The Wealth of Nations · Chapter
VIII: Conclusion of the Mercantile System explained
Smith concludes his critique of the mercantile system by examining how regulations that discourage exportation and encourage importation of raw materials ultimately serve the interests of manufacturers at the expense of consumers and other
What happens
Smith concludes his critique of the mercantile system by examining how regulations that discourage exportation and encourage importation of raw materials ultimately serve the interests of manufacturers at the expense of consumers and other producers. He discusses the impact of such policies on wool and other commodities, arguing that they distort natural market prices and harm the general public. Smith also criticizes the colonial system, particularly the monopoly on American and West Indian trade, as an extravagant burden on home consumers for the benefit of producers.
Themes in this chapter
Free Trade and Market Competition
Smith argues that mercantile regulations distort natural market prices and harm consumers, advocating for free trade.
Social Class and Inequality
The chapter highlights how the interests of manufacturers and merchants are prioritized over those of consumers, workers, and other producers.
Role of Government
Smith criticizes government intervention that favors specific producer groups, arguing for justice and equality in treatment of all citizens.
Wealth and Money
The mercantile system's focus on a favorable balance of trade is critiqued as misguided, with the real wealth of nations lying in consumption and production.
Characters to notice
- Adam Smith
Author and narrator; presents the concluding critique of the mercantile system.
- The Proprietors
Landlords and farmers whose interest in wool and hides is discussed in relation to price regulations.
- The Employer
Implied as the master manufacturers who benefit from cheap raw materials and export bounties.
- A Workman
Spinners and weavers whose labor is affected by policies favoring manufacturers.
- Great Britain
The nation whose mercantile policies and colonial empire are critiqued.
- The Colonies
American and West Indian colonies established as captive markets for British goods.
- The Consumer
Home-consumer whose interests are sacrificed to those of producers under the mercantile system.
Key passages
“Though the encouragement of exportation, and the discouragement of importation, are the two great engines by which the mercantile system proposes to enrich every country, yet with regard to some particular commodities, it seems to follow an opposite plan: to discourage exportation and to encourage importation.”
The mercantile system typically promotes exports and restricts imports, but for certain raw materials, it does the reverse—discouraging exports and encouraging imports.
Smith highlights the inconsistency in mercantile policy.
“The avidity of our great manufacturers, however, has in some cases extended these exemptions a good deal beyond what can justly be considered as the rude materials of their work.”
Manufacturers have pushed for duty exemptions on imports that go beyond true raw materials, benefiting themselves at public expense.
Critique of manufacturers' influence on trade policy.
“To hurt in any degree the interest of any one order of citizens, for no other purpose but to promote that of some other, is evidently contrary to that justice and equality of treatment which the sovereign owes to all the different orders of his subjects.”
It is unjust for the sovereign to harm one group of citizens solely to benefit another, as all deserve equal treatment.
Smith's principle of justice in government policy.
“A 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.”
The British colonial empire was created mainly to create a captive market for British manufacturers.
Smith's critique of the colonial system as a tool for producer interests.
