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Adam Smith, the Wealth of Nations (1776): on the American Colonies1

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Adam Smith, the Wealth of Nations (1776): on the American Colonies1 1 Primary Source 10.4 ADAM SMITH, THE WEALTH OF NATIONS (1776): ON THE AMERICAN COLONIES1 Adam Smith (1723–90) was a Scottish author, philosopher, economist, and political thinker educated at the Universities of Glasgow and Oxford. His first major work, The Theory of Moral Sentiments (1759), propounded the idea that our moral sentiments emerge from feelings of sympathy toward others. A close friend of David Hume (1711–76), he became acquainted with many French intellectuals during a lengthy stay in France. His masterwork, An Inquiry into the Nature and Causes of the Wealth of Nations (1776), revolutionized economic theory. With vast erudition, historical detail, practical examples, and personal observations, Smith divides economic output into three contributing elements: labor, rent from land, and profits on stock (or excess wealth unnecessary for subsistence) and analyzes each of these elements. As populations grow denser, he observes, producers of goods and commodities begin to exchange with others, gradually focusing on what they can produce most efficiently and profitably. Thus commerce begins with human civilization. As people specialize more, they produce more wealth, raising the standards of living of themselves and of their societies. Social elites often restrict economic activity, from fear of social change or seeking personal benefits. Since all members of society pursuing their self-interest will generally advance the general good, however, it is best for governments to leave economic activity to follow its natural course—via laissez-faire (“let it alone”) policies— concentrating instead on defending society from external attack and from domestic criminality and by providing necessary social services. In the passages below, Smith discusses the differences between the colonies established in the Americas by Spain, Portugal, France, and England, and argues that those of the latter thrived best. For the full text online, click here. For a freely accessible audio recording, click here. BOOK IV. OF THE NATURE, ACCUMULATION, AND EMPLOYMENT OF STOCK. CHAPTER VII. OF COLONIES. In consequence of the representations of Columbus, the council of Castile 2 determined to take possession of countries of which the inhabitants were plainly incapable of defending themselves. The pious purpose of converting them to Christianity sanctified 1 Adam Smith, An Inquiry into the Nature and Causes of Wealth of Nations (London: T. Nelson and Sons, 1852), 230–31, 132–33, 234–36, 240–41, 251. 2 In 1480, Queen Isabella I (r. 1468–1504), who later funded Columbus’s voyage to the Indies, created the Council of Castile as the chief governing body of her realm. 2 the injustice of the project. But the hope of finding treasures of gold there was the sole motive which prompted him to undertake it; and to give this motive the greater weight, it was proposed by Columbus that the half of all the gold and silver that should be found there should belong to the crown. This proposal was approved of by the council. All the other enterprises of the Spaniards in the new world, subsequent to those of Columbus, seem to have been prompted by the same motive. It was the sacred thirst of gold that carried Oieda,3 Nicuessa,4 and Vasco Nugnes de Balboa,5 to the Isthmus of Darien, that carried Cortez6 to Mexico, and Almagro7 and Pizzarro8 to Chili and Peru. When those adventurers arrived upon any unknown coast, their first inquiry was always if there was any gold to be found there; and according to the information which they received concerning this particular, they determined either to quit the country or to settle in it. Of all those expensive and uncertain projects, however, which bring bankruptcy upon the greater part of the people who engage in them, there is none perhaps more ruinous than the search after new silver and gold mines. It is perhaps the most disadvantageous lottery in the world, or the one in which the gain of those who draw the prizes bears the least proportion to the loss of those who draw the blanks: for though the prizes are few and the blanks many, the common price of a ticket is the whole fortune of a very rich man. Projects of mining, instead of replacing the capital employed in them, together with the ordinary profits of stock, commonly absorb both capital and profit. They are the projects, therefore, to which of all others a prudent law-giver, who desired to increase the capital of his nation, would least choose to give any extraordinary encouragement, or to turn towards them a greater share of that capital than that would go to them of its own accord. Such in reality is the absurd confidence which almost all men have in their own good fortune that, wherever there is the least probability of success, too great a share of it is apt to go to them of its own accord. In