Adam Smith and Colonialism

Introduction & Thesis


It is hard to separate the Atlantic World, as well as India, and the changing economic system in the 18th century, from the works and ideas of Scottish enlightenment thinker and moral philosopher, Adam Smith. This paper will focus on Adam Smith and colonialism in India, the Thirteen American Colonies, and the Caribbean during the Hanoverian period. As such, the Atlantic World, for the purpose of this paper, deals primarily with Britain and her colonies in the 18th century rather than with Spain, Portugal, the Netherlands, or France. Because the British also colonized India it is included in this paper and spoken of alongside the “Atlantic World” despite its location along the Indian Ocean.

To understand and explain why some countries are wealthier than others Smith published his famous An Inquiry into the Nature and Causes of the Wealth of Nations in 1776. It focuses on free markets versus mercantile capitalism and the division of labor within a country in relation to efficiency. His conclusions, in essence, were that government intervention hinders productivity, efficiency, and wealth. In line with this conclusion he saw that the mercantile capitalism that has existed for many years was decrepit, and wished to replace it with free trade. Smith’s views on colonialism are complicated and not entirely morally based; rather they present a unique view of the subject based upon efficiency and the creation of wealth.

Because mercantilism is the system that was replaced by more modern ideas of free-trade and laissez-faire capitalism (and other economic systems such as the communism of the USSR and China), it should be defined. It is a system wherein a single government, either through a proxy such as the East India Company or with a country’s own military, controls all trade between possessions, colonies, and the home country. This kind of protectionism was done because of how wealth was viewed in a pre-Smith world. Wealth was not created as it is generally viewed that it can be now. Instead, wealth was seen as finite and already present. Wealth could be taken and moved from one location to another, each country struggling for the largest share of Earthly wealth, but it could not be formed from nothing, usually. It was also a system that existed before and during the industrial revolution, meaning that it was not a form of industrial capitalism. A merchant would buy goods and then sell them, in theory. Of course many goods were simply stolen. In the case of this paper, mercantilism was the system meant that “The British put restrictions on how their colonies spent their money so that they could control their economies. They put limits on what goods the colonies could produce, whose ships they could use, and…with whom they could trade. The British…put taxes…on imported goods to discourage this practice. This pushed the colonists to buy only British goods.”[1]


Of Colonies: The Motives for Establishing New Colonies and the Causes of the Prosperity of New Colonies


Before understanding why Smith’s views are complicated, a basic and brief introduction to his thinking and his writing on colonialism is needed.

The title of this section refers to chapter seven of The Wealth of Nations, Of Colonies. Smith argues, in this chapter (in particular the section concerning the motivation for new colonies), that “the establishment of the European colonies in America and the West Indies arose from no necessity”[2] but that because Columbus, and those who came after him[3], found a land that was “nothing but a country quite covered with wood, uncultivated, and inhabited only by some tribes of naked and miserable savages”[4], European powers saw opportunity. This opportunity was largely marked by the quest for gold and “when…adventurers arrived upon any unknown coast, their first enquiry was always if there was any gold to be found there.”[5] Smith perfectly sums up the motivations for early exploration and travel when he wrote that “every Spaniard who sailed to America expected to find an Eldorado.”[6] It is important to note that Smith explains that the fortune-seekers were “disappointed.”[7]

This disappointment wore off, however, because “the colony of a civilized nation which takes possession, either of a waste country, or of one so thinly inhabited…advances more rapidly to greatness than any other human society.”[8] In Smith’s section on prosperity in the chapter Of Colonies, he explains that peacefulness, knowledge, the regular administration of justice, and placing value on labor all contribute to the increase of wealth. This situation, he argues, is very clearly seen in colonies where there is plenty of land (America and the Caribbean for example). He reasons that “the high wages of labor encourage population” and that the “cheapness and plenty of…land encourage improvement.”[9] This situation in “American and the West Indies resemble, and even greatly surpass, those of [ancient] Greece.”[10] Low taxes, Smith says, are also essential to this formula: “The labor of the English colonists is not only likely to afford a greater and more valuable produce, but, in consequence of the moderation of their taxes, a greater proportion of this produce belongs to themselves.”[11] It is at this point that Smith turns and denigrates mercantilism by observing that colonists were forced to trade with only the home country, often in the form of an exclusive company (such as the East India Company). Because of this forced economics the produce of the Americas was “forced into the market of Great Britain.”[12] Smith argues that this is ineffective despite the “most perfect freedom of trade…between the British colonies of America and the West Indies.”[13] The process could be improved. Smith goes so far as to say that the mercantile practices in place at the time are “a manifest violation of the most sacred rights of mankind.”[14] This phrase should be noted for its relation to Thomas Paine, a small example of Smith’s influence on not only world affairs (The American and French Revolutions) but for its appearance in an Anglo-American thinker’s later writings.

