The Wealth of Nations · Chapter
Of the Motives for Establishing New Colonies explained
This chapter examines the economic motives behind European colonization, focusing on the search for gold and silver mines as the primary driver.
What happens
This chapter examines the economic motives behind European colonization, focusing on the search for gold and silver mines as the primary driver. Adam Smith critiques the ruinous nature of mining projects, comparing them to a disadvantageous lottery, and traces how the lust for precious metals led to the discovery and conquest of the New World, particularly by the Spanish. He notes that while the Spanish found some success, other European colonizers were largely disappointed in their quest for mineral wealth.
Themes in this chapter
Wealth and Money
Smith critiques the pursuit of gold and silver as a misguided measure of wealth, arguing that mining projects are ruinous and that the value of precious metals arises from their scarcity.
Self-Interest and the Invisible Hand
The chapter illustrates how the self-interested passion for gold and silver drove colonial ventures, often with disastrous economic consequences, contrasting with prudent economic policy.
Characters to notice
- Columbus
Columbus is depicted as the central figure whose voyages initiated European colonization, driven by the hope of finding gold mines and presenting gold ornaments to the Spanish sovereigns.
- The Spaniards
The Spanish are portrayed as the primary colonizers motivated by a 'sacred thirst of gold,' leading expeditions to Mexico, Peru, and other regions.
- The Europeans
European colonizers in general are described as being animated by chimerical views of gold and silver, though most were unsuccessful compared to the Spanish.
- Great Britain
Great Britain is referenced through its early English settlers in North America, who offered a fifth of gold and silver to the crown and sought a northwest passage, but were disappointed.
- The Dutch
The Dutch are mentioned among European colonizers who discovered no valuable mines in their colonies.
- The French
The French are noted as one of the European nations whose colonies yielded no gold or silver mines worth working.
Key passages
“Of all those expensive and uncertain projects, however, which bring bankruptcy upon the greater part of the people who engage in them, there is none perhaps more perfectly ruinous than the search after new silver and gold mines.”
Among all risky ventures that ruin most participants, searching for new silver and gold mines is the most destructive.
Smith emphasizes the extreme financial risk of mining speculation.
“The same passion which has suggested to so many people the absurd idea of the philosopher’s stone, has suggested to others the equally absurd one of immense rich mines of gold and silver.”
The same irrational desire that leads people to believe in the philosopher's stone also leads them to believe in vast gold and silver mines.
Smith compares the quest for gold to alchemy, highlighting its irrationality.
“It was the sacred thirst of gold that carried Oieda, Nicuessa, and Vasco Nugnes de Balboa, to the isthmus of Darien, that carried Cortez to Mexico, and Almagro and Pizzarro to Chile and Peru.”
The intense desire for gold drove Spanish explorers like Oieda, Balboa, Cortez, and Pizarro to conquer new territories.
Smith identifies gold lust as the primary motive for Spanish conquests.