strong, from the negative standpoint, is the example of the Congo State. The proposition that sovereigns

make bad traders is only a variant on the betterknown proposition that for the state to direct private people in what manner they ought to employ their capitals must in almost all cases be either a useless or a hurtful regulation.

§ 8. Adam Smith's Appreciation of the Founders of the Indian Empire.

It must not be supposed that Adam Smith did not appreciate the difficulties and the merits of those who laid the foundations of our Indian empire, as is evidenced by the passage which forms the conclusion of the chapter on colonies and colonial policy.1 "I mean not, however, by anything which I have here said to throw any odious imputation upon the general character of the servants of the East India Company, and much less upon that of particular persons. It is the system of government, the situation in which they are placed, that I mean to censure, not the character of those who have acted in it. They acted as their situation naturally directed, and they who have clamoured the loudest against them would probably not have acted better themselves. In war and negotiation the councils of Madras and Calcutta have upon several occasions conducted themselves with a resolution and decisive wisdom which would have done honour to the Senate of Rome in the best days of that republic. The members of those councils,

1 Book IV. chap. vii.

however, had been bred to professions very different from war and politics. But their situation alone, without education, experience, or even example, seems to have formed in them all at once the great qualities which it required, and to have inspired them both with abilities and virtues which they themselves could not well know they possessed."

But the conclusion of the whole matter is that: "Such exclusive companies are therefore nuisances in every respect; always more or less inconvenient to the countries in which they are established, and destructive to those who have the misfortune to fall under their government.'

1

'See Principles of Political Economy, vol. ii. Book III. chap. xxiv. on history of chartered companies for fuller treatment of this subject by the author.

CHAPTER XIII

ADAM SMITH ON COLONIAL POLICY

§ 1. Historical Conditions Affecting the Composition of the "Wealth of Nations."

THE first edition of the Wealth of Nations was published on the 9th of March 1776; the Declaration of the Independence of the American Colonies was made on July 4 of the same year. This independence was recognised in 1783; and in 1784 the third edition of the Wealth of Nations was published with some considerable additions and alterations by the author, after which he made no more than verbal corrections.

The composition of the Wealth of Nations was spread over at least the twenty-seven years from 1749 to 1776, and from the former date to the death of the author in 1790 occurred the most important events connected with the building up of the British Empire,—on the one side the acquisition of India and on the other the loss of the North American Colonies, both the results of a long series of cumulative causes broken by catastrophic accidents. This was the period also when the storm of ideas was gathering which burst in the great French Revolution, and the

period which in England culminated in what is called the Industrial Revolution.

§ 2. Adam Smith's Appreciation of History and Foresight.

Adam Smith wrote in the midst of great events, and in the shadows of even greater coming events. "The discovery of America and that of a passage to the East Indies by the Cape of Good Hope are the two greatest and most important events recorded in the history of mankind. Their consequences have already been great; but in the short period of between two and three centuries which has elapsed since these discoveries were made it is impossible that the whole extent of their consequences can have been seen. What benefits or what misfortunes to mankind may hereafter result from those great events no human wisdom can foresee."

This passage is immediately preceded by the forecast that in little more than a century, judging by the rapid progress already made in wealth, population, and improvement, the American Colonies might surpass Britain; so that if representation were proportioned to taxation, according to Adam Smith's scheme of imperial federation, "the seat of the empire would naturally remove itself to that part of the empire which contributed most to the general support and defence of the whole." The material progress of the United States has been of the magnitude indicated, though the separation has at any rate deferred the problem of the transfer of the seat of empire. The

passage quoted is also immediately followed by a remarkable forecast as to the possible development of the nations of the East. "At the particular time when these discoveries were made, the superiority of force happened to be so great on the side of the Europeans that they were enabled to commit with impunity every sort of injustice in those remote countries. Hereafter, perhaps, the natives of those countries may grow stronger and those of Europe may grow weaker; and the inhabitants of all the different quarters of the world may arrive at that equality of courage and force which by inspiring mutual fear can alone overawe the injustice of independent nations into some sort of respect for the rights of one another. But nothing seems more likely to establish this equality of force than that mutual communication of knowledge and of all sorts of improvements which an extensive commerce from all countries to all countries naturally or rather necessarily carries along with it." The sudden rise of Japan to a first-class power, the awakening of China, and the unrest in India confirm the soundness of this anticipation. If the "short period" of two or three centuries before 1776 witnessed remarkable changes, a similar short period from our own times is likely to witness changes still more remarkable.

§ 3. Bearing of Argument on Present Situation.

The treatment by Adam Smith of the fundamental questions of colonial and imperial policy ought to throw light on our present problems. Let those who