The Wealth of Nations was published on this day (9 March) in 1776. I will resume my survey of Smith’s magnum opus in my next post; in the meantime, to mark this occasion, check out Ronald Coase’s 1976 essay on “Adam Smith’s View of Man” (available here or here), Maria Pia Paganelli’s previous tribute to Smith’s magnum opus, as well as the Smith installment of the late Professor Michael Sugrue’s legendary lecture series on “The Great Minds of the Western Intellectual Tradition” below:
Bonus link: “An Inquiry into the Nature and Causes of the Wealth of Nations, first edition”
To mark the 250th anniversary of the publication of The Wealth of Nations (9 March 1776) and Adam Smith’s timeless defense of natural liberty, I am reposting Shervin Hajipour’s haunting anthem “Baraye”, which he composed in response to his government’s brutal repression of the 2022 Mahsa Amini protests in Iran. As the child of Cuban exiles, the lyrics of this poetic protest song resonate with me. May the sons and daughters of Iran — and Cuba! — both be free of their religious and secular tyrants soon!
Alternative title: Adam Smith, an Enlightened legal realist
Among other things, Plato’s Republic contains a dialogue between Socrates and Thrasymachus about the nature of justice. Most educated people already know who Socrates was, but who was Thrasymachus? By all accounts, he was a 5th-century BC sophist and teacher of rhetoric. In his dialogue with Socrates in Book 1 of Plato’s Republic (see lines 336b to 354c, available here), Thrasymachus famously defines “justice” as nothing more than “the interest of the stronger.” In other words, justice is merely a convention imposed by the powerful to protect their own interests.
For his part, Adam Smith appears to take sides with Thrasymachus in Part 2 of Chapter 1 of Book V of The Wealth of Nations. Here, Smith surveys the second duty of government, “that of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice ….” (WN, V.i.b.1) But as we shall see below, Smith does not paint an idyllic or idealized picture of law, for he has no illusions about the true nature of justice. Instead, the Scottish philosopher makes the following five timeless and realist points about law and government:
POINT #1 — THE ORIGINS OF LAW AND GOVERNMENT: PROPERTY RIGHTS
First off, government becomes necessary when people start to accumulate private property: “The acquisition of valuable and extensive property, therefore, necessarily requires the establishment of civil government. Where there is no property, or at least none that exceeds the value of two or three days labour, civil government is not so necessary.” (WN, V.i.b.2; my emphasis)
POINT #2 — LAW AND GOVERNMENT ARE THE INTEREST OF THE STRONGER
Secondly, Smith takes a Thrasymachean stance towards government: “Civil government supposes a certain subordination. But as the necessity of civil government gradually grows up with the acquisition of valuable property, so the principal causes which naturally introduce subordination gradually grow up with the growth of that valuable property.” (V.i.b.3; my emphasis) Smith leaves no room for doubt on this crucial point, for he further writes: “Civil government, so far as it is instituted for the security of property, is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all.” (V.i.b.12; my emphasis)
POINT #3 — JUSTICE IS NOT FREE
There are no free lunches in law: “Justice, however, never was in reality administered gratis in any country.” (V.i.b.18; my emphasis)
POINT #4 — THE COST OF JUSTICE SHOULD BE PAID BY FIXED USER-FEES
Unlike Socrates or even Thrasymachus, Smith explores the economics of the administration of justice, and he proposes charging litigants fixed fees when they take their disputes to court:
“The whole expence of justice, too, might easily be defrayed by the fees of court; and, without exposing the administration of justice to any real hazard of corruption, the public revenue might thus be discharged from a certain, though, perhaps, but a small incumbrance. It is difficult to regulate the fees of court effectually where a person so powerful as the sovereign is to share in them, and to derive any considerable part of his revenue from them. It is very easy where the judge is the principal person who can reap any benefit from them. The law can very easily oblige the judge to respect the regulation, though it might not always be able to make the sovereign respect it. Where the fees of court are precisely regulated and ascertained, where they are paid all at once, at a certain period of every process, into the hands of a cashier or receiver, to be by him distributed in certain known proportions among the different judges after the process is decided, and not till it is decided, there seems to be no more danger of corruption than where such fees are prohibited altogether. Those fees, without occasioning any considerable increase in the expence of a law-suit, might be rendered fully sufficient for defraying the whole expence of justice.” (V.i.b.20; my emphasis)
