HomeLiterature Study GuidesThe Wealth Of NationsVolume 2 Book 5 Chapter 3 Summary

The Wealth of Nations | Study Guide

Adam Smith

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The Wealth of Nations | Volume 2, Book 5, Chapter 3 : Of Public Debts | Summary

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Summary

In this rather anticlimactic final chapter, Smith describes the history of Great Britain's national debt and offers some suggestions for repaying it. According to Smith, such debts "oppress, and will in the long-run probably ruin, all the great nations of Europe." Thus, finding an immediate solution becomes imperative. Returning to his discussion of taxation from the previous chapter, Smith identifies a higher tax on luxury goods—specifically, sugar, rum, and tobacco—as the most probable scheme by which to repay the debt in a reasonable amount of time. This tax, he points out, would be easier to implement in the American colonies if those colonies were united with Great Britain and more fully incorporated into its system of government. To this end Smith proposes a union similar to the one effected between Scotland and England in 1707.

If a source of revenue cannot be found, however, the remaining option is for Great Britain to cut back on its expenses. Divesting the American colonies is, in Smith's view, the easiest way to do this. Those colonies (as described at greater length in Book 4, Chapter 7) are a huge money drain, especially in wartime, and they have so far been made "made to contribute towards the support of the whole empire." Smith argues, "it is surely time that Great Britain should free herself from the expense of defending those provinces ... and of supporting [them]."

Analysis

Smith's magnum opus ends on a sobering, even depressing note—Great Britain is not as wealthy as it has long pretended to be. In fact, the work's final sentence is devoted to pointing out "the real mediocrity of [Britain's] circumstances," and urging a tightening of the collective belt. Although parting with the colonies seems the obvious strategy to Smith, he also acknowledges this is a painful step to take, since it means coming to terms with Britain's financial "mediocrity," rather than continuing to live in a state of ruinous opulence. As it happened, however, Smith's readers would not have to deliberate very long regarding the fate of the American colonies, as they were in the process of setting up an independent government as The Wealth of Nations went to press.

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