Reading Lugard and Adam Smith

Lugard’s The Dual Mandate in British Tropical Africa was published in 1922. It discusses indirect rule in colonial Africa. In this work, Lugard outlined the reasons and methods that he recommended for the colonisation of Africa by Britain. Some of his justifications included spreading Christianity and ending ‘barbarism’ (such as human sacrifice). He also saw state-sponsored colonisation as a way to protect missionaries, local chiefs, and local people from each other as well as from foreign powers.

Also, for Lugard, it was vital that Britain gain control of unclaimed areas before Germany, Portugal, or France claimed the land and its resources for themselves. He realised that there were vast profits to be made through the exporting of resources like rubber and through taxation of native populations, as well as importers and exporters (the British taxpayers actually always made a loss from the colonies in this period). In addition, these resources and inexpensive native labour (slavery having been outlawed by Britain in 1834) would provide vital fuel for the industrial revolution in resource-depleted Britain as well as monies for public works projects. Finally, Lugard reasoned that colonisation had become a fad and that in order to remain a super power, Britain would need to hold colonies in order to avoid appearing weak.

Wikipedia – The Dual Mandate

Lord Lugard of England was a “colonial administrator” for the British Empire tasked with establishing and maintaining control of African and Asian colonies. While direct military occupation of foreign territory was successfully employed by the Empire, it had found that indirect rule through corrupt local officials and clandestine intelligence activity and by establishing international businesses like the infamous East India Company let it obtain foreign resources and cheap labor without having to bear the costs of suppressing the revolutions that direct military occupation were known to incite.

Fredrick Lugard discussed in his handbook the Dual Mandate the methods of indirect occupation of territory, the strategic and business reasons and moral justifications for the activity. Of England’s occupation of Africa – which the region still has not recovered from today – Lugard argued that “England is in Africa for the mutual benefit of her own industrial class and of the native races in their progress to a higher plane.” Ultimately the conquer of Africa was justified by the argument that, since Africa was not as able to mobilize its raw resources as the more highly industrialized superpowers, these resources were wasted on the natives and justifiably owned by the British. The British, in turn for taking the resources, would presumably give some wealth back to Africa as a sort of reparation. Thus the “Dual Mandate”: to do good to Britain and good to the colony.

This analysis was not unique to Lugard or to the British. Every European colonial power justified their colonial ambitions to secure foreign resources and cheap labor with facades of ‘mutual benefit’. In Franch, the term was “Mission Civilisatrice.” In Spain it was called the Spanish Requirement. In reality colonies in Africa, Asia and the Americas were plundered and subject to systemic abuse including genocide, their women subject to rape, and their cultures subject to eradication.

According to Wikipedia, global society has moved on from colonialization. Though colonies existed in their old forms until the late 1900’s, common wisdom is that they have been eradicated – replaced with the nobler and kinder gift of free market liberalization espoused by economic thinkers like Adam Smith, who gets credit in the United States for “being against colonialization, broadly”.

However, reading of The Wealth Of Nations is necessary to understand exactly what this means. In Book IV, Chapter VII Smith argues that colonialization is a wonderful idea but that the way it was practised in the 1700’s required too much regulation and taxation; and that the forms of control used by mother countries to get monopoly access to colony output all together dragged these new economies down. Adam Smith argues that the reason colonies generate so much wealth is because:

The colony of a civilised nation which takes possession either of a waste country, or of one so thinly inhabited that the natives easily give place to the new settlers, advances more rapidly to wealth and greatness than any other human society.

The colonists carry out with them a knowledge of agriculture and of other useful arts superior to what can grow up of its own accord in the course of many centuries among savage and barbarous nations.

Every colonist gets more land than he can possibly cultivate. He has no rent, and scarce any taxes to pay. No landlord shares with him in its produce, and the share of the sovereign is commonly but a trifle. He has every motive to render as great as possible a produce, which is thus to be almost entirely his own. But his land is commonly so extensive that, with all his own industry, and with all the industry of other people whom he can get to employ, he can seldom make it produce the tenth part of what it is capable of producing. He is eager, therefore, to collect labourers from all quarters, and to reward them with the most liberal wages. But those liberal wages, joined to the plenty and cheapness of land, soon make those labourers leave him, in order to become landlords themselves, and to reward, with equal liberality, other labourers, who soon leave them for the same reason that they left their first master. The liberal reward of labour encourages marriage. The children, during the tender years of infancy, are well fed and properly taken care of, and when they are grown up, the value of their labour greatly overpays their maintenance. When arrived at maturity, the high price of labour, and the low price of land, enable them to establish themselves in the same manner as their fathers did before them.