POINT #5 — JUDGES MUST BE INDEPENDENT
Because law and government are the interest of the stronger, the judicial branch of government must be independent from the other branches, especially the executive:
“When the judicial is united to the executive power, it is scarce possible that justice should not frequently be sacrificed to what is vulgarly called polities. The persons entrusted with the great interests of the state may, even without any corrupt views, sometimes imagine it necessary to sacrifice to those interests the rights of a private man. But upon the impartial administration of justice depends the liberty of every individual, the sense which he has of his own security. In order to make every individual feel himself perfectly secure in the possession of every right which belongs to him, it is not only necessary that the judicial should be separated from the executive power, but that it should be rendered as much as possible independent of that power. The judge should not be liable to be removed from his office according to the caprice of that power. The regular the good-will or even upon the good œconomy payment of his salary should not depend upon of that power.” (V.i.b.25; my emphasis)
Nota bene: this Monday (9 March) is the 250th anniversary of the publication of The Wealth of Nations, so my next two blog posts will mark this occasion with some fun surprises. Then, on Tuesday (10 March), we will proceed to Part 3 of Chapter 1 of Book V of Smith’s magnum opus, to the third and last of the three duties of government: the provision of public goods.
Nota Bene: Adam Smith turns his attention to the role of government, law, and public finance in the fifth and final section of The Wealth of Nations (available here). In brief, Book V contains three chapters and is structured as follows: Chapter 1 surveys the essential duties that government must perform and thus the expenses it must incur in order to carry out these duties, while Chapters 2 and 3 survey the main methods a government can use to finance these expenses: taxes and public debt. Chapter 1, in turn, is divided into three separate parts, with each part corresponding to the one of the three main duties of government: national defense (part 1), the administration of justice (part 2), and public works (part 3). Today, I will discuss Smith’s thoughts on national defense (WN, V.i.a).
Are standing armies dangerous to liberty, as Alexander Hamilton warned, or do standing armies somehow end up promoting liberty? Adam Smith answers this key question in Part 1 of Chapter 1 of Book V of The Wealth of Nations as follows:
The noblest of all arts. First off, Smith says that national defense is not only the “first duty” of government (V.i.a.1); it is also “the noblest of all arts.” (V.i.a.14) Why the noblest? Because a strong and well-trained military protects people who are incapable of protecting themselves: “An industrious, and upon that account a wealthy nation, is of all nations the most likely to be attacked; and unless the state takes some new measures for the public defence, the natural habits of the people render them altogether incapable of defending themselves.” (V.i.a.15)
Standing armies > citizen militias. Although Smith is a champion of natural liberty, in this chapter he gives three irrefutable reasons why professional and permanent standing armies are hands-down “superior” over amateur and part-time citizen militias: training, reaction time, and the division of labor. (See especially WN, V.i.a.28-40.) After all, when the bullets start flying, who is more likely to stand their ground and fight: well-trained soldiers who are used to following the orders of a central command, or a bunch of rank amateurs under dispersed and local commanders? Also, in times of war or invasion, time itself is of the essence, and a standing army is ready and prepared to react to any emergency; a militia, by contrast, must be assembled and trained before it can join the field of battle.
