The commercial system which was Adam Smith’s enduring object of investigation – he described the Wealth of Nations, in a letter to a Danish-Norwegian friend, as the ‘very violent attack I had made upon the whole commercial system of Great Britain’ – was from the outset a system of long-distance or global relationships. Approximately one third of the Wealth of Nations is about empire, or at least about the American, African and Asian commerce which was so intricately entangled, in Smith’s description, with the 18th-century European empires. Of the two quarto volumes of the first edition of 1776, the first begins with an elegy to long-distance exchange, including the commerce between London and Calcutta. The second volume is largely concerned with the regulation of overseas commerce and with government policies, especially in relation to commerce, taxes and foreign wars. The Additions and Corrections which Smith published in 1784 as a slim, separate volume and which begins abstractly and audaciously – ‘Wealth, as Mr Hobbes says, is power’ – is almost entirely about overseas commerce, including bounties, elephants’ teeth and East India companies.

These disquisitions on commerce are not easy to read and they are not often read. There have been distinguished studies of Smith’s colonial writings, particularly in relation to the Atlantic colonies. But the pages in which Smith considers the sealskins of the British Greenland fishery or the importation of undressed flax or a pamphlet called Memoirs of Wool or the constitution of the Turkey Company are among the most obscure corners of the vast forest of Smith’s mind.

There are at least two reasons that Smith’s posthumous renown has been so little concerned with overseas or long-distance commerce and empire. One has to do with Smith’s canonisation in the now old-fashioned history of economic thought – the history practised by economists or political theorists more than by historians – in which Smith has become a timeless and placeless founding figure; a detail-less figure, in a sense, as is appropriate for the supposed founder of a political economy which abstracts from the circumstances of economic activity, with the exception of market exchanges, and from the circumstances of individual agency, with the exception of economic interests.

The second reason is rather different and has to do with economic history (of a perhaps also more or less old-fashioned sort). Smith has been canonised, too, as the founding figure of the (national) economies which were supposed to have been discovered, in the large states of Western Europe, in the mid to late-18th century, and of a corresponding science of (national) economic policy; of ‘the wealth of nations’. The extension of national transport, communications and the banking institutions that Smith described as a ‘highway through the air’, together with the new ideas of interconnected markets associated both with Smith and with the French Economists of the mid-18th century, amounted, in one of the familiar narratives of long-term economic history, to the invention of the economy. The new national economies, especially in England and France, were the location, in turn, for the transformation which has been the central preoccupation of economic history for more than a century; or the Industrial Revolution, and its antecedent ‘economic’ revolutions. Smith has been taken severely to task for not writing enough about the early signs of industrial change in his own lifetime, from his birth in 1723 to his death in 1790; in Charles Kindleberger’s words, ‘he should have known about’ the Industrial Revolution. But the narrative of economic growth is still profoundly Smithian, in the sense that it is a story of how nations become rich.

To see Smith in his own contemporary context is to have a very different view of why long-distance commerce was so important to his understanding of economic change, and even of the principles of economic policy. Smith worked on the Wealth of Nations over the period, very roughly, from the end of the Seven Years’ War in 1763 to the end of the American Revolutionary War in 1783. This was a time of political transformation in North America and in India, where the moment to which can be dated the British Empire in the East (in Lord Macaulay’s triumphalist expression) was the assumption by the British East India Company, in 1765, of the diwan or financial administration of Bengal, Bihar and Orissa. It was a time, too, of economic transformation in European commerce with Asia and in the Atlantic slave trade, which increased dramatically after 1763 to a peak in the 1790s (and an eventual zenith, or nadir, in 1829). One of Smith’s favourite students, who was closely involved in both the East and the West Indian commerce, spoke in 1772 of ‘these golden times’.

It is interesting that the earliest publications which were actually about Smith were concerned, in general, with his writings on empire. The first work in which Smith was named in the title was thus a defence of the continental colonies by a Virginia publicist, who criticised Smith for having ‘exalted into heroes’ the African slaves (in his first book, the Theory of Moral Sentiments) and ‘debased into monsters’ the American colonists. The Africans were in the view of Smith’s critic characterised by ‘universal depravity and barbarism’ and the native American ‘savages’ were ‘atrocious’, ‘perfidious’, ‘cowardly and cruel’. The colonists of Virginia, Maryland and the Carolinas were, by contrast and despite the oppressions of colonial policy, ‘descended from worthy ancestors, from whom he has not proved them to have degenerated’.