the countries first discovered by the Spaniards, no gold or silver mines are at present known which are supposed to be worth the working. The quantities of those metals which the first adventurers are said to have found there had probably been very much magnified, as well as the fertility of the mines which were wrought immediately after the first discovery. What those adventurers were reported to have found, however, was sufficient to inflame the avidity of all their countrymen. Every Spaniard who sailed to America expected to find an Eldorado. Fortune, too, did upon this what she has done upon very few other occasions. She realized in some measure the extravagant hopes of her votaries, and in the discovery and conquest of Mexico and Peru (of which the one happened 3 Alonso de Ojeda (c. 1468–1515) was a Spanish conquistador who explored northern South America. 4 Diego de Nicuesa (d. 1511) was a Spanish conquistador and explorer. 5 Vasco Núñez de Balboa (c. 1475–1519) was a Spanish explorer and conquistador. In 1513 he led an expedition across the Isthmus of Panama (or of Darien) to the Pacific Ocean. 6 Hernán Cortés de Monroy y Pizarro (1485–1547) was a Spanish conquistador whose expedition precipitated the collapse of the Aztec Empire and made possible the conquest of Mexico by the King of Castile. 7 Diego de Almagro, (c. 1475–1538) was a Spanish conquistador who participated in the Spanish conquest of Peru and was the first European to discover Chile. 8 Francisco Pizarro González (c. 1471–1541) was a Spanish conquistador who led an expedition that overthrew the Inca Empire. 3 about thirty, the other about forty years after the first expedition of Columbus), she presented them with something not very unlike that profusion of the precious metals which they sought for. A project of commerce to the East Indies, therefore, gave occasion to the first discovery of the West. A project of conquest gave occasion to all the establishments of the Spaniards in those newly discovered countries. The motive which excited them to this conquest was a project of gold and silver mines; and a course of accidents, which no human wisdom could foresee, rendered this project much more successful than the undertakers had any reasonable grounds for expecting. The crown of Spain, by its share of the gold and silver, derived some revenue from its colonies from the moment of their first establishment. It was a revenue, too, of a nature to excite in human avidity the most extravagant expectations of still greater riches. The Spanish colonies, therefore, from the moment of their first establishment, attracted very much the attention of their mother country, while those of the other European nations were for a long time in a great measure neglected. The former did not, perhaps, thrive the better in consequence of this attention; nor the latter the worse in consequence of this neglect. In proportion to the extent of the country which they in some measure possess, the Spanish colonies are considered as less populous and thriving than those of almost any other European nation. The progress even of the Spanish colonies, however, in population and improvement, has certainly been very rapid and very great. The city of Lima, founded since the conquest, is represented by Ulloa9 as containing fifty thousand inhabitants near thirty years ago. Quito, which had been but a miserable hamlet of Indians, is represented by the same author as in his time equally populous. Gemelli Carreri,10 a pretended traveller, it is said, indeed, but who seems every where to have written upon extremely good information, represents the city of Mexico as containing a hundred thousand inhabitants; a number which, in spite of all the exaggerations of the Spanish writers, is, probably, more than five times greater than what it contained in the time of Montezuma.11 These numbers exceed greatly those of Boston, New York, and Philadelphia, the three greatest cities of the English colonies. Before the conquest of the Spaniards there were no cattle fit for draught either in Mexico or Peru. The llama was their only beast of burden, and its strength seems to have been a good deal inferior to that of a common ass. The plough was unknown among them. They were ignorant of the use of iron. They had no coined money, nor any established instrument of commerce of any kind. Their commerce was carried on by barter. A sort of wooden spade was their principal instrument of agriculture. Sharp stones served them for knives and hatchets to cut with; fish bones and the hard sinews of certain animals served them for needles to sew with; and these seem to have been their principal instruments of trade. In this state of things, it seems impossible that either of those empires could have been so much improved or so well cultivated as at present, when they are plentifully furnished with all sorts of European cattle, and when the use of iron, of the plough, and of many of the arts of Europe, has been introduced among them.
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