In other countries, rent and profit eat up wages, and the two superior orders of people oppress the inferior one. [But in new colonies]… waste lands of the greatest natural fertility are to be had for a trifle. The increase of revenue which the proprietor, who is always the undertaker, expects from their improvement, constitutes his profit which in these circumstances is commonly very great. But this great profit cannot be made without employing the labour of other people in clearing and cultivating the land; and the disproportion between the great extent of the land and the small number of the people, which commonly takes place in new colonies, makes it difficult for him to get this labour. He does not, therefore, dispute about wages, but is willing to employ labour at any price. The high wages of labour encourage population. The cheapness and plenty of good land encourage improvement, and enable the proprietor to pay those high wages. In those wages consists almost the whole price of the land; and though they are high considered as the wages of labour, they are low considered as the price of what is so very valuable. What encourages the progress of population and improvement encourages that of real wealth and greatness.

Adam Smith arrives at a theory where a colonizing mother country should not tax, impose rent or take profit from developing lands – preferring instead to allow the land to develop as quickly as possible and benefit only from the trade generated by the quickly advancing land.

This “free market system” of freeing colonies of the burden of externally imposed rents, debts, taxes, and profit-seeking is what gets associated with post-colonial international development.

However, it wasn’t long before Smith’s message – even though he hadn’t even opposed colonization itself – was subverted and so-called “free markets” in the so-called post-colonial age became bereft again with the same problems of the old system. The rent of land mother countries used to extract was replaced with rent-seeking privatization of mother country institutions, expats and patriots. Developed country corporations sought the profits that ate the wages necessary for the developing countries to grow in a manner Smith had hoped. Development loans were issued to countries at rates that prevented them from maturing beyond the cheap resource and labor economies beneficial to developed nation needs and Structural Adjustment Programs replace local government public works with ones whose tax goes to the developed world.

The combination of debts, rents, and profit have eaten up wages and opportunities to flourish in developing countries. The most valuable natural resources and infrastructure have become owned by foreign rent collectors. The promises from Adam Smith that quickly industrializing and developing foreign nations should be free from foreign rent were never taken very seriously, even by those who claimed to espouse it.



  1. I had read most of “Wealth of Nations” before realizing it was written from a tax collector’s point of view. It was also published in 1776, was an instant hit, and earned Smith the post of Commissioner of Customs in Edinburgh.

    I have to wonder if our US Framers used it to stage a pseudo-war for independence, with the intent of exchanging one taxing authority for another. Britain won either way, because it could reap the benefits of cheap imports without the costs of maintaining a colony. The mercantilists who funded both sides of the war probably didn’t care who won, and Britain was already stretched thin by debt from its previous wars and its ongoing struggle with France.

    “Wealth” goes into great detail describing the different forms of taxation used by different governments, and Smith mentioned that even the king of England probably could not get away with an income tax, because citizens would resist the invasion into their personal finances.

    The book seems incredibly cold-blooded to me, especially when Smith goes into the cost of labor. The wealth of a nation, he says, ultimately comes down to the annual produce of the land and its labor. Then he goes into all the ways labor can be squeezed to generate more profits, especially for stocks, which he believed should be accorded 10 percent.

    Like everyone of his day, he was fascinated by industrialization, claiming farmers are inefficient and lazy and don’t produce enough fast enough to generate adequate profits for middle-men. The way to increase profits is to squeeze the farmer and his labor enough so that they have to produce more than they need merely to survive.

    We see the modern equivalent today, a collaborative arrangement by the governments and corporations, to squeeze the “commoners” who do the work, to the point of desperation, under the pretext of helping them.

  2. PS. Smith also says that when land is scarce and labor plentiful, owners can afford to pay less in wages, as was the case in Europe. However, when land is plentiful–as in the Americas or Africa–and labor scarce, wages go up, and laborers can then afford to buy land of their own, which is to be avoided if you stand to profit on the backs of others.

  3. Thanks for an interesting, thought-provoking summary. So many ideals from 1776 still prevalent in neo-liberal capitalism today, a desperate attachment to a sort of “eternal growth” turning the present into a nightmare, as the complexities of a technological age run far ahead of human understanding.

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