The second work in which Smith was named in the title was a Letter to Adam Smith, published in 1776 by a former governor of Massachusetts. This, too, sought to defend the colonial system against Smith’s contempt and his supposed support for a ‘dismemberment of the empire’. The American monopoly is not an ‘invidious and malignant project (as you stile it)’, from which ‘Great Britain derives nothing but loss’, the author wrote; ‘I do not see the malignancy of the principle of a monopoly’ even in respect of commercial opulence, he concluded, and in respect of ‘sovereign power’ it was ‘indispensable’.

The third publication in the title of which Smith is mentioned was the response in 1777, by one of the chaplains to King George III, to Smith’s account of the tranquil death of his irreligious friend David Hume. The fourth work, a Candid Examination of the East-India Company, which was published by the poet William Julius Mickle in 1779, was once again a criticism of Smith’s views of global and colonial commerce. Smith’s error, for Mickle, was to have sought the abolition of the East India Company and to have promoted a system of ‘voluntary, unconnected settlers’ and a ‘free trade with Asia’. Smith was completely ignorant, in Mickle’s account, of the insecurity of the commerce with the Indies. ‘It is, according to the Doctor, as safe to settle in and trade with India as to take a counting-house near London-bridge or to buy a peck of peas at Covent Garden.’ His schemes of reform were unrealistic, in that they would either relegate the East India merchants to the political protection of Indian sovereigns or require, eventually, the establishment of an elaborate political-military establishment in India by the sovereign of Great Britain. Smith’s own milieu provides a different sort of illustration of his involvement with long-distance commerce. Smith was surrounded, from his earliest childhood, by families in Scotland with commercial and colonial connections. His oldest friend in his home town of Kirkcaldy was commissioner of the navy and an expert on East Indian affairs; the friend’s son was the secretary of the Leeward Islands in the West Indies. David Hume, who was Smith’s closest intellectual friend, worked as a young man for a Bristol sugar trading company and set out, in 1746, to make his fortune in America (he was detained in the English Channel by unfavourable winds). Smith’s student who talked about golden times was one of seven brothers, from a family of lawyers in the West of Scotland, of whom three became officials of the East India Company, one was governor of West Florida and four became proprietors of sugar plantations

Smith’s Danish-Norwegian friend, to whom he wrote about the commercial system of Great Britain, was an official of the Danish commercial college at a time of frantic reform in Danish overseas commerce, with a new charter of the Asiatic Company in 1772, and a period of almost entirely free trade to India, overseen by the college. His friend’s two pupils, who were Smith’s other Danish acquaintances, were later involved in colonial commerce, one as a director of the Asiatic Company and the other as governor of the Danish colony of Tranquebar in South India.

Smith had a very clear conception, in this setting, of the economic world of the mid-18th century as a unity or, in his own expression, of the course of prosperity in ‘the whole globe of the earth, of which the wealth, population and improvement may be either gradually increasing or gradually decaying’. The ‘communication’ of commerce was like an immense and global body of water, in David Hume’s description, such that, without new precious metals from America, ‘money would soon sink in Europe and rise in China.’

But the economic geography of the times, or the sense of who was rich and who was poor, was strikingly different from the geography of even 50 years later. As Hume also wrote, in 1750, ‘a Chinese works for three halfpence a day and is very industrious. Were he as near us as France or Spain, everything we used would be Chinese.’ India, too, was, for Smith’s contemporaries, an industrious and opulent country. Its ‘home market’ was ‘very great’, in Smith’s own description, and Bengal, in particular, was ‘remarkable for the exportation of a great variety of manufactures’. A German-Dutch-English-Swedish official of at least three different East India companies, who was one of Smith’s sources, described Bengal as a land of ‘many millions of civilised, inoffensive and industrious inhabitants’, and even of a lost society of industry and exquisite muslins, in which ‘by the Gentoo [Hindu]-accounts, the former manufactures in Bengal were incomparably finer than anything now produced’. Bengal was described in the House of Commons in 1772 as a ‘paradise of the earth’, whose ‘superfluity’ of ‘very curious and valuable manufactures’ is ‘sufficient for the use of the whole globe’.

