Book IV, Chapter VII, 7

The mother countries' exclusive trade tends to reduce—or at least to hold below the level they would otherwise reach—both what all those nations in general, and the American colonies in particular, can enjoy and the extent of their industry. It is a dead weight upon one of the great springs that sets much of mankind's business in motion. By making colonial produce more expensive in every other country, it reduces consumption and thereby constrains the colonies' industry, as well as both the enjoyment and the industry of other countries: their inhabitants enjoy less when they pay more for what they consume, and produce less when they receive less for what they produce. By making the produce of all other countries more expensive in the colonies, it similarly constrains the industry of all other colonies, and both the enjoyment and the industry of the colonies. It is an impediment that, for the supposed benefit of certain countries, hinders the pleasures and burdens the industry of every other country, but most of all the colonies. It not only excludes other countries as far as possible from one particular market, but confines the colonies as far as possible to one particular market; and there is a vast difference between exclusion from one market when all others are open, and confinement to one when all others are closed. Yet the colonies' surplus produce is the original source of all the increase in enjoyment and industry that Europe derives from the discovery and colonization of America, and the mother countries' exclusive trade tends to make this source much less abundant than it would otherwise be.

The particular advantages each colonizing country derives from its own colonies are of two kinds: first, the ordinary advantages every empire derives from provinces under its dominion; and second, the special advantages supposedly arising from provinces of such a peculiar nature as Europe's American colonies.

The ordinary advantages every empire derives from its subject provinces consist, first, in the military force they supply for its defense and, second, in the revenue they provide to support its civil government. Roman colonies occasionally provided both. Greek colonies sometimes provided military force, but seldom revenue. They rarely acknowledged subjection to the mother city. They were generally her allies in war, but very seldom her subjects in peace.

The European colonies in America have never yet provided military forces to defend their mother countries. Their own military forces have never sufficed even for their own defense; and in the various wars involving their mother countries, the defense of the colonies has generally diverted a considerable portion of those countries' military forces. In this respect, therefore, every European colony without exception has been a source of weakness rather than strength to its mother country.

Only the colonies of Spain and Portugal have contributed any revenue toward the defense of the mother country or the support of its civil government. Taxes levied on the colonies of other European nations, especially England's, have seldom equaled what those nations spent on the colonies in peacetime, and have never sufficed to meet the costs the colonies occasioned in wartime. Such colonies, therefore, have been sources of expense, not revenue, to their mother countries.

The benefits such colonies bring their mother countries thus consist entirely of the special advantages supposed to arise from provinces as peculiar as the European colonies of America; and exclusive trade, it is acknowledged, is the sole source of all these special advantages.

As a result of this exclusive trade, the portion of the English colonies' surplus produce made up of what are called enumerated commodities, for example, can be sent only to England. Other countries must then purchase it from her. It must consequently be cheaper in England than in any other country, and must increase what the English can enjoy more than what any other country's inhabitants can enjoy. It must likewise do more to encourage her industry. For each portion of its own surplus produce that England exchanges for those enumerated commodities, England must receive a better price than other countries receive for comparable portions of theirs in exchange for the same commodities. English manufactures, for example, will purchase more sugar and tobacco from her colonies than comparable manufactures from other countries can purchase of that sugar and tobacco. To the extent, therefore, that English manufactures and those of other countries alike are exchanged for the sugar and tobacco of the English colonies, this superior price encourages the former more than the latter can be encouraged in these circumstances. Thus, while the colonies' exclusive trade reduces, or at least holds down, the enjoyment and industry of countries without it, it gives countries possessing it a clear advantage over the others.

This advantage, however, may prove to be relative rather than absolute: it gives the country enjoying it superiority by depressing the industry and produce of other countries, rather than by raising its own beyond what they would naturally reach under free trade.

Through England's monopoly, for instance, Maryland and Virginia tobacco certainly reaches England more cheaply than it reaches France, to which England usually sells a considerable portion. But if France and every other European country had always been free to trade with Maryland and Virginia, the tobacco of those colonies might by now have become cheaper than it actually is, not merely for the other countries but also for England. With a far wider market than it has ever had, tobacco production might, and probably would, have expanded enough by now to bring the profits of a tobacco plantation down to their natural level alongside those of a corn plantation, above which they are still thought to stand somewhat. Tobacco's price might, and probably would, have fallen somewhat below its present level. An equal quantity of English goods, or of the goods of other countries, might have purchased more tobacco in Maryland and Virginia than it can now, and consequently have sold there for a correspondingly better price. To the extent, then, that the cheapness and abundance of that weed can increase what people enjoy or expand industry in England or elsewhere, free trade would probably have produced both effects to a somewhat greater degree than at present. England, admittedly, would in that case have had no advantage over other countries. She might have bought her colonies' tobacco somewhat more cheaply, and consequently sold some of her own goods somewhat more dearly, than she actually does; but she could neither have bought the one more cheaply nor sold the other more dearly than any other country could. She might perhaps have gained an absolute advantage, but she would certainly have lost a relative one.