Where this writing meets the topic of colonialism in a more direct way occurs later in the chapter when Smith writes that “though the policy of Great Britain with regard to the trade of her colonies has been dictated by the same mercantile spirit as that of other nations, it has…been less illiberal and oppressive than [other empires].”[15] Much like the Americans since the 1776 revolution, the British population in the colonies, as well as in the mother country, felt that they were the freest people on the Earth. Smith agrees with this apart from the freedom of foreign trade. That is ironic because of the existence of that cruel institution, slavery.

The plight of the slave is not ignored by Smith. Smith “endorsed an anti-slavery perspective based on economic principles. Smith thought that slavery was not economically viable.”[16] Though this was not necessarily a primary concern for Smith. This represents, perhaps, the first instance of moral confusion and complexity in Smith’s mind regarding colonialism. Smith sees the slave life under a free government as worse than under an absolute government. Smith writes that “in every [free] country where the unfortunate law of slavery is established”[17] the master has, because of his power in the government, more say on how to treat his slaves (which was usually badly), whereas an absolute government had better control over the treatment of slaves. The use of the word “unfortunate” here is very interesting because of its lack of emotion. Notice how Smith does not seem to completely denigrate the morality of slavery. Smith uses the example of the total monarchy in France and its better treatment of slaves as a foil to how the Englishmen in the colonies are unnecessarily cruel and not controlled to the same degree. Not quite shrugging off the institution he had already denounced, Smith concludes this section of his chapter by stating that it was the land and resources that made the people who could profit from it. “Magna virum Mater!”[18] However, “the colonies owe to the policy of Europe the education and great views of their active and enterprising founders; and some of the greatest and most important of them, so far as it concerns their internal government, owe to it scarce anything else.” Slavery was a European issue brought to the Americas, Smith nearly, and incorrectly, seems to suggest. The people in the colonies, then, have pursued from their own interest a path that allows for their success, yet the issue of slavery still lingers in the background, unanswered fully by Smith.


The Americas, India and the East India Company, and Smith’s Thoughts on How Colonialism Should Be Handled. Also, Smith’s Moral Failings.

Adam Smith argued that the economic systems that he was explaining were a product of colonialism, at least indirectly. Smith saw that “The discovery and colonization of America… [has] contributed to augment the industry, first, of all the countries which trade to it directly…and…of all those which, without trading to it directly, send, through the medium of other countries, goods to it of their own produce.”[19] There was no doubt that there were very particular advantages that were gained when a home country colonized different areas of the Earth. These advantages, Smith argues, stem not only because of the subjugation of different provinces, but also, in relation to the Americas, with regard to the “peculiar nature [of] the European colonies of America.”[20] The continents of America existed in such a state so that its resources had not been depleted by the natives, its lands were virtually untouched by any form of mass population density, industry, or other form of human interference in nature. That is not to say that the land was literally untouched or unpopulated, but the societies in Europe evolved in a very different way than in the Americas. Many authors touch on this subject and because Smith does not explore the idea of the pre-European Americas very deeply it will not be addressed in full.

Returning to slavery for a moment, it is important to also state that slavery was not a European invention and that the institution existed in the Americas long before it was invaded and settled by Europeans. Just as in European countries, different native governmental powers in America engaged in wars and “violent conflict” to “maintain their territorial integrity and political autonomy.”[21] This should not absolve the Europeans and their impact on the institution of slavery throughout the process of colonialism, however. “European invasion…encouraged [the Indians] to capture and sell unprecedented numbers of Indian slaves.”[22] The European presence also contributed to the waging of longer, fiercer wars with more advanced weapons. A brief example of this can be seen in the “shatter-zone” and the Pays d’en Haut, or “Upper Country,” an area of land near the Great Lakes in North America which was devastated by the Iroquois (allied with the British) and the Huron (allied with the French) in wars over land and resources—a direct effect of colonialism.

