1.19 Colonies and Their Products
Colonies represent a peculiar and particular situation of government expansion, a state of existence between foreign and domestic status.
Where a foreign land has a good that are desired in a given nation, the nation may trade with the people of that land to obtain it, or seize it by military force, and there is no governing relationship with that land.
Where there is no productive capacity in a foreign land to convert or harvest its natural resources, a government may establish a plantation or factory; and where there is insufficient population to engage in productivity, it may send its own citizens. At some point, the government sees fit to consider these facilities to be the property of the state, and the people to be subjects (though often not citizens) of that state.
Events in recent years lead Say to suggest that this is a transitory state, in that colonies tend to form a national identity and seek to govern themselves, at which time the state must contend with them as a foreign power and engage in trade or use military force in an attempt to seize their resources and subjugate their people.
In ancient times, the colonies of a nation were seen as expansions of that nation: those Romans and Greeks who colonized distant lands remained citizens of equal status to those who remained at home, and had full ownership of their resources and authority over their operations and trade. A colony would become a settlement, and eventually part of the empire.
In his time, European states look upon colonies with a parasitic eye, seeking to subjugate colonists, even those who were once citizens, to their rule and demand them to work to produce goods that will be sent back to the mother nation without just compensation. They may have no ownership of their land, no authority to freely trade their own product, and no rights as citizens. A penal colony is a prison camp of forced laborers; any other colony differs in name only.
By their system of colonization, the ancients "made themselves friends all over the known world." Whereas the modern system has made enemies of their colonists and neighbors alike.
Generally, colonies are established where there is a great abundance of natural resources. Colonists bring with them the knowledge of how to cultivate and make productive use of these resources, and generally make good use of virgin lands, resulting in rapid prosperity. It is because of this excellent opportunity to be productive and generate wealth that citizens will part from their native land, abandoning the comforts of civilized society and the friends and relations of many years. They are adventurers who believe the rewards to be well worth the risk and inconvenience, a motivation familiar to an entrepreneur on domestic soil.
All of this is generalization, as the relations between a mother country and its colonies is highly variable. What seems to be constant is that the colonies are generally populated by producers who furnish goods to the market. The rights and privileges of colonies can vary as much as those of producers who reside within the nation's nominal geographic demesne: and the problems are entirely similar in terms of subsidies, tariffs, taxation, and restriction by government of their economic activities.
Say digresses to the topic of slavery, as it is quite common for there to be compulsory labor in foreign nations, whether by indentured servants or prisoners who hail from the mother country or slaves taken from Africa or India. In economic terms, the slave is less costly than the free laborer, resulting in cheaper production.
Various sources (Smith, Turgot, and Stewart) have disputed the value of slave labor, considering that the slave is less productive than the freeman and the difference in cost of labor (for while slaves receive no wages, they must be housed and fed at the cost of their master) is offset by the difference in output. The incidence of slavery in practice does not bear out in favor of paid laborers as readily as theorists would suggest, or the practice would have long since been abandoned. The arguments that oppose slavery, which the author supports wholeheartedly, are supported more by morality than accounting.
Returning from this digression: the system of colonialism is based on compulsion and restriction of trade, which is implemented in one degree or another: colonials may be given incentives to produce or restrictions to trade with nations other than their mother country - but ultimately the equation must work out in favor of the colony, or the colonists would revolt or abandon it.
To domestic consumers, colonization is attractive because it provides cheap and plentiful goods. The broader consequences are the same as competition between domestic producers and subsidized foreign producers: colonial goods are cheap and plentiful, which is detrimental to producers in the mother country. Unemployment and the collapse of industries that are not competitive with colonial goods are the result.
A special case exists when the product of a colony is not consumed in the mother country, but re-exported to other nations/ Perhaps England supposes that by exporting colonial grain to France, it will destroy the agricultural infrastructure of a rival. However, exportation may happen many times over, such that if colonial grain is sufficiently cheaper than domestic in England, grain shipped to France may be traded to England, directly or through a proxy such as Holland, and the net effect is not eliminated - though the benefits and detriments are spread among the nations involved in trade triangles.
There is also the economic cost of maintaining and defending colonies to consider, which is borne by domestic taxpayers. The author points to accounting done by colonial governors (Poivre of Isle de France, Mautirus of Bengal) that demonstrate the immense expense to the mother country that well exceeded the savings of goods produced.
In economic terms, England benefited greatly by the loss of the North American colonies. The cost of efforts to retain them during the revolution was calculated at 335 million dollars, and even had the effort succeeded, it would likely not have been recovered. Napoleon made a similar blunder in attempting to preserve St. Domingo. "It is high time to drop our absurd lamentation at the loss of our colonies" and recognize that the people of Europe are more greatly benefited by trading with them as free nations.