To gain this relative advantage in colonial trade, however—to carry out the odious and malicious project of excluding other nations from any share of it as far as possible—England has, there is good reason to believe, not merely sacrificed part of the absolute advantage that she and every other nation might have derived from that trade, but placed herself at both an absolute and a relative disadvantage in almost every other branch of trade.

When England claimed a monopoly of colonial trade under the act of navigation, foreign capitals formerly employed in that trade were necessarily withdrawn. English capital, previously engaged in only part of the trade, now had to carry on all of it. The capital that had supplied the colonies with only some of the goods they wanted from Europe was now the only capital available to supply them all. It could not, however, supply them all; and the goods it did supply were necessarily sold at very high prices. The capital that had previously bought only some of the colonies' surplus produce was now the only capital available to buy it all. But it could not buy all of it at anything like the old price, and therefore necessarily bought whatever it did buy very cheaply. In a use of capital where the merchant sold very dearly and bought very cheaply, profit had to be very great, far above its usual level in other branches of trade. These superior profits from colonial trade inevitably drew into it some capital formerly employed in other branches. But as this movement of capital gradually increased the competition of capitals in colonial trade, it gradually reduced their competition in all those other branches. It lowered the profits of the former while raising those of the latter, until the profits of all settled at a new level, different from and somewhat higher than the old one.

This double effect—drawing capital out of all other trades and raising the rate of profit in every trade somewhat above where it would otherwise have stood—was produced not only when the monopoly was first established but has continued ever since.

First, the monopoly has continually drawn capital from every other trade into colonial trade.

Though Great Britain's wealth has greatly increased since the act of navigation was established, it has certainly not grown as fast as the wealth of the colonies. A country's foreign trade naturally grows in proportion to its wealth, and its surplus produce in proportion to its total produce. Great Britain, having appropriated almost the whole of what may be called the colonies' foreign trade while her capital did not increase as quickly as that trade expanded, could not carry it on without continually withdrawing capital already employed in other branches of trade and withholding from them still more capital that would otherwise have gone to them. Accordingly, since the establishment of the act of navigation, colonial trade has continually grown, while many other branches of foreign trade, particularly trade with other parts of Europe, have continually declined. Instead of being adapted, as they were before the act of navigation, to the neighboring European market or to the more distant countries around the Mediterranean sea, most of our manufactures for export have been adapted to the still more distant colonies—to the market in which they enjoy a monopoly, rather than the market where they face many competitors. The causes of decline in other branches of foreign trade that Sir Matthew Decker and other writers have sought in excessive and poorly designed taxation, high wages, increased luxury, etc., may all be found in the excessive growth of colonial trade. Though Britain's mercantile capital is very large, it is not infinite; and though it has grown considerably since the act of navigation, it has not grown as fast as colonial trade. That trade therefore could not possibly be carried on without drawing some of that capital away from other branches, or consequently without some decline in those branches.

England, it should be observed, was already a great trading country, with abundant and steadily growing mercantile capital, not only before the act of navigation established the monopoly of the corn trade, but before that trade became very considerable. In the Dutch war under Cromwell, her navy was superior to Holland's; and in the war that began early in the reign of Charles II., it was at least equal, perhaps superior, to the combined navies of France and Holland. Its superiority would scarcely seem greater today, at least if the Dutch navy now bore the same relation to Dutch commerce as it did then. But England's great naval power in either war could not have resulted from the act of navigation. When the first war took place, the plan of the act had only just been drawn up; and although it had been fully enacted before the second war broke out, no part of it had had time to produce any substantial effect—least of all the part establishing exclusive colonial trade. Both the colonies and their trade were insignificant then compared with what they are now. Jamaica was an unhealthy wilderness, sparsely inhabited and even less cultivated. New York and New Jersey belonged to the Dutch, and half of St. Christopher's to the French. Antigua, the two Carolinas, Pennsylvania, Georgia, and Nova Scotia had not been settled. Virginia, Maryland, and New England had been settled and were thriving colonies; yet perhaps not a single person in Europe or America then foresaw, or even suspected, how rapidly they would grow in wealth, population, and improvement. Barbadoes, in short, was the only British colony of any consequence whose condition then bore any resemblance to its condition today. Even for some time after the act of navigation, England controlled only part of colonial trade, since the act was not strictly enforced until several years after its enactment. That trade could not then have caused England's great trade or the great naval power that trade supported. The commerce sustaining her naval power at that time was with Europe and the countries around the Mediterranean sea. But Britain's present share of that commerce could support no such naval power. Had the growing trade of the colonies been left open to all nations, whatever share Great Britain obtained—and a very considerable share would probably have been hers—would have added to the great trade she already possessed. Instead, because of the monopoly, the increase of colonial trade has brought about not so much an addition to Britain's former trade as a complete change in its direction.