The mid to late 18th-century period of early globalisation, together with the unfulfilled expectations of the times, is of great historical interest in understanding early political economy in its context. It is of interest, too, in relation to the economic history of the industrial, industrious and institutional revolutions of the immediately pre-industrial world. It is of interest, above all, for a ‘new’ new economic history, which is open to different kinds of economists and different kinds of historians, including intellectual, cultural and transnational historians, historians of science and technology, historians of energy and the environment, who are all, to some extent, historians of connections that traverse frontiers of nations and languages.

But the more abstract questions raised by Smith’s writings on long-distance commerce are also of interest and even of importance to our own 21st-century times, and to the understanding of contemporary capitalism. For Smith’s arguments about free trade and regulation, in their 18th- century setting of overseas connections, raise four very serious difficulties: about the political conditions for free trade, the morality of long-distance relationships, the uses of money in politics and the values of commercial societies. All of these difficulties have to do, in turn, with a continuing tension in Smith’s own system of freedom that, on the one hand, there are political, legal, historical and perhaps also psychological conditions for the flourishing of free commerce; and, on the other hand, that the conditions for these antecedent conditions are either obscure or unfree, or both, and nowhere more so than in respect of commerce that crosses political and legal frontiers.

The first difficulty has to do with the political conditions for the flourishing of free trade, and in particular with those conditions which necessarily involve the political institutions of more than one society, because the trade itself extends across the frontiers of societies or states. Smith believed that long-distance commerce was the source of increases in opulence, and that ‘order and good government’ – the ‘equal and impartial administration of justice’, ‘the liberty of every individual, the sense which he has of his own security’ – was the most important condition of such opulence. But long-distance commerce required one of three sorts of ‘order’ if it was to be tolerably secure. The first was the order which is provided, in distant societies, by the political institutions of those societies themselves; this was the objective of the English East India Company before the 1760s and it was the recourse of Smith’s friends among the French Economists, who recommended French merchants trading with the East Indies to the protection of the ‘Indian princes’. The second was the order provided by the sovereigns of the merchants’ own society; this was the recourse of empire, in a military and political sense. The third was the order provided by institutions that transcend the frontiers of existing political societies; this was the idyll of an oceanic government, or a world assembly, with which so many 18th- century figures, including Smith, were so intrigued.

The poet William Julius Mickle’s criticism of Smith was a work of the moment, full of misrepresentations and misquotations. But it pointed to an awkwardness in Smith’s system, which was that he was not willing, in his writings on the East India Company, to endorse any of these three possible orders. He was respectful of the ‘Mahometan government’ of Bengal, without being prepared to confide to it the orderliness of British commerce. He was in favour of an expansion of the role of the British sovereign in India, without considering the extent to which this would bring with it all the ills of empire which he elsewhere denounced. He was intrigued by systems of government across frontiers but identified them as no more than utopias. It is interesting that the very first extended debate about free trade after the publication of the Wealth of Nations was in fact the debate which Mickle entered over a ‘free trade with India’. It was not a debate in which Smith was in any evident sense the victor.

The second difficulty of Smith’s system is more profound. Smith was an eloquent critic of the ills of empire, including the ills of slavery in which so many of his friends were inculpated. The passage in the Theory of Moral Sentiments to which Smith’s Virginian critic so objected, about magnanimous slaves and their sordid masters, is an example of Smith’s own philosophical method of sympathy; of seeing moral choices with the eyes of other people, or ‘changing places in fancy’. So is the passage in the Wealth of Nations in which he inverts a celebrated eulogy to commerce by the French writer, the Abbé Raynal: ‘to the natives, however, both of the East and West Indies, all the commercial benefits… have been sunk and lost.’ There is no question in the case of Smith, unlike in the case of David Hume, that the universal human nature to which he alludes so frequently is the human nature of all individual human beings, including the individuals whom he describes as ‘natives’ or ‘savages’.

