Adam Smith's Simplified Wealth of Nations, Book 4, Chapter 7f, Part 3: Advantages Europe got from the discovery of America and the Cape of Good Hope
Chapter 7f: Part 3: The Advantages Europe Derived From The Discovery of America And The Cape Of Good Hope
87Such were the advantages the American colonies derived from the policy of Europe.
88What are the advantages Europe derived from the discovery and colonization of America?
89Those advantages are:
The general advantages which Europe, as one great country, derived from those great events
The particular advantages which each colonizing country derived from its colonies
90 The general advantages which Europe derived are:
The increase of its enjoyments
The increase of its industry
91 The surplus American produce imported into Europe furnishes Europeans with commodities they could not otherwise have possessed.
These contributes to increase their enjoyments for:
convenience and use
92 The discovery and colonization of America contributed to increase the industry of the following:
All the countries which trade to it directly, such as:
All those which trade to it indirectly such as:
These send their goods. such as linen, through Spain, Portugal, France, and England.
All such countries have gained a more extensive market for their surplus produce and have been encouraged to increase its quantity. 93 It is not so evident that those great events contributed to encourage the industry of countries which may never have sent their own produce to America, such as:
Some American produce is consumed in Hungary and Poland.
There is some demand there for American sugar, chocolate, and tobacco.
But those commodities must be purchased with Polish or Hungarian produce or with something purchased with Polish or Hungarian produce.
Those American commodities are new values and equivalents.
They are introduced into Hungary and Poland to be exchanged the surplus produce of Hungary and Poland.
By being carried to America, they create a new and more extensive market for that surplus produce.
They raise its value and encourage its increase.
Though none of it may ever be carried to America, it may be carried to other countries which purchase it with surplus American produce.
It may find a market by that trade which was originally mobilized by surplus American produce.
94 Those great events may even have increased the enjoyments and increased the industry of countries which never directly traded with America.
Even such countries may have received more of other commodities from countries of which the surplus produce had been increased by the American trade.
This greater abundance must have increased their enjoyments and increased their industry.
More new equivalents must have been presented to them to be exchanged for those surplus produce.
A more extensive market must have been created for that surplus as to raise its value and encourage its increase.
All of America's surplus produce must have increased the mass of commodities thrown into the great circle of European commerce.
This commerce distributed those commodities among all the nations in it.
A greater share of this greater mass must have fallen to each of those nations.
It would have increased their enjoyments and increased their industry.
95 The exclusive trade of the mother countries reduces or unnaturally keeps down the enjoyments and industry of:
those nations in general
the American colonies in particular.
It is a dead weight of one of the great springs which mobilizes a great part of the business of mankind.
By rendering the colony produce dearer in all other countries:
it lessens its consumption
it cramps the industry of the colonies
It cramps the enjoyments and the industry of all other countries.
Those other countries enjoy less when they pay more for what they enjoy.
They produce less when they get less for what they produce.
By rendering the produce of all other countries dearer in the colonies:
It cramps the industry of all other countries
It cramps the enjoyments and the industry of the colonies.
For the supposed benefit of some countries, it clogs the pleasures and encumbers the industry of other countries and more of the colonies.
It excludes as much as possible all other countries from one market.
It confines as much as possible the colonies to one market.
The difference is very great between being excluded from a market when all others are open and being confined to a market when all others are shut.
The surplus produce of the colonies is the original source of all the increased enjoyments and industry Europe derives from the discovery and colonization of America.
The exclusive trade of the mother countries renders this source much less abundant than it otherwise would be.
96 Each colonizing country derives two advantages from its colonies:
Those common advantages which every empire derives from its provinces.
Those peculiar advantages from peculiar provinces as the European colonies of America.
97 The common advantages which every empire derives from its provinces consist in:
The military force which they furnish to defend it
The revenue which they furnish to support its civil government
The Roman colonies occasionally furnished both.
The Greek colonies sometimes furnished a military force but seldom any revenue.
They seldom acknowledged the dominion of the mother city.
They were her allies in war, but very seldom her subjects in peace.
98 The European colonies of America never furnished any military force for the defence of the mother country.
Their military force never was sufficient for their own defence
In the different wars of the mother countries, the defence of their colonies has distracted the military force of the mother countries.
In this respect, all European colonies have been a cause of weakness to their mother countries.
99 The colonies of Spain and Portugal only contributed revenue towards the defence of the mother country or the support of her civil government.
The taxes which levied on the colonies of other European nations, particularly of England, were seldom equal to the expence laid out upon them in peacetime.
They were never sufficient to defray the expences which they occasioned in wartime.
Such colonies were a source of expence and not of revenue to their mother countries.
100 The advantages of such colonies to their mother countries consist in peculiar advantages resulting from the provinces of so very peculiar a nature as the European colonies of America.
The exclusive trade is the sole source of all those peculiar advantages.
101 Because of this exclusive trade, all the surplus enumerated commodities of the English colonies can be sent only to England.
Other countries must buy it of her.
It must be cheaper in England than in any other country.
It must increase the enjoyments of England more than any other country.
It must encourage her industry more.
For all the surplus English produce exchanged for those enumerated commodities, England must get a better price than what other countries can get for their commodities.
For example, the manufacturers of England will purchase more sugar and tobacco of her own colonies than the manufactures of other countries.
This superiority of price to the English manufacturers gives it an encouragement beyond what foreign manufactures can enjoy.
The exclusive trade of the colonies reduces, or keeps down below natural, the enjoyments and the industry of the excluded countries.
It gives an advantage to the countries included in the exclusive trade.
Absolute Vs Relative Advantage
102 This advantage is relative, not absolute.
It gives a superiority by depressing the industry and produce of other countries.
It does not give a superiority to the country by raising its industry and produce as in the case of a free trade.
103 For example, England enjoys a monopoly of Maryland and Virginia tobacco, which it exports some to France.
Those tobacco comes cheaper to England than to France.
If France and other European countries were allowed a free trade to Maryland and Virginia, the tobacco of those colonies might come by this time cheaper than it actually does to England.
By this time, tobacco production might be increased so much because of the more extensive market.
Tobacco profits might be reduced to their natural level with those of corn profits.
Tobacco profits are still somewhat above corn profits.
By this time, tobacco prices might fall lower than at present.
An equal quantity of the commodities of England or of those other countries might have purchased more tobacco in Maryland and Virginia than at present.
They might have been sold there for a much better price.
By its cheapness and abundance, tobacco can increase the enjoyments and increase the industry of England or any other country.
A free trade would probably further increase those enjoyments and industry than it is at present.
In this case, England would not have any advantage over other countries.
She might have bought the tobacco of her colonies cheaper and sold some of her own commodities dearer.
But she would do this the same as any other country.
She might gain an absolute advantage.
But she would certainly lose a relative advantage.
104 England probably:
sacrificed her absolute advantage in the colony trade
subjected herself to an absolute and relative disadvantage in every trade in order to:
obtain this relative advantage in the colony trade