An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith (ebook reader macos .TXT) 📕

European country, been subjected to an exclusive company.

Monopolies of this kind are properly established against the very

nation which erects them. 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 in 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.

Both these kinds of monopolies derange more or less the natural

distribution of the stock of the society ; but they do not always

derange it in the same way.

Monopolies of the first kind always attract to the particular

trade in which they are established a greater proportion of the

stock of the society than what would go to that trade of its own

accord.

Monopolies of the second kind may sometimes attract stock towards

the particular trade in which they are established, and sometimes

repel it from that trade, according to different circumstances.

In poor countries, they naturally attract towards that trade more

stock than would otherwise go to it. In rich countries, they

naturally repel from it a good deal of stock which would

otherwise go to it.

Such poor countries as Sweden and Denmark, for example, would

probably have never sent a single ship to the East Indies, had

not the trade been subjected to an exclusive company. The

establishment of such a conpany necessarily encourages

adventurers. Their monopoly secures them against all competitors

in the home market, and they have the same chance for foreign

markets with the traders of other nations. Their monopoly shows

them the certainty of a great profit upon a considerable quantity

of goods, and the chance of a considerable profit upon a great

quantity. Without such extraordinary encouragement, the poor

traders of such poor countries would probably never have thought

of hazarding their small capitals in so very distant and

uncertain an adventure as the trade to the East Indies must

naturally have appeared to them.

Such a rich country as Holland, on the contrary, would probably,

in the case of a free trade, send many more ships to the East

Indies than it actually does. The limited stock of the Dutch East

India company probably repels from that trade many great

mercantile capitals which would otherwise go to it. The

mercantile capital of Holland is so great, that it is, as it

were, continually overflowing, sometimes into the public funds of

foreign countries, sometimes into loans to private traders and

adventurers of foreign countries, sometimes into the most

round-about foreign trades of consumption, and sometimes into the

carrying trade. All near employments being completely filled up,

all the capital which can be placed in them with any tolerable

profit being already placed in them, the capital of Holland

necessarily flows towards the most distant employments. The trade

to the East Indies, if it were altogether free, would probably

absorb the greater part of this redundant capital. The East

Indies offer a market both for the manufactures of Europe, and

for the gold and silver, as well as for the several other

productions of America, greater and more extensive than both

Europe and America put together.

Every derangement of the natural distribution of stock is

necessarily hurtful to the society in which it takes place;

whether it be by repelling from a particular trade the stock

which would otherwise go to it, or by attracting towards a

particular trade that which would not otherwise come to it. If,

without any exclusive company, the trade of Holland to the East

Indies would be greater than it actually is, that country must

suffer a considerable loss, by part of its capital being excluded

from the employment most convenient for that port. And, in the

same manner, if, without an exclusive company, the trade of

Sweden and Denmark to the East Indies would be less than it

actually is, or, what perhaps is more probable, would not exist

at all, those two countries must likewise suffer a considerable

loss, by part of their capital being drawn into an employment

which must be more or less unsuitable to their present

circumstances. Better for them, perhaps, in the present

circumstances, to buy East India goods of other nations, even

though they should pay somewhat dearer, than to turn so great a

part of their small capital to so very distant a trade, in which

the returns are so very slow, in which that capital can maintain

so small a quantity of productive labour at home, where

productive labour is so much wanted, where so little is done, and

where so much is to do.

Though without an exclusive company, therefore, a particular

country should not be able to carry on any direct trade to the

East Indies, it will not from thence follow, that such a company

ought to be established there, but only that such a country ought

not, in these circumstances, to trade directly to the East

Indies. That such companies are not in general necessary for

carrying on the East India trade, is sufficiently demonstrated by

the experience of the Portuguese, who enjoyed almost the whole of

it for more than a century together, without any exclusive

company.

