Printable Version

Adam Smith Criticizes the British Colonial System
Digital History ID 109

Author:   Adam Smith


In his Inquiry into the Nature and Causes of the Wealth of Nations, published in 1776, the Scottish economist Adam Smith (1723-1790) argued that the individual pursuit of economic self-interest, unhindered by government interference, would promote economic and social well-being. "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner," he wrote, "but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow-citizens." Smith argued that the natural workings of the free market would result in social progress, "as if by an invisible hand."

In his book, Smith criticized the British colonial system as a textbook example of the detrimental effects of tariffs, bounties, and other restraints on trade. In arguing in behalf of "hand's off" government policies toward the economy and against mercantilism, Smith discussed the economic irrationality of Britain's colonial system, which provided bounties for the production of such items as pitch, tar, rosin, turpentine, hemp, masts, yards, and bowsprits, while imposing a host of prohibitions on the production of steel, hats, woolen goods, and many other products in North America. In many respects, Smith presented in 1776 the economic counterpart to the Americans' revolutionary ideology, envisioning a kind of economic freedom and prosperity that would be as attractive to millions of future American immigrants as the ideals of political freedom and equal rights.


The most perfect freedom of trade is permitted between the British colonies of America and the West Indies, both in the enumerated and the non-enumerated commodities. These colonies are now become so populous and thriving that each of them finds in some of the others a great and extensive market for every part of its produce. All of them taken together, they make a great internal market for the produce of one another.

The liberality of England, however, towards the trade of her colonies has been confined chiefly to what concerns the market for their produce, either in its rude state or in what may be called the very first stage of manufacture. The more advanced or more refined manufactures...the merchants and manufacturers of Great Britain choose to reserve to themselves, and have prevailed upon the legislature [Parliament] to prevent their establishment in the colonies, sometimes by high duties, and sometimes by absolute prohibitions.

While Great Britain encourages in America the manufactures of pig and bar iron, by exempting them from duties to which the like commodities are subject when imported from any other country, she imposes an absolute prohibition upon the erection of steel furnaces and slit-mills in any of her American plantations. She will not suffer her colonists to work in those more refined manufactures, even for their own consumption; but insists upon their purchasing of her merchants and manufacturers all goods of this kind which they have occasion for.

She prohibits the exportation from one province to another by water, and even the carriage by land upon horseback or in a cart, of hats, of wools and woolen goods, of the produce of America--a regulation which effectually prevents the establishment of any manufacture of such commodities for distant sale, and confines the industry of her colonists in this way to such coarse and household manufactures as a private family commonly makes for its own use, or for that of some of its neighbors in the same province.

To prohibit a great people, however, from making all that they can of every part of their own produce, or from employing their stock and industry in the way that they judge most advantageous to themselves, is a manifest violation of the most sacred rights of mankind.

Unjust, however, as such prohibitions may be, they have not hitherto been very hurtful to the colonies. Land is still so cheap and, consequently, labor so dear among them that they can import from the Mother Country almost all the more refined or more advanced manufactures cheaper than they could make them for themselves. Though they had not, therefore, been prohibited from establishing such manufactures, yet in their present state of improvement a regard to their own interest would probably have prevented them from doing so. 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 the impertinent badges of slavery imposed upon them, without any sufficient reason, by the groundless jealousy of the merchants and manufacturers of the Mother Country. In a more advanced state they might be really oppressive and insupportable.…

Source: Gilder Lehrman Institute

Additional information: Adam Smith, An Inquiry in to the Nature and causes of the Wealth of Nations

Copyright 2016 Digital History