1807-40] The West Indies. — American trade 761

Meanwhile the old Dutch commerce with the Malay islands had revived. The spice trade of the Moluccas dwindled into insignificance; but its place was more than filled by the rapid growth of the new trade in coffee and other tropical produce from Java. Capable governors organised there a curiously artificial system of forced labour and strict monopoly, which, whatever its merits as a method of government, clearly gave new economic strength to the Dutch colonial empire, and to Amsterdam and Rotterdam something of their ancient activity.

Comparable to the development of Java, and of greater importance for international commerce as a whole, was the new phase in the history of the West Indies that began with the freeing of Cuban trade by Spain in 1809. After the ruin of San Domingo, Jamaica for a time held the first place among the sugar colonies. But the stopping of the slavetrade in 1812, followed by the abolition of slavery itself twenty years later, helped to throw back the English islands and free the way for the rise of Cuba and Porto Rico. The land of Cuba was still virgin; English capital was offered abundantly to bring it into use; the population of the island nearly trebled in a generation; the tobacco industry was created; and by 1830 Cuba alone was supplying almost a fifth of the sugar consumed in Europe. The story of Brazil is not unlike that of Cuba. There, owing to English influence, trade was thrown open when the Portuguese royal family crossed the Atlantic in 1807. The tutelage which Great Britain had exercised over Portugal was extended to the new dominion, and carried with it the advantages of commercial connexion with the world's greatest market and a supply of British capital for the extension of coffee-planting, cotton-growing, and other less certain undertakings. In both Brazil and Cuba, as in the United States, the demand of Europe for tropical produce directly encouraged the consolidation and extension of a society based on slavery, with its evil economic and social consequences.

Towards the end of the first quarter of the nineteenth century the insurgent Spanish colonies of the North and South American mainland were also opened to European trade. Here too was England's opportunity and for a time she had few competitors. By gradually easing the bonds of the old colonial system and relaxing the Navigation Acts she also encouraged, though grudgingly, the natural intercourse between the new nations of America and her own American dependencies. As the New World took shape and gained strength, political and economic, it began to exercise trade influence on Europe greater than had been known since its precious metals deranged prices and perplexed statesmen in the sixteenth century. The young republics borrowed as freely as they sold and bought. Already in 1825 speculative trading with America had thrown the commerce of England out of gear; while before 1840 all the markets of Europe had felt, and for the first time, the effects of American manipulation of the cotton

762 Emigration [1815-50

supplies and the discomforts of that world-wide division of labour whereby one continent grows what another works.

Among the immediate results of the whole course of economic, legal, and political change in Europe and out of Europe, none was of greater significance or more intricately connected with all the complex forces that ruled the new age than the great flow of men outward from Europe that set in as the great wars ceased. It was an emigration such as the modern world had not before known. Population, held down in many countries by war, showed astonishing recuperative and expansive power. In the United Kingdom even war had done little to check its growth. The ties of law or custom that held the peasantry of Europe to the soil were falling away. Restrictions on emigration failed or were swept aside. The barriers round the old Spanish dominions fell. Even Africa began to open. Travel became easier year by year; and the unoccupied lands and the young trades of four continents gave room for industry and skill.

For the first fifteen years of the peace the movement of the population was, in the main, a movement from Great Britain to North America. In Britain employment was insufficient and wages low, both in the cities and on the land; trades and towns and classes were in the grip of the great changes ; and political discontent came to aid the economic forces that were driving the people from home. According to the official figures, which however are undoubtedly too low, the average annual emigration from the United Kingdom for the five years 1820^ was just over twelve thousand ; for the years 1830-4 it was sixty-five thousand. The continental emigration was also mainly directed towards America; but it began late and gradually, and it is hard to measure. It is known that some fifteen thousand Germans landed yearly at United States ports between 1830 and 1840; but in the earlier years of that decade the numbers were small. Of the Germans who went to other countries — and they were many — there are no adequate records. From the United Kingdom the movement was accelerating in the thirties. Schemes for systematic colonisation were on foot; but their numerical results were inconsiderable. North America retained its vast attractive power; it was not until 1838 that more than five thousand British emigrants turned elsewhere in any one year. From France and Belgium, Holland and Scandinavia, Spain, Italy, and eastern Europe, emigration was slow before 1840. It gathered speed from Switzerland and Scandinavia in the forties; and in the early fifties even lands with but a small natural increase of population contributed to the stream. From the United Kingdom it was reaching full flood, for the Irish exodus had begun and the new gold of the west and south was drawing men away over seas.

CHAPTER XXIV

THE BRITISH ECONOMISTS

The Wealth of Nations was published in 1776. The work was based on lectures which formed part of Adam Smith's course of Moral Philosophy when Professor in the University of Glasgow (1752-63). After resigning his Chair, Smith travelled on the Continent for three years as tutor of the Duke of Buccleuch. A considerable part of the time was spent in Paris, where he made the acquaintance of Quesnay, the founder of the Physiocratic system, which Smith described as " with all its imperfections perhaps the nearest approximation to the truth that has yet been published upon the subject of political economy." On returning to Scotland, Smith settled at Kirkcaldy, and for the next ten years devoted himself entirely to the composition of his great work. It ran through several editions during his lifetime; but, although he made many small alterations, he introduced no substantial changes and only added one new chapter.