The mother countries' exclusive trade tends to reduce both the enjoyment and the industry of all these nations generally, and of the American colonies especially. At the very least it holds them below the levels they would otherwise reach. It weighs down one of the great forces that drive much of humanity's business. It makes colonial goods more expensive in every other country, so people buy less of them. This restricts colonial industry. It also reduces what other countries can enjoy and produce: people enjoy less when they pay more for their goods, and produce less when they get less for what they make. The monopoly also makes other countries' goods more expensive in the colonies. In the same way, it restricts the industry of all the other colonies and reduces both the enjoyment and industry of the colonies. For the supposed benefit of certain countries, this obstruction limits what people in every other country can enjoy and produce. It hurts the colonies most of all. It not only shuts other countries out of a particular market as far as possible; it also confines the colonies to one market as far as possible. There is a great difference between losing access to one market while all others remain open and being confined to one market while all others are closed. Yet the colonies' surplus produce is the original source of all the increase in enjoyment and industry that Europe gains from the discovery and colonization of America. The mother countries' exclusive trade tends to make that source far less abundant than it could be.

The particular benefits each colonizing country gets from its own colonies are of two kinds. First are the ordinary benefits any empire gets from the provinces it rules. Second are the special benefits supposedly gained from provinces as unusual as Europe's American colonies.

An empire receives two ordinary benefits from the provinces it rules: military forces for its defense and revenue to support its civil government. The Roman colonies sometimes supplied both. Greek colonies sometimes supplied troops but rarely supplied revenue. They seldom acknowledged the mother city's authority over them. They were generally its allies in war, but rarely its subjects in peace.

The European colonies in America have never supplied any military forces to defend their mother countries. Their forces have not even been sufficient for their own defense. In the various wars fought by their mother countries, defending the colonies has generally drawn off a substantial part of those countries' military forces. In this respect, every European colony without exception has weakened rather than strengthened its mother country.

Only the colonies of Spain and Portugal have contributed revenue to defend the mother country or support its civil government. The taxes imposed on the colonies of other European nations, especially those of England, have seldom matched the money spent on them in peacetime and have never covered the costs they caused in wartime. These colonies have therefore cost their mother countries money rather than brought them revenue.

The benefits of these colonies to their mother countries must therefore lie entirely in the special benefits supposedly offered by such unusual provinces as Europe's American colonies. And, as everyone admits, exclusive trade is the sole source of all those special benefits.

Because of exclusive trade, all the surplus produce of the English colonies that consists of what are called enumerated commodities, for example, can be sent only to England. Other countries must then buy those goods from England. They must therefore be cheaper in England than anywhere else, and they must increase what England's people can enjoy more than what any other country's people can enjoy. They must also encourage England's industry more. England can get a better price for any of its own surplus produce that it trades for those enumerated goods than other countries can get for similar produce traded for the same goods. For example, England's manufactures can buy more sugar and tobacco from its colonies than similar manufactures from other countries can buy of that sugar and tobacco. So when both English and foreign manufactures are traded for sugar and tobacco from the English colonies, England's better terms encourage its manufactures more than foreign manufactures can be encouraged under these conditions. Colonial exclusive trade thus reduces, or at least holds down, what countries without it can enjoy and produce. It gives countries with it an obvious advantage over those without it.

Yet this may turn out to be a relative advantage rather than an absolute one. It may make the country with the monopoly appear stronger mainly by reducing other countries' industry and produce, not by raising its own above the levels that free trade would naturally bring.

For example, England's monopoly of Maryland and Virginia tobacco certainly makes that tobacco cheaper for England than for France, to which England commonly sells a considerable share. But if France and every other European country had always been free to trade with Maryland and Virginia, their tobacco might now be cheaper for everyone, including England, than it actually is. With such a much larger market, tobacco production might—and probably would—have grown enough by now to bring the profits of a tobacco plantation down to their natural level alongside those of a corn plantation. Tobacco plantations are thought still to make somewhat higher profits. The price of tobacco might, and probably would, have fallen somewhat below its present price. The same quantity of English or other countries' goods could have bought more tobacco in Maryland and Virginia than it can now, so those goods would in effect have sold there for a better price. To the extent that cheap and abundant tobacco can increase what England or any other country enjoys or produces, free trade would probably have done both somewhat more than the present system does. England would, of course, have had no advantage over other countries in that case. It might have bought its colonies' tobacco somewhat more cheaply, and sold some of its own goods somewhat more dearly, than it now does. But it could not have bought more cheaply or sold more dearly than any other country. It might have gained an absolute advantage but would certainly have lost its relative one.

