The Wealth of Nations Essay

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The Wealth of Nations

Whilst few historians would seek to denigrate the potency of Adam Smith’s ‘The Wealth of Nations’ in continuing to provoke debate, there are many, no doubt, who would question the validity of applying a Smithian framework to account for the impact of the Atlantic economy in establishing British industrial and commercial predominance over France.

If we adopt a manifestly reductionist definition of what constitutes a Smithian framework; an expansion of the market allowing for greater trade, a crucial precondition of the division of labour, it becomes not only possible to ‘contextualize those hegemonic models of Smithian growth in which the French failed to embrace competitive factor and commodity markets’[1], as O’Brien has, but also allows for a total rejection of the role of the Atlantic economy in accounting for 18th century British predominance, something O’Brien, Allen[2], North and Weingest[3] have done.

Smith, himself, states that although European markets greatly expanded it inevitably results in ‘the shopkeepers and other traders of England [attempting] to secure to themselves the monopoly of [the colony’s] custom’[4] thus ‘[hindering] the capital of that country’[5]. Naturally, with such a definition of what constitutes a Smithian framework it would appear that Atlantic trade actually serves to imperil economic development rather than bolster it.

Yet, if a more nuanced definition of what constitutes a Smithian framework is used, which not only takes into account the role of the state in establishing conditions conducive to growth but also the internal theoretical tension inherent in the book itself surrounding the deleterious effects of monopolies versus the likelihood of any nation ensuring their destruction, then it is not only possible to repudiate O’Brien’s contention but it also becomes possible to strengthen the contention of Acemoglu, Johnson and Robinson[6].

Yet, O’Brien’s contention, that French industrial growth was inhibited by ‘geographical constraints’, a view which fails to ascribe the role of the Atlantic economy and appears to undermine the validity of Smith’s ideas, is certainly a compelling one. The French climate was, after all, uncongenial to the cultivation of arable crops, an issue made all the more severe by the acidity of the French soil. Agricultural productivity was thus naturally constrained by unfavorable climatic conditions, labour could not, as a result, be released from the land.

Any explanation of France’s failure to industrialize predicated on a lack of extra-European trade precluding the division of labour is totally subordinate to the basic issue of the French climate, so unconducive to industrial expansion. It was for this reason, no doubt, that the agricultural productivity of the French trailed the British until 1911 (between 1520 and 1910 labour productivity multiplied 4. 7 times in Britain compared to 2. 4 in France)[7]. Indeed the revolutionary agrarian settlement doubtless served to further impede growth.

Partiable inheritance, coupled with the direct transference of land to the peasantry (13,000 acres where redistributed to 30,000 peasants[8]) served to ensure holdings remained small, requiring greater labour to increase output thus precluding rural-urban migration rates key to industrialization. Evidently, French growth was not, primarily, impinged by an inability to trade with the Atlantic. Expansion of foreign markets would be of no use to French industrialists whose ventures were fundamentally constrained by a fatal concatenation of poor climatic conditions and an unfavourable land settlement denying them of essential labour.

British industrial or commercial predominance was thus not secured in the shipping lanes of the Atlantic but in the acidic fields of France. O’Brien’s view does not, however, preclude the importance of a Smithian framework in accounting for British predominance. France’s failure to industrialize, on account of its inability to establish an integrated internal market, the peasants producing largely for personal consumption, is predicated upon Smith’s contention that ‘the propensity to truck and barter’[9] gives rise to the division of labour. It is not, therefore, possible, to totally reject the efficacy of Smith’s ideas.

Underpinning O’Brien’s contention is the ‘principle which gives occasion to the division of labour’ or, in this instance, fails to. An acceptance of O’Brien’s view should not result in the unequivocal rejection of Smith’s ideas. Moreover, compelling as O’Brien’s argument is, upon a closer inspection of the available evidence, it can’t be wholly maintained. Whilst there can be little doubt that partiable inheritance, in contrast to the British system of primogeniture, served to cultivate conditions unconducive to economic growth it is easy to overstate its significance.

With, admittedly, the power of hindsight it is clear that the peasantry were not inextricably tied to the land. Between 1821 and 1871, for instance, 3. 5 million people migrated from the countryside to the centres of industry[10]. In fact, the redistribution of land in the 1790s materialize too late for it to have any impact upon French economic performance in the 18th century, the same is naturally true of the institution of partiable inheritance under the Napoleonic code of 1804.

Given that the French peasantry were prepared, in the 19th century, to depart the countryside whose complexion, in terms of holding size, was virtually identical to its 18th century predecessor, suggests that what constrained French growth and assured British preeminence was not an archaic agrarian system but the lack of demonstrable incentives to migrate to the small, yet expanding, industrial centres.

It is thus clear that the British commercial ascendency was not assured by the intransigence of the French peasantry, nor did the concept of partiable inheritance preclude crucial rural-urban migration flows. The British lead over France should thus be liberated from O’Brien’s flawed and facile assumption that, on account of geography, British preeminence was inevitable. To argue, however, that Atlantic trade was key to British growth would appear to be in contravention to key Smithian ideas.