The social conditions and institutions of his time (1723-90) which chiefly affected, or modified the proportions of, " the wealth of nations," were, first and foremost, the survivals of medieval regulations and ideas in the governmental management of home industries and the predominance of the Mercantile System in foreign trade and colonial policy. In consequence, a large part of the work of Adam Smith was critical and destructive. " Laws frequently continue in force long after the circumstances which first gave occasion to them, and which could alone render them reasonable, are no more." Large estates, supported by primogeniture and entails, might have been necessary under the insecurity of the feudal system; but in the actual state of Europe the proprietor of a single acre was as secure as the proprietor of 100,000. The survivals of feudal institutions checked the improvement of agriculture. " After small proprietors, rich and great farmers are in every country the great improvers." Feudal survivals checked the subdivision of land and the establishment of peasant proprietors and yeomen, and checked also the investment by large tenant farmers of capital in land. Smith allowed that the land system in England was less hurtful than that prevailing in most parts of

764 Adam Smith's Wealth of Nations [1776

Europe; but he is hardly just to the " spirited landowners " of the seventeenth and eighteenth centuries. The reform of the land laws has, however, proceeded in England on the lines laid down by Adam Smith ; freedom of transfer has been promoted, settlements have been restricted, and the security of the tenant's capital has been increased. Cobden declared that in the reform of the English land laws he would rely entirely on the teaching of Adam Smith. Labour, like land, in Adam Smith's opinion, remained in fetters or in leading-strings no longer required. The Statute of Apprenticeship (or Artificers), 5 Eliz. cap. 4, and the customs which enforced the same ideas, imposed restrictions on the advancement of labour; and the " ill-contrived " laws of settlement limited its mobility. Combinations of masters were tacitly if not openly permitted, while those of labour were suppressed. Adam Smith advocated free trade in labour as in land.

With regard to capital, although he held strongly that, from the national stand-point, there were differences in the relative advantages of employing capital in different ways, he still considered that the direction of private people as to the employment of their capital could be "safely trusted not only to no single person but to no council or senate whatever." His view that the State should not attempt to direct the employment of capital is the more remarkable because he did not think profit, by which individuals are guided, was the measure of national advantage. On the contrary he maintained that, with equal or nearly equal profits, there might be great differences in national advantages. The most remarkable illustration of this doctrine is the argument that the monopoly of the colonial trade had, by raising the general rate of profit, affected adversely the national interests, and even the separate interests of the three great classes which make up the nation —labourers, capitalists, and landlords. Of all employments of capital, that in agriculture was by him considered the most advantageous to a nation ; but " those systems which, preferring agriculture to all other employments, in order to promote it impose restraints on manufactures and foreign trade, act contrary to the very end which they propose and indirectly discourage that very species of industry which they mean to promote." Adam Smith condemned equally the laws intended to prevent speculation and those designed to regulate the inland trade in corn; he condemned alike the bounties intended to encourage the export of corn and the extension of the area under cultivation, and the restraints on the importation of foreign corn.

The main part, however, of Adam Smith's criticism was directed against the regulations framed for the management and direction of foreign and colonial trade, which are generally summarised under the title of the Mercantile System. In his Fourth Book he examined the foundations of this system, especially from the point of view of the encouragement alleged to be given to home labour and the promotion of native industries. He attacked the general theory of the balance of

1776] The Mercantile System. — Colonial policy 765

trade, and then examined in detail, with an abundance of historical and statistical illustrations, the various expedients by which it was sought to attain a favourable balance: restraints on imports, encouragements to exports, commercial treaties, and the exploitation of colonies. It has been well said by Adolf Held that any one who reads the Book carefully will find in it a wonderful picture of the whole social relations and of the state of the economic and financial legislation of England about the middle of the eighteenth century—and he might have said, not only of England, but of the whole world. On surveying mankind from China to Peru, Adam Smith discovered an enormous mass of what he considered useless or harmful regulations, not merely, as is so often supposed, from what List calls the cosmo-political point of view, but from that of the various nations concerned. He set himself to cut away these growths and give free play to the natural economic forces. And the conclusion of the Fourth Book is that, "all systems either of restraint or preference being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord."

This passage, divorced from its context, has often been quoted to show that Adam Smith was the founder and supporter of the most extreme form of laisser/aire. But, before examining this popular error, it is desirable to recall briefly other historical conditions and events by which his work was naturally influenced. While he was living the life of a recluse at Kirkcaldy, on one side of the world the British Colonies was being driven to rebellion, and on the other the races of India were being brought under British dominion. Naturally some of the longest and best chapters in the Wealth of Nations deal with British policy as regards the Colonies and India. No part of his work is better calculated to show that Adam Smith did not consider it the duty of British statesmen simply to let India and the Colonies look to themselves. On the contrary, as a basis of colonial policy, he expounded a most elaborate and far-reaching scheme of imperial federation involving imperial taxation with imperial representation ; and, as regards India, he maintained strongly that a company of merchants was unfitted to exercise the functions of government. With respect to European policy, the most noticeable feature of Adam Smith's position is his advocacy of better trade relations with France. Until his time the commercial relations of the two countries had been marked by animosity and distrust, evidenced by heavy duties and prohibitions. The treaty negotiated by Eden (1786) was the direct outcome of Pitt's approval of Adam Smith's teaching, though the wars which ensued from political causes did not permit the fruits to be seen. Adam Smith also strongly approved of a union with Ireland on the lines of the union with Scotland. " By a union with Great Britain, Ireland would gain, besides the freedom of trade, other advantages much more important, and which would much more than compensate any increase of taxes that might accompany that union."