Adam Smith: An Inquiry into the Nature and Causes of the Wealth of Nations (1776)


This Scottish economist was the most influential thinker in the history of capitalist economics, a fact that is all the more remarkable in that he was writing during the earliest phases of the industrial revolution. He is still cited as in support of arguments for an unregulated economy: the less government interferes with business the more prosperous the nation will be, runs this theory. Although not an absolutist (he did recognize that some tariffs were necessary), he generally opposed restrictions on international trade. These arguments have been repeated in recent years in the U.S. in regard to such Japanese imports as automobiles and in the context of debates over the North American Free Trade Agreement (NAFTA) and the General Agreement on Tariffs and Trade (GATT).

Which group does Smith seem to trying most to protect: workers, manufacturers, or consumers?


The Case for Free Trade and Lower Taxes

By restraining, either by high duties, or by absolute prohibitions, the importation of such goods from foreign countries as can be produced at home, the monopoly of the home-market is more or less secured to the domestic industry employed in producing them. Thus the . . . high duties upon the importation of corn, which in times of moderate plenty amount to a prohibition, give a like advantage to the growers of that commodity. The prohibition of the importation of foreign woolens is equally favorable to the woolen manufacturers. The silk manufacture, though altogether employed upon foreign materials, has lately obtained the same advantage. The linen manufacture has not yet obtained it, but is making great strides towards it. Many other sorts of manufacturers have, in the same manner, obtained in Great Britain, either altogether, or very nearly a monopoly against their countrymen. . . .

That this monopoly of the home-market frequently gives great encouragement to that particular species of industry which enjoys it . . . cannot be doubted. But whether it tends either to increase the general industry of the society, or to give it the most advantageous direction, is not, perhaps, altogether so evident. . . .

The natural advantages which one country has over another in producing particular commodities are sometimes so great, that it is acknowledged by all the world to be in vain to struggle with them. By means of glasses, hotbeds, and hotwalls, very good grapes can be raised in Scotland, and very good wine too can be made of them at about thirty times the expense for which at least equally good can be brought from foreign countries. Would it be a reasonable law to prohibit the importation of all foreign wines, merely to encourage the making of claret and burgundy in Scotland? But if there would be a manifest absurdity in turning towards any employment, thirty times more of the capital and industry of the country, than would be necessary to purchase from foreign countries an equal quantity of the commodities wanted, there must be an absurdity, though not altogether so glaring, yet exactly of the same kind, in turning towards any such employment a thirtieth, or even a three hundredth part more of either. . . . As long as the one country has those advantages, and the other wants (1) them, it will always be more advantageous for the latter, rather to buy of the former than to make. It is an acquired advantage only, which one artificer has over his neighbor, who exercises another trade; and yet they both find it more advantageous to buy of one another, than to make what does not belong to their particular trades.

Merchants and manufacturers are the people who derive the greatest advantage from this monopoly of the home market. The prohibition of the importation of foreign cattle, and of salt provisions, together with the high duties upon foreign corn, which in times of moderate plenty amount to a prohibition, are not near so advantageous to the graziers and farmers of Great Britain, as other regulations of the same kind are to its merchants and manufacturers. Manufacturers, those of the finer kind especially, are more easily transported from one country to another than corn (2) or cattle. It is in the fetching and carrying manufacturers, accordingly, that foreign trade is chiefly employed. In manufactures, a very small advantage will enable foreigners to undersell our own workmen, even in the home market. It will require a very great one to enable them to do so in the rude produce of the soil. If the free importation of foreign manufacturers were permitted, several of the home manufactures would probably suffer, and some of them, perhaps, go to ruin altogether, and a considerable part of the stock and industry at present employed in them, would be forced to find out some other employment. But the freest importation of the rude produce of the soil could have no such effect upon the agriculture of the country.


(1) Lacks.

(2) Grains such as wheat.


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This is an excerpt from Reading About the World, Volume 2, edited by Paul Brians, Mary Gallwey, Douglas Hughes, Michael Myers, Michael Neville, Roger Schlesinger, Alice Spitzer, and Susan Swan and published by American Heritage Custom Books.

The reader was created for use in the World Civilization course at Washington State University, but material on this page may be used for educational purposes by permission of the editor-in-chief:

Paul Brians
Department of English
Washington State University
Pullman 99164-5020

This is just a sample of Reading About the World, Volume 2.


Reading About the World is now out of print. You can search for used copies using the following information:Paul Brians, et al. Reading About the World, Vol. 1, 3rd edition, Harcourt Brace College Publishing: ISBN 0-15-567425-0 or Paul Brians, et al. Reading About the World, Vol. 2, 3rd edition, Harcourt Brace College Publishing: ISBN 0-15-512826-4.

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