Machiavelli and Adam Smith on the worst polity

As is well known, Spinoza and Rousseau think that Machiavelli is a republican. This view is rooted in a reading of the Discourses on Livy. The interpretation has been popular again during the last half century among scholars.

Now, the paradigmatic republics for Machiavelli are Sparta, Rome, and Athens. In each case, the real power is with a property-owning class, and at least two of these (Sparta and Rome) have quite strong (elected) monarchic elements in their constitutions. But they do all allow all male citizens non-trivial role in shaping political life (especially Athens). So, by ‘republican,’ Machiavelli means self-government by a large group of people.

Yet, for all of Machiavelli’s fondness for a well ordered or true Republic, Machiavelli recognizes that republicanism is not in all respects the best polity for all. As he notes:

Of all hard slaveries, the hardest is that subjecting you to a republic: first, because it is more lasting and there is less hope of escape from it; second, because the purpose of a republic is to enfeeble and weaken, in order to increase its own body, all other bodies.—Machiavelli Discourses (2.2)

That is to say, for Machiavelli, republics are structurally zero-sum affairs in favor of those who have a say in the running of affairs and at the expense of those who lack a say in their self-government. And they are especially awful for those who lack powerful champions (slaves, but also women and resident aliens, etc.). And, in fact, on this view, those that benefit from republican arrangements always have a material incentive to prevent broadening the franchise because, ceteris paribus, it always means a redistribution of an existing pie. And, by the same logic, if one is confident about where the new lines fall one need not be automatically opposed to a narrowing of the franchise.

Now, in Wealth of Nations, Smith alerts his reader that he has read widely in Machiavelli, including the Discourses in Livy (but also the Life of Castruccio Castracani and History of Florence.) In The Theory of Moral Sentiments, Smith also quotes from A Description of the methods adopted by the Duke Valentino when murdering Vitellozzo Vitelli, Oliverotto da Fermo, the Signor Pagolo, and the Duke di Gravina Orsini.

So, with that in place, I would like to quote a passage (famous among Smith scholars, although less so outside that group) that suggests an implied disagreement with Machiavelli (while drawing on a similar underlying logic). This shows up in Smith’s treatment of colonies (a topic close to Machiavelli’s heart) in book 4 of Wealth of Nations which is part of his more general critique of mercantilism in the second section of chapter 7.

At the start of this section, Smith notes that settler colonialism is unusually harsh for slaves subject to colonial rule (WN 4.7.b.3, p. 565), but if the settlers possess human capital it is rather easy on them. Smith then analyzes the circumstances in which a slave-holding settler colonialism is itself governed by an exclusive/monopolistic chartered company. While doing so he discusses “St. Thomas and Santa Cruz,” which was were originally under control of the Danish West India-Guinea Company. (This is now part of the US Virgin Islands.) Smith writes:

These little settlements too were under the government of an exclusive company, which had the sole right, both of purchasing the surplus produce of the colonists, and of supplying them with such goods of other countries as they wanted, and which, therefore, both in its purchases and sales, had not only the power of oppressing them, but the greatest temptation to do so. The government of an exclusive company of merchants, is, perhaps, the worst of all governments for any country whatever.—Adam Smith (WN 4.7.b.11, p. 570 in the Glasgow Edition)

Smith writes in the past tense because the Danish West India-Guinea Company had gone bankrupt, and was under direct control of the Danish crown by the middle of the eighteenth century. Lurking in the background is Smith’s critique of the British East India Company’s rule over Bengal, where “Some improper regulations, some injudicious restraints imposed by the servants of the East India Company upon the rice trade, contributed, perhaps, to turn that dearth into a famine.” (WN 4.5.b.6, p. 527)

The reason why a government of an exclusive company of merchants is the worst of any is that their incentives are all wrong. And while the chartered company itself also struggles under the tension of the interest of principals and agent, its monopoly comes at the expense of the colony and so of the settler colonists and their slaves. As Smith puts it later, “No two characters seem more inconsistent than those of trader and sovereign. If the trading spirit of the English East India company renders them very bad sovereigns; the spirit of sovereignty seems to have rendered them equally bad traders.” (WN 5.2.a7, p. 819) And those who pay the worst price are the most powerless of all in the colonies.

While Smith, then, disagrees with Machiavelli, his underlying argument draws on the same principles. Charted companies with their exclusive (or monopolistic) trading principles behave in the same structural zero-sum way as Machiavellian republics do. But they do so on a much larger scale and constrained by fewer other powers.