Standing armies and liberty. But Smith’s most original and surprising observation appears in Paragraph 41 of Part 1 of Chapter 1 of Book V. Here, the Scottish philosopher turns the main argument against a standing army — that it will be used by the government to quash dissent at home — on its head(!):
“Men of republican principles have been jealous of a standing army as dangerous to liberty. It certainly is so wherever the interest of the general and that of the principal officers are not necessarily connected with the support of the constitution of the state. The standing army of Caesar destroyed the Roman republic. The standing army of Cromwell turned the Long Parliament out of doors. But where the sovereign is himself the general, and the principal nobility and gentry of the country the chief officers of the army, where the military force is placed under the command of those who have the greatest interest in the support of the civil authority, because they have themselves the greatest share of that authority, a standing army can never be dangerous to liberty. On the contrary, it may in some cases be favourable to liberty. The security which it gives to the sovereign renders unnecessary that troublesome jealousy, which, in some modern republics, seems to watch over the minutest actions, and to be at all times ready to disturb the peace of every citizen. Where the security of the magistrate, though supported by the principal people of the country, is endangered by every popular discontent; where a small tumult is capable of bringing about in a few hours a great revolution, the whole authority of government must be employed to suppress and punish every murmur and complaint against it. To a sovereign, on the contrary, who feels himself supported, not only by the natural aristocracy of the country, but by a well-regulated standing army, the rudest, the most groundless, and the most licentious remonstrances can give little disturbance. He can safely pardon or neglect them, and his consciousness of his own superiority naturally disposes him to do so. That degree of liberty which approaches to licentiousness can be tolerated only in countries where the sovereign is secured by a well-regulated standing army….” (WN, V.i.a.41; my emphasis)
Notice, however, how Smith qualifies his libertarian defense of standing armies with the words “in some cases.” So, how can we distinguish between those standing armies that expand the circle of liberty at home and those that reduce it? Between, for example, the armies of the two Koreas? Regardless, we will proceed to Part 2 of Chapter 1 of Book V in my next post.
Adam Smith sums up what is wrong with mercantilism and protectionism in two sentences at the very end of Book IV of The Wealth of Nations:
“It is thus that every system which endeavours, either by extraordinary encouragements [i.e. subsidies or bounties] to draw towards a particular species of industry a greater share of the capital of the society than what would naturally go to it, or, by extraordinary restraints [i.e. regulation or taxes], force from a particular species of industry some share of the capital which would otherwise be employed in it, is in reality subversive of the great purpose which it means to promote. It retards, instead of accelerating, the progress of the society towards real wealth and greatness; and diminishes, instead of increasing, the real value of the annual produce of its land and labour.” (WN, IV.ix.50)
The Scottish philosopher then concludes Book IV of his magnum opus with a ringing defense of “the obvious and simple system of natural liberty”:
“All systems either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord. Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man, or order of men. The sovereign is completely discharged from a duty, in the attempting to perform which he must always be exposed to innumerable delusions, and for the proper performance of which no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of the society.” (WN, IV.ix.51)
So, when, if ever, is the heavy hand of state intervention in the economy justified? Smith tells us when at the end of Book IV:
“According to the system of natural liberty, the sovereign has only three duties to attend to; three duties of great importance, indeed, but plain and intelligible to common understandings: first, the duty of protecting the society from violence and invasion of other independent societies; secondly, the duty of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice; and, thirdly, the duty of erecting and maintaining certain public works and certain public institutions which it can never be for the interest of any individual, or small number of individuals, to erect and maintain; because the profit could never repay the expense to any individual or small number of individuals, though it may frequently do much more than repay it to a great society.” (WN, IV.ix.51)
There are thus, for Smith, but three duties of government: national defense, the administration of justice, and the provision of other public goods. He will expound on the scope and substance of these three essential public duties in the fifth and final part of The Wealth of Nations, Book V. Suffice it to say, we will turn to Book V in my next post.
Fun fact: the words “under God” were added in 1954.
Adam Smith concludes Book IV of his magnum opus with a critical survey of one of the leading schools of political economy of his day (the Age of Enlightenment), that of the French économistes led by the incomparable royal doctor François Quesnay. In brief, if it took the Scottish philosopher all of eight lengthy chapters to survey and refute the main tenets of the so-called “mercantile system” and the doctrine of the balance of trade (or what I have been referring to as “mercantilism/protectionism” or “MP”), Smith is able to dispose of the system of his colleague and friend, Quesnay, in but a single chapter, Chapter 9 of Book IV of The Wealth of Nations.