Because the consequences of colonialism are so significant, and because of Smith’s fervent support for a free economic society, the issues of the disruption of the native peoples, as well as the institution of slavery, present a moral problem. It can also be argued that Smith’s views are inconsistent, and present a moral hypocriticism.

Smith felt that government interference would disrupt the proper and natural flow of a good economy. By remaining outside of the market, competition would naturally ensue and prices would be driven down while efficiency was driven up. Slavery was a system that Smith saw as counter to this theory. It made markets inefficient because slaves would have to be purchased “year after year,” and was unfree both market-wise and because of the institution itself. “This cost could be avoided by switching to a wage-labor economy and providing decent working conditions for blacks. For example, it would be cheaper to pay blacks a low wage and not provide them with food, housing, or clothing than to continually buy new slaves and provide for them.”[23] It is important to note that Smith does not refer to the morality of slavery, speaking of it only in terms of efficiency and wealth.

While the literature, and Smith’s own writings, concerning the Americas deals with the impact of colonialism especially in relation to slavery, the situation of India is a variant of that in North America. Unlike the Americas the literature on the topic seems to deal particularly with the East India Company and colonialism’s impact on the economy. On the topic of India, Smith seems to take a stronger stance regarding the faults of British colonialism and its economic impact. Arthur Jenkins’ 1948 book, a shortened, simplified, and annotated version of The Wealth of Nations, explained Smith’s thoughts concerning the monopoly of the East India Company and the differences between the colonialism in the Atlantic World and in India: “The contrast between the genius of the British constitution which protects and governs North America, and that of the mercantile company which oppresses and domineers in the East Indies, cannot perhaps be better illustrated than by the different state of these countries.”[24] Smith and Jenkins here refer to the fact that somehow America had been more successful than India. This cause seems to remain unaddressed by Smith in some ways. The fact that the British rule of India lasted longer may give some answer to exactly why it did not evolve like the countries in the Americas.

When Smith speaks of India he almost always is referencing his disdain for the East India Company, a British mercantilist operation that ensured that British goods would travel on British ships and that the British subjects would only consume the selfsame goods. The reason for this animosity towards the East India Company, which Smith does not disguise in any way, is only partly explained by David Johnson in his 2010 essay “British Models of Colonial Governance: Adam Smith and John Bruce on the Cape Colony.” Johnson argued that “Smith’s comments on the governance of colonial settlements are dominated by an uncompromising hostility towards chartered companies.”[25] The apparent reason of this anger is not clearly defined, but it is notable for its hostility. Smith expresses a much stronger hatred for private chartered companies than he does for the institution of slavery. “Comparing the different European colonies in the Americas, Smith concludes that ‘the government of an exclusive company of merchants is, perhaps, the worst of all governments for any country whatever.’ Smith argues further that not only colonies, but all political systems should strive to banish exclusive companies.”[26]

It should at this point come as no surprise that Smith would use much stronger language to condemn mercantilism than he would slavery, in relation to colonialism. “Free trade is described as ‘one of the great springs which puts into motion the great part of the business of mankind,’ and the ‘exclusive trade of the mother countries’ by contrast is described variously as a ‘dead weight’ and ‘a clog,’ which ‘cramps,’ ‘encumbers,’ ‘excludes,’ and ‘confines’ free trade.”[27] Johnson summed up the language that Smith uses in reference to mercantilism as “vehement.”[28] It should be kept in mind that the word Smith used to describe the institution of slavery was “unfortunate.” Though this is interesting concerning Smith’s views on colonialism regarding India, they are also limited in their scope. Nothing about India was very directly argued by much of the literature, as the large parts of it focuses on Smith’s obviously more emotive views.

