Adam Smith’s Defence of Empire: A Note

Abstract

Recent historiography has alleged inconsistencies in Adam Smith’s views on the British Empire. First, Smith opposes the British Empire because it was established for rent-seeking merchants eager to monopolize the colonial trade; second, Smith supported the Empire because it underwrote a global free trade regime that expanded the market for British goods and services, increasing trade, specialization, and the international division of labour; third, the British Empire served a valuable military purpose in the expansion and security of worldwide British interests. This note argues that Smith’s views on the British Empire can be reconciled by focusing on the beginnings of Britain’s imperial project in Asia. In North America, the British Empire expanded under the colonial system, while in India the system of exclusive companies was the driving force. Smith recommended the abolition of the East Indies monopoly. However, the East India Company was unlikely to survive without its monopoly privileges. Therefore, Smith proposed an alternative solution for the Company’s governance of the Indian territories. The Company would retain its joint-stock status while discharging the three duties of the sovereign as a representative of the British state, a proposal which is consistent with the system of natural liberty and justice Smith avowed.