopoly but in spite of its monopoly. 142 The colony trade monopoly is like all the other mean and malignant expedients of the mercantile system.
Next: Chapter 7i: Other Monopoly Effects