Many people believe that Smith favored retaliatory tariffs. With that, Smith launched a succession of free-trade economists and paved the way for David Ricardo’s and John Stuart Mill’s theories of comparative advantage a generation later. The primary advantage of trade, he argued, was that it opened up new markets for surplus goods and also provided some commodities from abroad at a lower cost than at home. Smith vehemently opposed mercantilism-the practice of artificially maintaining a trade surplus on the erroneous belief that doing so increased wealth. The interest of this debt alone is not only greater than the whole extraordinary profit, which, it ever could be pretended, was made by the monopoly of the colony trade, but than the whole value of that trade, or than the whole value of the goods, which at an average have been annually exported to the colonies. For this purpose, and for this purpose only, in the two last wars, more than a hundred and seventy millions has been contracted over and above all that had been expended for the same purpose in former wars. 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. His reasoning about the excessively high cost of British imperialism is worth repeating, both to show Smith at his numerate best and to show that simple, clear economics can lead to radical conclusions:Ī 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.
In the fourth book of The Wealth of Nations-published, remember, in 1776-Smith told Great Britain that its American colonies were not worth the cost of keeping. Smith used numerate economics not just to explain production of pins or differences in pay between butchers and hangmen, but to address some of the most pressing political issues of the day.
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