<!-- generated: provider=openrouter model=arcee-ai/trinity-large-preview:free date=2026-02-19 source=book-4-chapter-08 -->

# Colonial Economic System

## Definition

The structured relationship between mother country and colonies characterised by exclusive trade privileges, administrative control, and military protection. This system treats colonies as economic dependencies that provide raw materials and captive markets for the mother country's manufactured goods, while bearing the costs of their own administration and defense.

## Source Chapter

Book IV, Chapter 8

## Context

Smith provides a comprehensive critique of the colonial economic system as the most expensive and inefficient aspect of the mercantile system. He demonstrates how the costs of maintaining colonial control far exceed any economic benefits, and how colonies would be more valuable as independent trading partners than as dependent territories.

## Economic Domain

Regulation

---