However, the view so far presented can be contested. In their 1981 essay “The Utilitarianism of Adam Smith’s Policy Advice,” T.D. Campbell and I. S. Ross make a strong argument for Smith’s vindication concerning the difference between his feelings against both slavery and the East India Company. “His whole approach to social philosophy is…admirably well adapted to the divinely planned end of human welfare.”[29] Though somewhat religious in its tone, it nevertheless offers the idea that Smith sought to maximize human happiness, and he saw free-trade as the means to that end. The authors also argue that Smith’s seeming lack of empathy is in fact a judicious and objective approach to the topics at hand: “While this [lack of care] may appear as showing merely that Smith indulges in the occasional appeal to utility, if taken together with his doctrine of final causation, it strengthens the case that utility is for Smith…the sole moral standard.”[30] This seems to hold true only when one analyzes Smith’s writings on slavery in connection to colonialism. But the argument does not hold up, as aforementioned, when Smith uses such contemptible language to condemn another, arguably less serious, moral problem—mercantilism. If Smith had used the same language to speak about both issues, the argument might have been more convincing.

            Despite these apparent contradictions in Smith’s writing, and the interpretations of his writing, he still advocated different actions that would advance the cause of free-market capitalism. His utilitarian approach, if it was that, allowed him to suggest courses of action in relation to colonization and liberty. Campbell and Ross write that “Though Smith concedes that Britain’s voluntary political withdrawal from her colonies is the least likely of all courses…he points out the real advantages of such a course of action.”[31] They also write that Smith feels that men should not intervene in the lives of others to such a degree that “they play god.”[32] Campbell and Ross go a step further in their argument by writing that Smith had even advocated for the dissolution of empire: “The conclusion of [The Wealth of Nations]…could be viewed as a deliberate appeal to the legislators to leave aside their fantasies, the ‘golden dream’ of a ‘great empire on the west side of the Atlantic,’ and instead of expending their energies on legalistic quibbling, to… [have] Britain cut the losses.”[33] Smith’s views, then, are those of freedom, individualism, and representation within that individualism. It is also a view of his that stems not from a moral standard concerning empathy, but from economics—though Campbell and Ross would call it ‘utilitarianism.’ Nowhere was Smith clearer about his views on the subject than by admitting that one of the most important purposes is to “develop a critique of what he called the ‘commercial, or mercantile System [sic].’”[34]


             In all of the conversation surrounding colonialism, it is important to keep perspective on Adam Smith, the man. He was not an outside agent speaking about economics and colonialism, but had his own biases and views because of the life he was living. Perhaps it is most important to say that though Smith was British, he was not English. At the time (and even today) this was (and is) a very important difference. Having been born relatively shortly after the Act of Union, Smith grew up and was educated in a new clash of cultures. Lori Branch, in her 2004 essay “Plain Style, or the High Fashion of Empire: Colonialism, Resistance and Assimilation in Adam Smith’s Lectures on Rhetoric and Belles Lectures” argues that “Smith embraced an economic conception of abstraction and exchange value…extending it to ethics and culture as well.”[35] Smith came from a society where certain groups of people were advocating the adoption of more English values (though Smith saw them as universal values); they were “seeking to negotiate a British cultural norm satisfactory to Englishmen as well as to Scots.”[36] Smith did indeed felt very strongly about the Union in 1707, having written that “The immediate effect of [the Union] was to hurt the interest of every single order of men in the country.”[37] Bearing this in mind places a new dimension on how Smith viewed colonialism and the moral and cultural clashes and problems involved. That is not to say that certain sentiments of his are excused, or that others are less understandable, but it does provide insight into the topic in a helpful way; it makes Smith a human who philosophized and theorized rather than a philosopher who happened to be a human.

In other words, it means that because of his own cultural experiences, in their fusion and meeting with English tradition, he was complex and that his motivations and ideas were not beyond question. This might explain, to some extent, the dry and unemotional approach he takes towards the institution of slavery, arguing against it from a practical point of view rather than a moral one. It also elucidates the same issues concerning colonialism and Smith’s views towards its advantages and disadvantages. This sentiment is succinctly defined by Johnson: “In other words, violence is an accidental and not a natural component of colonialism; correctly conceived, colonialism should bring commercial benefits to ‘the natives.’”[38]