But Smith’s system of seeing oneself in other people’s eyes or from other positions or in other situations is not, in any straightforward sense, a system which has room for extremely distant people. There are passages, certainly, which have been taken to indicate that Smith in his many references to ‘other people’, including people who see our sentiments ‘at a certain distance from us’, intended to extend the universe of reflection to persons who are very unlike ‘ourselves’. Smith was himself highly conscious of the difficulty of sympathising with or even observing very dissimilar people; as in his observations on the different senses in which a man might sympathise with a woman in ‘child-bed’ or on the ‘man of humanity in Europe’ who hears the terrible news of an earthquake which destroys the empire of China. But the system of sympathy could not easily be both a system of continuing conversation and a system which included very distant individuals. This is the problem of who it is we see in the many mirrors of the self. It is a problem which is particularly poignant if Smith is set in his own world of friendship in the new British empire.

The third problem goes to the heart of Smith’s system of laissez-faire, or his violent attack on the commercial system of Great Britain. Smith’s critique of government regulation turns, in general, on the uses of money in politics and, in particular, on the uses of money to buy the political regulation of complicated institutions, including ideas and information about regulation. The class of merchants, or men who live by profit, is distinguished, in Smith’s description, by their superior understanding, including but not confined to their understanding of their own interests. They are sometimes deluded about these interests and their interests only infrequently correspond to the interests of the society or of an eventual larger global society. But they are effective in pursuing what they take to be their interests; on occasion by intimidating the legislature and on occasion by persuading with ideas or intellectual systems.

Smith’s critique of regulation is quite general, in the sense that he identifies the political uses of money in local and domestic as well as long-distance disputes. But it arose in the most intense form in respect of the regulation of long-distance commerce. For it was the regulation of the East India Company that was an enduring object of political discussion in England over the period in which Smith was completing the first edition of the Wealth of Nations – more so, at least until 1774, than the conflict with the North American colonies – and it was the East India Company and its own advisers who were the best informed experts on East Indian affairs. ‘Whenever the legislature attempts to regulate the differences between masters and their workmen, its counsellors are always the masters,’ Smith wrote of domestic disputes; and the counsellors of the legislature in East Indian regulation were the factions of the East India Company. The company was itself a ‘fluctuating democratic’ society of traders, in a contemporary description. But its advisers, like the advisers of the politically connected monopolies of modern societies, included the eminent theorists of the times: Sir James Steuart and Adam Ferguson, in Smith’s time, and a generation later, James and John Stuart Mill.

Smith’s critique of the influence of ‘masters’ on the policy of Europe is extraordinarily harsh. Their theories were the outcome, in general, of the ‘private interests and prejudices of particular orders of men’, elaborated into vast systems of the ‘general welfare of the society’. The sophistry of merchants was such that they were highly successful in persuading other people – legislators, princes, the endlessly imposed-upon country gentlemen – that their own private interests were identical with ‘the general interest of the whole’. The policies they supported were inspired by ‘mean rapacity’, by the ‘monopolising spirit’ and by ‘impertinent jealousy’. They had increased in political power in England to the point where ‘like an overgrown standing army, they have become formidable to the government and, upon many occasions, intimidate the legislature.’ The member of parliament who attempted to oppose them was subjected to the ‘most infamous abuse and detraction’, arising from the ‘insolent outrage of furious and disappointed monopolists’. The ‘sneaking arts of underling tradesmen’ were expressed with ‘all the passionate confidence of interested falsehood’. This was the consequence of money in politics and, in particular, in the politics of long-distance commerce.

The fourth and final difficulty is the most elusive and the most important. For it has to do with the values of a commercial society or the mildness and moderation on which Smith’s system depended, even more than on the political institutions of security of property and of the equal and impartial administration of justice. These interior virtues, too, have been rediscovered in the early 21st-century period of economic self-inquiry (over the future of political economy and the future of capitalism) and they were at the heart of Smith’s theory. Smith, like Hume, was a dispassionate observer of private interests and prejudices. But he expected that the ordinary exchanges of commerce and conversation would have the consequence, over time, of changing and improving individual dispositions. The relations between buyers and sellers, or masters and servants, would become less violent. Even the relations between societies or between distant individuals would be less warlike. There would be less heroism and more kindness.

