Gold, Ships and Shares: Colbert and Adam Smith Disagree

The Port Called "The East"

1In 1666 the French East India Company began building a shipyard on the coast of Brittany, in western France. The town that grew around it came to be called L'Orient, "the East," and today it is Lorient. From its docks, company ships sailed around Africa to India and came back with cotton cloth, pepper, tea and other goods.

2Lorient was part of a world trade very different from the trade of 1450. Back then, most Asian goods reached Europe over land or through the Mediterranean Sea, passing through the hands of many traders. After Columbus crossed the Atlantic in 1492 and Vasco da Gama reached India by sea in 1498, European ships began to sail directly to the Americas and to Asia. France's Caribbean colonies, such as Martinique and Saint-Domingue, grew sugar on plantations worked by enslaved Africans, and the sugar was shipped to Europe.

3Jean-Baptiste Colbert, the chief finance minister of King Louis XIV from 1665 to 1683, shaped many of these French ventures. Like many leaders of his time, he followed ideas later called mercantilism. He raised taxes on many foreign goods, paid to set up royal workshops making tapestries, mirrors and fine cloth, and wanted France's colonies to trade only with France.

4In 1664 Colbert founded the French East India Company. It was a joint-stock company: investors bought shares and would share in its profits or losses. French merchants were slow to buy shares, so the king, his family and members of his court bought many of them, and royal officials pressed wealthy townspeople to invest. The king gave the company the sole right to French trade with Asia. The company often lost money, and the government reorganized it several times. In 1769 the French government ended the company's sole right to trade with Asia.

5Seven years later, in 1776, the Scottish writer Adam Smith published a long book called The Wealth of Nations. In it he looked back at Colbert's ideas and argued against many of them.