Although Adam Smith concedes that the French économistes were right about many things — for example, they opposed mercantilist regulations and defended free trade and minimal government interference in the economy — Smith smells a rat: Doctor Quesnay and his followers committed a major theoretical blunder, one that undermined their entire economic theory. What was this fatal fallacy? Smith finally gets around to telling us in Paragraph 29 of this chapter: “The capital error of this system, however, seems to lie in its representing the class of artificers, manufacturers, and merchants as altogether barren and unproductive.” (WN, IV.ix.29; my emphasis)
Say what?!?!
The talented doctor Quesnay had even built and refined a beautiful macro-economic model, the inscrutable Tableau économique (pictured below) or what Smith refers to as “the Œconomical Table” (WN, IV.ix27), to prove this fallacious observation. In summary, Quesnay’s model consists of an idealized and self-contained economic system consisting of “three classes” or categories of economic actors, three Weberian “ideal types”, so to speak: (1) landowners, (2) artisans & merchants, and (3) farmers. To cut to the chase, what Quesnay’s model purports to show is that agriculture — and only agriculture — is a “productive” activity! Why? Because farmers produce a physical surplus of goods (e.g. grain) exceeding their costs of production. Artisans and merchants, by contrast, consume as much value in food and raw materials as they produce, thus creating no net gain for society. Manufacturing, for example, merely transforms existing raw materials; it does not add new intrinsic value to the nation’s wealth; while commerce (i.e. the buying and selling of raw materials and manufactured goods) merely moves existing sources of wealth around instead of creating new wealth. (See WN, IV.ix.13.)
Although Smith carefully and patiently picks apart Quesnay’s egregious economic fallacy in Paragraphs 30 to 37 of Chapter 9 of Book IV of his magnum opus, Smith graciously concedes that Quesnay’s system, “with all its imperfections is, perhaps, the nearest approximation to the truth that has yet been published upon the subject of political œconomy ….” (WN, IV.ix.38) Why? Because Quesnay and his disciples got two big things right:
“Though in representing the labour which is employed upon land as the only productive labour, the notions which it inculcates are perhaps too narrow and confined; yet in representing the wealth of nations as consisting, not in the unconsumable riches of money, but in the consumable goods annually reproduced by the labour of the society, and in representing perfect liberty as the only effectual expedient for rendering this annual reproduction the greatest possible, its doctrine seems to be in every respect as just as it is generous and liberal.” (WN, IV.ix.38)
Be that as it may, there is a larger lesson in this chapter: beware of grandoise systems, complex models, and ambitious blueprints that require absolute perfection. They are like little castles built of sand — they will crumble as soon as they make contact with the waves of the real world. For Smith, it was their fetish for perfection that led Quesnay and his economic sect astray:
“Some speculative physicians seem to have imagined that the health of the human body could be preserved only by a certain precise regimen of diet and exercise, of which every, the smallest, violation necessarily occasioned some degree of disease or disorder proportioned to the degree of the violation. Experience, however, would seem to show that the human body frequently preserves, to all appearances at least, the most perfect state of health under a vast variety of different regimens; even under some which are generally believed to be very far from being perfectly wholesome…. Mr. Quesnai, who was himself a physician, and a very speculative physician, seems to have entertained a notion of the same kind concerning the political body, and to have imagined that it would thrive and prosper only under a certain precise regimen, the exact regimen of perfect liberty and perfect justice. He seems not to have considered that, in the political body, the natural effort which every man is continually making to better his own condition is a principle of preservation capable of preventing and correcting, in many respects, the bad effects of a political œconomy, in some degree, both partial and oppressive. Such a political œconomy, though it no doubt retards more or less, is not always capable of stopping altogether the natural progress of a nation towards wealth and prosperity, and still less of making it go backwards. If a nation could not prosper without the enjoyment of perfect liberty and perfect justice, there is not in the world a nation which could ever have prospered.” (WN, IV.ix.28; my emphasis)
In other words, Adam Smith is, above all, a pragmatist: we must take economic and government actors as they are — warts and all — and not as we would like them to be!