The benign expectations of Smith and the other philosophers of the Enlightenment were the subject, even in their own lifetimes, of bitter criticism. The French economists’ policies of deregulation, which Smith celebrated in the 1770s, were likely to have the consequence, in the description of their critics, of emancipating dangerous and disorderly young men and of endangering the moral foundations of social order. Less than a generation later, after the French Revolution and after Smith’s own death, Smithian policies of freedom of commerce were inculpated in the even more momentous charge of having contributed to violence and revolution by destroying respect for social institutions. Competition and the pursuit of self-interest made individuals more rather than less vicious; more terrifying to each other, in the description of a French critic, than the ‘cayman of the Ganges and the tiger of Zara’. The only recourse, for  Smith’s early 19th-century critics, was a reconstruction of society and an end to moral as well as economic laissez-faire; an inculcation of religion, obedience and respect for the established order.

The awkwardness of Smith’s expectations about the values of commercial societies were particularly evident in respect of long-distance commerce and conquest. Holland was a sombre and prudent society, in Smith’s description, where it was ‘unfashionable not to be a man of business’; while, in the East Indies, the Dutch were experts in the ‘arts of oppression’ and in the ‘perfectly destructive’ system of colonial violence. Smith’s and Hume’s confidence in the mildness of commercial society was founded, or so it seemed to early 19th-century observers, on the relationships of trust and the repeated exchanges of Glasgow and Edinburgh merchants, who were also, in their overseas commerce, merchants in sugar and slaves.

But the conflict between commercial and other virtues was far more general, in the view of Smith’s early critics. The free exchanges of commerce required good rules, including rules of competition and rules for the security of property, and they also required good values or good norms; the disposition of merchants to compete by mild and moderate means and for economic rather than political advantage. The profound difficulty of the Smithian system, as it was interpreted by his followers, was that the course of free commerce – and the celebration of the virtues of self-interest – had the effect, over time, of reducing respect for rules and changing the norms of competition. The commercial society was founded on uncommercial values and its tendency, eventually, was to consume its own foundations.

The tensions in early 21st-century ideologies of capitalism are a reflection, still, of these post-revolutionary disputes. For the political coalition between enthusiasts of laissez-faire and of traditional conservative values is as insecure now as it was in Adam Smith’s time. So too is the distinction between ‘good’ regulations, to be respected, and ‘bad’ regulations, to be disregarded and eventually destroyed. So, even, is the contest between freedom of commerce and freedom of values.

One failure of contemporary economic thought – to return to the uses and misuses of Adam Smith – is to have paid relatively little attention to Smith’s criticisms of masters and merchants and of the politics of money. The mid 20th-century revival of laissez-faire economics was in substantial part a revival of the old-fashioned critique of regulation or of the process by which economic regulations were influenced by the self-interest of the regulating institutions. In Smith’s own terms, when the legislature attempted to regulate economic exchanges, its counsellors were the regulatory agencies. But after more than a generation of free-market reforms, the critique of regulation or of regulatory capture, is less prominent. The counsellors are now, as in Smith’s time, the ‘masters’ and, in particular, the financial and energy industries to be regulated. In the new economic theory of markets there is very little inquiry as yet into the politics of financial and industrial lobbies. The coalition between support for laissez-faire and support for established (economic) power is insecure once again.

There is a more serious failure as well. Of the four enduring difficulties of Adam Smith’s system of freedom of commerce – to do with the political conditions for free exchange, the morality of long-distance relationships, the uses of money in politics and the values of commercial societies – it is the final difficulty, to do with values and how they change over time, which is the most troublesome. It is insidious for liberal as well as conservative thought because it poses the question of the inculcation of values and of psychological as well as economic interference or inter- vention. It is connected to the uses of money in politics because one of the ways in which money is used, as Adam Smith described, is to influence ideas and values. It is the most serious of all the problems which Smith has left to his followers, in respect of economic thought and in respect, too, of the future of the commercial system.