The Wealth of Nations · Chapter
II: Causes of the Prosperity of New Colonies explained
Smith examines why new colonies of civilized nations advance rapidly in wealth and greatness, attributing this to colonists bringing advanced knowledge, habits of subordination, and legal systems.
What happens
Smith examines why new colonies of civilized nations advance rapidly in wealth and greatness, attributing this to colonists bringing advanced knowledge, habits of subordination, and legal systems. Abundant cheap land, high wages, and low taxes encourage population growth and improvement. He contrasts the rapid progress of ancient Greek colonies with modern European colonies, particularly praising English colonies for their moderate taxes, free trade, and lack of monopolistic companies, which foster greater prosperity compared to the oppressive systems of Spain, Portugal, and France.
Themes in this chapter
Social Class and Inequality
Smith contrasts the oppression of lower orders in old countries with the generosity and humanity shown in new colonies due to abundant land and high wages, though notes slavery as an exception.
Role of Government
Discusses how moderate taxes and frugal civil and ecclesiastical government in English colonies promote prosperity, while expensive ceremonials and oppressive taxes in Spanish and Portuguese colonies hinder it.
Free Trade and Market Competition
Highlights how English colonies benefit from a more extensive market and lack of monopolistic companies, unlike the Dutch, Spanish, and Portuguese colonies which suffer from exclusive trade restrictions.
Characters to notice
- The Colonies
Discussed as entities that advance rapidly due to abundant land and high wages, with English colonies favored for their moderate taxes and free trade.
- Great Britain
Mentioned as the mother country that defends its colonies at its own expense, allowing them low taxes and self-governance.
- The Dutch
Cited for their use of an exclusive company to monopolize colony trade, which stunts natural growth.
- The Spaniards
Noted for their oppressive colonial policies, including expensive ceremonials, high taxes, and monopolistic trade restrictions.
- The Portuguese
Mentioned for their similar oppressive colonial policies and recent adoption of exclusive company trade in Brazil.
- The French
Noted for not drawing significant revenue from colonies but having expensive colonial government and oppressive ecclesiastical taxes.
- Don Antoine de Ulloa
Quoted regarding the high price of iron and steel in the Spanish West Indies.
Key passages
“The colony of a civilized nation which takes possession either of a waste country, or of one so thinly inhabited, that the natives easily give place to the new settlers, advances more rapidly to wealth and greatness than any other human society.”
A civilized nation's colony in a sparsely populated area grows in wealth and power faster than any other society.
Smith's opening thesis on the rapid progress of new colonies.
“Every colonist gets more land than he can possibly cultivate. He has no rent, and scarce any taxes to pay.”
Colonists have more land than they can farm, pay little to no rent or taxes.
Key factor in colony prosperity: low costs and abundant land.
“The liberal reward of labour encourages marriage. The children, during the tender years of infancy, are well fed and properly taken care of, and when they are grown up, the value of their labour greatly overpays their maintenance.”
High wages promote marriage and child-rearing, as children's future labor more than covers their upbringing costs.
Smith links high wages to population growth and economic benefit.
“Of all the expedients that can well be contrived to stunt the natural growth of a new colony, that of an exclusive company is undoubtedly the most effectual.”
An exclusive trading company is the most effective way to hinder a colony's natural development.
Critique of monopolistic colonial trade policies.