If further research on this topic were to be sought, the best direction to go into might be the exploration of slavery and its impact on capitalism and vice versa. Campbell and Ross voice their thesis that “[Smith] may thus be regarded as a rule-utilitarian, or perhaps system-utilitarian, although, since he rarely recommends radical changes in the systems he describes, it would seem reasonable to emphasize the contemplative rather than the practical side of his utilitarianism.”[39] As it stands, Adam Smith’s views concerning colonialism can be said to have been controversial, inconsistent morally, but nevertheless very important in the advancement of liberal values. Like most of his peers, and for most of history and today, morality has never been perfect, but there have been men and women who take small steps towards a more refined and respectable idea. This revelation should not come as surprising, merely reassuring. Smith was an enlightenment philosopher, not a civil rights activist or martyr.





Branch, Lori. “Plain Style, or the high fashion of empire: colonialism, resistance and assimilation

in Adam Smith’s lectures on rhetoric and Belles letters.” Studies in Scottish Literature:

Vol.33: Iss. 1.


Campbell, T. D., and I. S. Ross. “The Utilitarianism of Adam Smith’s Policy Advice.” Journal of

the History of Ideas 42, no. 1 (1981): 73. doi:10.2307/2709418.


Independence Hall Association. “Mercantilism.” American History. Accessed November 30,



Johnson, David. “British Models of Colonial Governance: Adam Smith and John Bruce on the

Cape Colony.” The Eighteenth Century 51, no. 1-2 (2010): 103-27.



Smith, Adam. An Inquiry into the Nature and Causes of the Wealth of Nations. Edited by R. H.

Campbell and Andrew S. Skinner. Oxford: Clarendon Press, 1976.


Smith, Adam, and Arthur Hugh Jenkins. Adam Smith Today: An Inquiry into the Nature and

Causes of the Wealth of Nations. New York: R.R. Smith, 1948.


Snyder, Christina. Slavery in Indian Country: The Changing Face of Captivity in Early America.

Cambridge, MA: Harvard University Press, 2010.


University of Michigan. “Adam Smith.” Adam Smith’s Take. Accessed November 30, 2015.


[1] Independence Hall Association

[2] Smith, Adam. An Inquiry into the Nature and Causes of the Wealth of Nations. 558

[3] Ibid. 562

[4] Ibid. 559

[5] Ibid. 562

[6] Ibid. 563

[7] Ibid. 564

[8] Ibid. 564

[9] Ibid. 566

[10] Ibid. 567

[11] Ibid. 573

[12] Ibid. 578

[13] Ibid. 580

[14] Ibid. 582

[15] Ibid. 584

[16] University of Michigan. Adam Smith’s Take.

[17] Smith, Adam. An Inquiry into the Nature and Causes of the Wealth of Nations. 587

[18] Ibid. 590

[19] Ibid. 591

[20] Ibid. 593

[21] Snyder, Christina. Slavery in Indian Country: The Changing Face of Captivity in Early America. 5

[22] Ibid. 4

[23] University of Michigan. “Adam Smith.” Whole passage.

[24] Smith, Adam, and Arthur Hugh Jenkins. Adam Smith Today: An Inquiry into the Nature and Causes of the Wealth of Nations. 81

[25] Johnson, David. “British Models of Colonial Governance: Adam Smith and John Bruce on the Cape Colony.” 107

[26] Ibid. 107

[27] Ibid. 108

[28] Ibid. 108

[29] Campbell, T. D., and I. S. Ross. “The Utilitarianism of Adam Smith’s Policy Advice.” 76

[30] Ibid. 77

[31] Ibid. 80

[32] Ibid. 80

[33] Ibid. 81

[34] Ibid. 82

[35] Branch, Lori. “Plain Style, or the high fashion of empire: colonialism, resistance and assimilation in Adam Smith’s lectures on rhetoric and Belles letters.” 447

[36] Ibid. 447

[37] Campbell, T. D., and I. S. Ross. “The Utilitarianism of Adam Smith’s Policy Advice.” 78

[38] Johnson, David. “British Models of Colonial Governance: Adam Smith and John Bruce on the Cape Colony.” 110

[39] Campbell, T. D., and I. S. Ross. “The Utilitarianism of Adam Smith’s Policy Advice.” 73

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