“Though the encouragement of exportation and the discouragement of importation are the two great engines by which the mercantile system proposes to enrich every country, yet with regard to some particular commodities it seems to follow an opposite plan: to discourage exportation and to encourage importation. Its ultimate object, however, it pretends, is always the same, to enrich the country by an advantageous balance of trade.” (WN, IV.viii.1)
Thus begins Book IV, Chapter 8 of The Wealth of Nations (available here). Adam Smith not only concludes his epic takedown of the mercantile/protectionist system — a compelling and cogent critique that applies to our demagogic and crony capitalist trade policies of today — it is also here where Smith’s magnum opus moves from mere description into a full-blown stinging and timeless normative critique of corporate crony capitalism.
To begin, the Scottish philosopher smuggles in (so to speak) an egalitarian normative premise in Paragraph 30 of Chapter 8:
“To hurt in any degree the interest of any one order of citizens, for no other purpose but to promote that of some other, is evidently contrary to that justice and equality of treatment which the sovereign owes to all the different orders of his subjects.” (WN, IV.viii.30)
But according to Smith, mercantile and protectionist policies are rigged in favor of the “rich and powerful”:
“It is the industry which is carried on for the benefit of the rich and the powerful that is principally encouraged by our mercantile system. That which is carried on for the benefit of the poor and the indigent is too often either neglected or oppressed.” (WN, IV.viii.4)
Worse yet, mercantile and protectionist policies not only impose an economic cost on the general public; they also impose a political cost as well:
“It is unnecessary, I imagine, to observe how contrary such regulations are to the boasted liberty of the subject, of which we affect to be so very jealous; but which, in this case, is so plainly sacrificed to the futile interests of our merchants and manufacturers.” (WN, IV.viii.47; my emphasis)
It is in light of these normative admonitions that Adam Smith forcefully and categorically condemns well-organized and well-connected merchants and manufactures for “extorting” (IV.viii.4) mercantile and protectionist policies from the government in order to enrich themselves:
“Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self evident that it would be absurd to attempt to prove it. But in the mercantile system the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce.” (WN, IV.viii.49; my emphasis)
“But in the system of laws which has been established for the management of our [North] American and West Indian colonies, the interest of the home consumer has been sacrificed to that of the producer with a more extravagant profusion than in all our other commercial regulations. A great empire has been established for the sole purpose of raising up a nation of customers who should be obliged to buy from the shops of our different producers all the goods with which these could supply them. For the sake of that little enhancement of price which this monopoly might afford our producers, the home consumers have been burdened with the whole expense of maintaining and defending that empire.” (WN, IV.viii.53; my emphasis)
“It cannot be very difficult to determine who have been the contrivers of this whole mercantile system; not the consumers, we may believe, whose interest has been entirely neglected; but the producers, whose interest has been so carefully attended to; and among this latter class our merchants and manufacturers have been by far the principal architects. In the mercantile regulations, which have been taken notice of in this chapter, the interest of our manufacturers has been most peculiarly attended to; and the interest, not so much of the consumers, as that of some other sets of producers, has been sacrificed to it.” (WN, IV.viii.54; my emphasis)
In short, Smith exposes once and for all the true villains of his story: corrupt crony capitalists, i.e. merchants and manufactures who manipulate the government in order to enrich themselves at the expense of consumers and the public at large! Any questions? (To be continued …)
“Such exclusive companies [like the English East India Co.] … are nuisances in every respect; always more or less inconvenient to the countries in which they are established, and destructive to those which have the misfortune to fall under their government.” (WN, IV.vii.c.108)
Adam Smith concludes Part 3 of his lengthy chapter on mercantile colonialism — Chapter 7 of Book IV of The Wealth of Nations — with a scathing critique of the most powerful private corporation of his day, the English East India Company:
” … the trade to the East Indies has in every European country been subjected to an exclusive company…. The greater part of that nation are thereby not only excluded from a trade to which it might be convenient for them to turn some part of their stock, but are obliged to buy the goods which that trade deals somewhat dearer than if it was open and free to all their countrymen. Since the establishment of the English East India Company, for example, the other inhabitants of England, over and above being excluded from the trade, must have paid in the price of the East India goods which they have consumed, not only for all the extraordinary profits which the company may have made upon those goods in consequence of their monopoly, but for all the extraordinary waste which the fraud and abuse, inseparable from the management of the affairs of so great a company, must necessarily have occasioned. The absurdity of this second kind of monopoly, therefore, is much more manifest than that of the first.” (WN, IV.vii.c.91; my emphasis)