No private merchant, it has been said, could well have capital

sufficient to maintain factors and agents in the different ports

of the East Indies, in order to provide goods for the ships which

he might occasionally send thither; and yet, unless he was able

to do this, the difficulty of finding a cargo might frequently

make his ships lose the season for returning; and the expense of

so long a delay would not only eat up the whole profit of the

adventure, but frequently occasion a very considerable loss. This

argument, however, if it proved any thing at all, would prove

that no one great branch of trade could be carried on without an

exclusive company, which is contrary to the experience of all

nations. There is no great branch of trade, in which the capital

of any one private merchant is sufficient for carrying on all the

subordinate branches which must be carried on, in order to carry

on the principal one. But when a nation is ripe for any great

branch of trade, some merchants naturally turn their capitals

towards the principal, and some towards the subordinate branches

of it; and though all the different branches of it are in this

manner carried on, yet it very seldom happens that they are all

carried on by the capital of one private merchant. If a nation,

therefore, is ripe for the East India trade, a certain portion of

its capital will naturally divide itself among all the different

branches of that trade. Some of its merchants will find it for

their interest to reside in the East Indies, and to employ their

capitals there in providing goods for the ships which are to be

sent out by other merchants who reside in Europe. The settlements

which different European nations have obtained in the East

Indies, if they were taken from the exclusive companies to which

they at present belong, and put under the immediate protection of

the sovereign, would render this residence both safe and easy, at

least to the merchants of the particular nations to whom those

settlements belong. If, at any particular time, that part of the

capital of any country which of its own accord tended and

inclined, if I may say so, towards the East India trade, was not

sufficient for carrying on all those different branches of it, it

would be a proof that, at that particular time, that country was

not ripe for that trade, and that it would do better to buy for

some time, even at a higher price, from other European nations,

the East India goods it had occasion for, than to import them

itself directly from the East Indies. What it might lose by the

high price of those goods, could seldom be equal to the loss

which it would sustain by the distraction of a large portion of

its capital from other employments more necessary, or more

useful, or more suitable to its circumstances and situation, than

a direct trade to the East Indies.

Though the Europeans possess many considerable settlements both

upon the coast of Africa and in the East Indies, they have not

yet established, in either of those countries, such numerous and

thriving colonies as those in the islands and continent of

America. Africa, however, as well as several of the countries

comprehended under the general name of the East Indies, is

inhabited by barbarous nations. But those nations were by no

means so weak and defenceless as the miserable and helpless

Americans ; and in proportion to the natural fertility of the

countries which they inhabited, they were, besides, much more

populous. The most barbarous nations either of Africa or of the

East Indies, were shepherds; even the Hottentots were so. But the

natives of every part of America, except Mexico and Peru, were

only hunters and the difference is very great between the number

of shepherds and that of hunters whom the same extent of equally

fertile territory can maintain. In Africa and the East Indies,

therefore, it was more difficult to displace the natives, and to

extend the European plantations over the greater part of the

lands of the original inhabitants. The genius of exclusive

companies, besides, is unfavourable, it has already been

observed, to the growth of new colonies, and has probably been

the principal cause of the little progress which they have made

in the East Indies. The Portuguese carried on the trade both to

Africa and the East Indies, without any exclusive companies; and

their settlements at Congo, Angola, and Benguela, on the coast of

Africa, and at Goa in the East Indies though much depressed by

superstition and every sort of bad government, yet bear some

resemblance to the colonies of America, and are partly inhabited

by Portuguese who have been established there for several

generations. The Dutch settlmnents at the Cape of Good Hope and

at Batavia, are at present the most considerable colonies which

the Europeans have established, either in Africa or in the East

Indies; and both those settlements an peculiarly fortunate in

their situation. The Cape of Good Hope was inhabited by a race of

people almost as barbarous, and quite as incapable of defending

themselves, as the natives of America. It is, besides, the

half-way house, if one may say so, between Europe and the East

Indies, at which almost every European ship makes some stay, both

in going and returning. The supplying of those ships with every

sort of fresh provisions, with fruit, and sometimes with wine,

affords alone a very extensive market for the surplus produce of

the colonies. What the Cape of Good Hope is between Europe and

every part of the East Indies, Batavia is between the principal

countries of the East Indies. It lies upon the most frequented

road from Indostan to China and Japan, and is nearly about

mid-way upon that road. Almost all the ships too, that sail

between Europe and China, touch at Batavia; and it