Whilst the principles the gives rise to the division of labour are now well established, Smith, himself, would appear to undermine the efficacy of Atlantic trade in establishing a British lead over France by suggests that colonial expansion inexorably leads to the formation of monopolies, so deeply embedded into the British economy that ‘the expectation of a rupture with the colonies, accordingly, has struck the people of Great Britain with more terror than they ever felt for a Spanish armada, or a French invasion’. 11]

The monopoly, rather than assist economic development, according to Smith hinders it, not only through disincentivising the improvement of land[12] but also through the destruction of ‘that parsimony, which in other circumstances is natural to the character of the merchant’[13]. Yet whilst it would be impossible to claim that Smith does not lament the existence of dangerous disorders’[14] it is also clear that he accepts their permanence ‘no nation ever voluntarily gave up the dominion of any province’[15]. In fact, Smith not only claims that ‘to propose that Britain should voluntarily give up all authority over her colonies’, the 1651 Navigation Ordinance a manifestation of this ‘authority’, ‘would be to propose such a measure as never was, and never will be adopted, by any nation in the world. [16]

The adverse effects of the monopoly are not, on the whole, sufficient to prevent Smith from concluding that the ‘general tendency [for colonial expansion] would seem to be beneficial’[17] insofar as it provides European merchants with ‘two new worlds […] each of them much greater and more extensive than the old one, and the market of one of them growing still greater every day. ’[18] One should not allow Smith’s discussion of the detrimental effects of monopoly formation to obscure the demonstrable emphasis placed upon the importance of Atlantic and, indeed, colonial trade to the economies of 18th century Europe.

Indeed, the Smithian view that trade increases specialization has a good historical pedigree. It is a view vindicated by the experience of the English drapery industry. The increased productivity and international trade, which resulted in 69% of all cloth produced being exported to Europe, doubtless served to catalyze the specialization in these ‘new draperies’ in places like Norwich[19]. It is perhaps, on account of the growing levels of international trade, that the population of London, where draperies equaled 74%[20] of all exports, expanded from 55,000 in 1520 to 475,000 in 1670[21].

What was occurring in the 16th century was the stimulation of the division of labour and commercial growth through European trade, as Allen has correctly pointed out. What was occurring in the 17th and 18th centuries was Atlantic trade sustaining this growth. The countries that engaged in Atlantic trade saw their GDP grow by a factor of two over their non-trading neighbours[22], Britain’s profits from Atlantic trade expanded from a paltry ? 500,000 in 1651 to ? 1. 7m in 1710 and to ? m by the end of the century[23] and, between 1600-1700 the urbanization rates of the Atlantic traders exceeds, for the first time, those of eastern, and non-Atlantic trading nations[24].

The link between the Britain and the Atlantic, like for many other European nations, did not simply represent a trade route between Britain and her colonies but the life blood of British industry. It built upon a trading pedigree, ‘a propensity to truck and barter’, laid during the 16th century, albeit with Europe It created a pattern of trade that would prevail well into the 19th century when 30% of all British exports were destined for the colonies.

The epoch of 18th century British economic development is, therefore, the importance of the Atlantic economy. Whilst it would be absurd to claim France did not benefit from Atlantic trade, when the British blockaded Santo Domingo, for instance, the industrial centre of Grenoble collapsed[25], it would be equally absurd to suggest the French develop as extensive and as effective trade links, with the Atlantic, as their British counterparts had, the value of their exports equaled 38% of the value of Britain’s[26].

When the Hugenots enriched themselves through Atlantic trade the monarchy not only besieged them at La Rochelle but also outlawed the protestant Church and kept much of overseas trading activity as a royal monopoly, principally under Colbert[27]. It is clear that this arbitrary government, in accordance with the Smithian view that it is incumbent upon the state to forge favourable conditions for development, that prevent the formation of effective Atlantic trade links.

French growth was constrained not by the inactivity of the peasantry but by a reactionary government who was unprepared to countenance the prospect of international trade. The fear was, no doubt, that economic expansion, through Atlantic trade, would push the economic base both downwards and outwards, imperiling the Bourbon ascendency. To Louis XIV it would have been no coincidence that those who fought against the English monarchy in 1642 were the likes of the Earl of Warwick who had earned ? 0,000 from Atlantic trade[28] and the cities, who also greatly benefited, of London, Bristol, Liverpool and Manchester.

In the conflict between those seeking to cultivate a trading connexion with the Atlantic and the reactionary conservative interest, for much of the 18th century, the victor was the Bourbon ascendency. In conclusion, therefore, by appreciating the nuances in The Wealth of Nations it is possible not only to apply a Smithian framework to O’Brien’s otherwise flawed contention but also to demonstrate the importance of the Atlantic economy in establishing British predominance.

What the British had secured, in fostering a link with the Atlantic economies, was an expanded market that could provide British industrial and manufacturing interests with the incentives to grow. What the French lacked was not the inability or the colonial might to establish such links but a government prepared to let the fledgling links develop. In short, the British industrial and commercial lead over France was secured in the shipping lanes of the Atlantic, lanes which would stay open in perpetuity.

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