ADAM SMITH ON THE “WRETCHED SPIRIT OF MONOPOLY” IN THE EAST INDIES TRADE

Abstract

According to Adam Smith, the “wretched spirit of monopoly” dogged the East Indies trade. The regulations that governed the East Indies trade established legal barriers or restrictions to entry and sustained a mercantile community whose interests were “the opposite to that of the great body of the people” (WN IV, ch. iii, p. 494). The East Indies charter conferred a special privilege that shielded the English East India Company from all domestic competition in Asian trade. The East India Company was the complete incarnation of a mercantile system against which Smith had determined to launch “a very violent attack” in Wealth of Nations (Smith 1987, p. 251). Smith’s mistrust of trading bodies like the East India Company was compounded by its having assumed political powers commensurate with the sovereign while still in possession of its monopolistic franchise. Smith’s proposal was, first, to abolish the monopolistic franchise to rid society of “the unfortunate effects of all the regulations of the mercantile system” (WN IV, ch. vii, p. 606), and, second, to reform the East India Company’s administrative duties and functions in the Indian territories. The contention of this paper is that Smith’s call to abolish the East Indies monopoly was inseparable from his appeal for reform of the English East India Company.