Smith on Colonialism and Empire
Smith was one of the earliest and most systematic critics of European colonialism, arguing that empires impoverished both colonies and mother countries.
Empire as Bad Economics
Smith devoted substantial portions of The Wealth of Nations to arguing that colonial empires were a terrible investment. The cost of defending, administering, and policing colonies far exceeded any revenue they generated. Britain's American colonies, he calculated, cost the mother country enormous sums in military expenditure while the monopoly trade they provided benefited only a narrow class of merchants.
The colonial system, Smith argued, was mercantilism at its worst. Colonies were forced to buy manufactured goods only from the mother country and to sell raw materials only to the mother country. This double restriction raised prices for colonists, limited their economic development, and distorted investment patterns in Britain itself by channeling capital into privileged colonial trades rather than more productive domestic uses.