More simply put, Smith is saying that colonial India suffers from a double monopoly. She is not only prevented from trading with any other country except for England (Monopoly #1); to make matters worse, trade between India and England can only be carried out by one company, the English East India Company (Monopoly #2). Smith, however, exhorts Britain to reject “the meanness of mercantile prejudice” (IV.vii.c.106) and permit free trade:
“It is the interest of [the] sovereign … to open the most extensive market for the produce of his country, to allow the most perfect freedom of commerce, in order to increase as much as possible the number and the competition of buyers; and upon this account to abolish, not only all monopolies, but all restraints upon the transportation of the home produce from one part of the country to another, upon its exportation to foreign countries, or upon the importation of goods of any kind for which it can be exchanged. It is in this manner most likely to increase both the quantity and value of that produce, and consequently of his own share of it, or of his own revenue.” (WN, IV.vii.c.102)
By contrast, allowing a private company to rule another country is a recipe for disaster because the economic interest of the beneficiary of this double monopoly (the East India Co. or EIC) and that of the colonies under such a double monopoly (the sundry states of colonial India) are diametrically opposed! Or in the immortal words of Adam Smith:
“It is the interest of the East India Company, considered as sovereigns, that the European goods which are carried to their Indian dominions should be sold there as cheap as possible; and that the Indian goods which are brought from thence should bring there as good a price, or should be sold there as dear as possible. But the reverse of this is their interest as merchants. As sovereigns, their interest is exactly the same with that of the country which they govern. As merchants their interest is directly opposite to that interest.” (WN, IV.vii.c.103; my emphasis)
Last but not least, the Scottish philosopher points out that it’s not the company men who carry out the business of the EIC who are evil or nefarious; it’s the incentives that they are operating under that are evil and nefarious:
“I mean not, however, by anything which I have here said, to throw any odious imputation upon the general character of the servants of the East India Company, and much less upon that of any particular persons. It is the system of government [i.e. the double monopoly mentioned above], the situation in which they are placed, that I mean to censure, not the character of those who have acted in it. They acted as their situation naturally directed, and they who have clamoured the loudest against them would probably not have acted better themselves.” (WN, IV.vii.c.107; my emphasis)
In other words, incentives matter! I will now conclude with the following historical aside: the East India Co.’s trade monopoly with India was not abolished until 1813 — some 24 years after the death of Adam Smith! [1] N.B.: I will proceed to the penultimate chapter of Book IV, i.e. Chapter 8 (“Conclusion of the Mercantile System”), in my next post.
[1] See The East India Company Act of 1813 (53 Geo. 3. c. 155), more commonly known as the Charter Act of 1813.
Translation: The Adam Smith Colonial Problem (I respectfully beg the indulgence of my loyal readers for the Germanic title of this particular blog post. It is an intentional reference to the original so-called “Das Adam Smith Problem” — if you know, you know! Footnotes are below the fold.)
“NO TAXATION WITHOUT REPRESENTATION” was the chief rally cry of the North American rebels calling for independence in 1776 — the year The Wealth of Nations was published — but what if King George III of Great Britain had granted his North American (and West Indian) colonies representation in the British Parliament? Towards the middle of Part 3 of Chapter 7 of Book IV of his magnum opus (available here; scroll down to “Part Third”), Adam Smith drops the following bombshell:
“The Parliament of Great Britain insists upon taxing the colonies; and they [the colonies] refuse to be taxed by a Parliament in which they are not represented. If to each colony, which should detach itself from the general confederacy, Great Britain should allow such a number of representatives as suited the proportion of what is contributed to the public revenue of the empire, in consequence of its being subjected to the same taxes, and in compensation admitted to the same freedom of trade with its fellow-subjects at home; the number of its representatives to be augmented as the proportion of its contribution might afterwards augment; a new method of acquiring importance, a new and more dazzling object of ambition would be presented to the leading men of each colony.” (WN, IV.vii.c.75)
Wait, what?! Is Smith proposing giving the North American colonies full representation in Parliament? Is he really presenting a political solution to the brewing rebellion in North America? Yes, he is, and to follow up on my previous post, it is my Number One “Top Adam Smith Play” in this chapter. But was Smith being serious when made this bold proposal, or was he being ironic? One of my colleagues, Dan Klein (2023), has made a strong case that Smith did not mean this radical political proposal to be taken seriously. Other Smith scholars, by contrast, have taken Smith’s proposed constitutional union at face value.[1] Who’s right?