There are strong reasons to believe that, in seeking this relative advantage in colonial trade and carrying out the spiteful plan to exclude other nations from it as far as possible, England has sacrificed some of the absolute benefit that it and every other nation could have gained from the trade. It has also put itself at both an absolute and a relative disadvantage in nearly every other branch of trade.

When the act of navigation gave England a monopoly on colonial trade, foreign stock previously used in that trade had to leave it. English stock, which had previously handled only part of the trade, now had to handle all of it. The stock that had supplied the colonies with only some of the European goods they wanted was now the only stock available to supply all of them. But it could not supply everything, and the goods it did supply sold at very high prices. Likewise, the stock that had previously bought only some of the colonies' surplus produce was now the only stock available to buy all of it. It could not buy everything at anything close to the old price. So whatever it did buy, it bought very cheaply. Merchants selling very dearly and buying very cheaply must have made profits far above the ordinary rate in other trades. Those high colonial profits were bound to draw some stock out of other trades. As more stock entered colonial trade, competition there gradually increased, while competition in other trades decreased. Profits in colonial trade gradually fell and profits elsewhere rose, until profits across the trades settled at a new level, somewhat higher than the old one.

This monopoly both drew stock away from other trades and raised the rate of profit across trades above what it otherwise would have been. These effects did not end after the monopoly was first established; they have continued ever since.

First, this monopoly has continually drawn stock from every other trade into colonial trade.

Great Britain's wealth has grown greatly since the act of navigation was established, but it certainly has not grown at the same rate as the wealth of the colonies. A country's foreign trade naturally grows along with its wealth, just as its surplus produce grows along with its total produce. Great Britain took over almost all the colonies' foreign trade. Its stock did not grow as fast as that trade. It therefore could not conduct the trade without continually taking some stock out of other trades and keeping out much more that would otherwise have entered them. Accordingly, colonial trade has grown continuously since the act of navigation, while many other branches of foreign trade, particularly trade with other parts of Europe, have steadily declined. Before the act, our manufactures for export had been suited to the nearby European market or to the more distant countries around the Mediterranean sea. Since then, most have been adapted to the still more distant colonial market, where we have a monopoly rather than many competitors. Sir Matthew Decker and other writers have sought the causes of decline in our other foreign trades in excessive or poorly designed taxes, high wages, growing luxury, etc. But all those causes can be found in the excessive growth of colonial trade. Great Britain's mercantile stock is very large, but not unlimited. It has grown greatly since the act of navigation, but not as quickly as colonial trade. Conducting that trade was therefore impossible without taking some stock away from other trades and causing those other trades to decline.

England was already a great trading country before the act of navigation established the monopoly of the corn trade, and even before that trade was very large. Its mercantile stock was already very large and likely to keep growing. In the Dutch war under Cromwell, England's navy was stronger than Holland's. In the war that began early in the reign of Charles II., it was at least as strong as the combined navies of France and Holland, and perhaps stronger. Its superiority today might hardly look greater, at least if the Dutch navy still bore the same relation to Dutch commerce that it did then. Yet the act of navigation could not have caused England's great naval power in either war. The plan for the act had only just been drawn up during the first. Although the act had been fully enacted before the second began, none of it had had time to make a substantial difference, least of all the part establishing exclusive colonial trade. The colonies and their trade were then small compared with their present size. Jamaica was an unhealthy wilderness, with few inhabitants and even less cultivated land. The Dutch held New York and New Jersey; the French held half of St. Christopher's. Antigua, the two Carolinas, Pennsylvania, Georgia, and Nova Scotia had not been settled. Virginia, Maryland, and New England had been settled. They were flourishing, but probably nobody in either Europe or America then foresaw, or even suspected, how quickly their wealth, population, and cultivation would grow. Barbadoes was the only significant British colony whose condition then resembled its condition now. For some time after the act of navigation, England had only a share of the colonial trade, because the act was not strictly enforced until several years after it was enacted. That trade could not have been the cause of England's large trade at the time or of the great naval power it supported. Trade with Europe and the countries around the Mediterranean sea supported that naval power. But Britain's current share of that trade could not support such a great navy. If all nations had been free to participate in the growing colonial trade, Britain's share—and it would probably have been substantial—would have added to the large trade it already had. Because of the monopoly, growing colonial trade has not so much added to Britain's former trade as completely changed its direction.