On the one hand, Klein (2021) has shown how certain passages in some of Smith’s essays, lectures, and other works lend themselves to an esoteric reading, one in which we cannot take what Smith is saying at face value but must read between the lines to arrive at Smith’s true meaning.[2] For Klein (2023), Smith’s radical proposal should also be read this same esoteric way. Among other things, Klein emphasizes just how impractical such a constitutional union would have been given the time-consuming nature of travel across the Atlantic Ocean at the time.
But on the other hand, we have Smith’s own eloquent words:“There is not the least probability that the British constitution would be hurt by the union of Great Britain with her colonies.” (WN, IV.vii.c.77) That statement, taken at face value, sure sounds like a full-throated endorsement of a grand constitutional union between Britain and her North American colonies. Also, for what it’s worth, after Smith mentions in passing that “[t]here is not the least probability that the British constitution would be hurt by the union of Great Britain with her colonies,” he adds:
“That constitution [i.e. the grand union between North American and Great Britain], on the contrary, would be completed by it, and seems to be imperfect without it. The assembly which deliberates and decides concerning the affairs of every part of the empire, in order to be properly informed, ought certainly to have representatives from every part of it.” (WN, IV.ii.c.77)
Smith further suggests that the North American colonies might become even more prosperous than Great Britain and that the “seat of the empire” might move overseas from London to North America: “… in the course of little more than a century, perhaps, the produce of America might exceed that of [Great Britain’s]. The seat of the empire would then naturally remove itself to that part of the empire which contributed most to the general defence and support of the whole.” (WN, IV.ii.c.79) Are these prophetic passages in The Wealth of Nations mere rhetorical hyperbole? At that time (1776), the three largest cities in British North America by population were Boston (around 16,000 souls), New York City (25,000), and Philadelphia (30,000 to 38,000).[3] By way of comparison, the population of London at that same time was several orders of magnitude larger: around 750,000 souls.[4] For what it’s worth, the 20th-century Smith scholar W. R. Scott reports:
“… after the publication of The Wealth of Nations, [Adam Smith] was consulted in 1778 by Alexander Wedderburn, Solicitor-General in Lord North’s administration, and he replied in a Memorandum endorsed ‘Smith’s Thoughts on the Contest with America Feby. 1778’ in which he, ‘as a solitary philosopher’ recommends a constitutional union with America with ‘the most perfect equality’ between both parts of the Empire ‘enjoying the same freedom of trade and sharing in their proper proportions both in the burden of taxation and in the benefit of representation…. The leading men of America, being either members of the general legislature of the Empire, or electors of those members would have the same interest to support the general government of the Empire which the members of the British legislature and their electors have to support the particular government of Great Britain.'” (Scott 1935, p. 84, footnote omitted)
So, was Smith serious? If so, why didn’t he also propose a constitutional union between one or both of her two most recently-acquired colonial prizes, Bengal and Quebec?[5] Why not unify Britain and Ireland, for that matter?[6] Either way, I will conclude on this note: a political association between Britain and North America was not as far-fetched as my colleague and friend Dan Klein would have us believe, for there was a recent historical precedent for such a bold political union: the two “Acts of Union” of 1707 — one ratified by the Parliament of Scotland in March 1707, the other by the Parliament of England shortly thereafter — putting into effect the Treaty of Union signed on 22 July 1706, the treaty that formally united the Kingdom of England and the Kingdom of Scotland into a single Kingdom of Great Britain.
Nota bene: I will conclude my review Part 3 of Chapter 7 of Book IV of The Wealth of Nations on Monday.
prior probability 