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The infant industry argument is an economic reason for protectionism. The crux of the argument is that nascent industries often do not have the economies of scale that their older competitors from other countries may have, and thus need to be protected until they can attain similar economies of scale. It was first used by Alexander Hamilton in 1790 and later by Friedrich List, in 1841, to support protection for German manufacturing against British industry. Image File history File links Question_book-3. ... Economics (deriving from the Greek words οίκω [okos], house, and νέμω [nemo], rules hence household management) is the social science that studies the allocation of scarce resources to satisfy unlimited wants. ... Protectionism is the economic policy of restraining trade between nations, through methods such as high tariffs on imported goods, restrictive quotas, a variety of restrictive government regulations designed to discourage imports, and anti-dumping laws in an attempt to protect domestic industries in a particular nation from foreign take-over... The increase in output from Q to Q2 causes a decrease in the average cost of each unit from C to C1. ... Alexander Hamilton (January 11, 1755 or 1757[1]—July 12, 1804) was an Army officer, lawyer, Founding Father, American politician, leading statesman, financier and political theorist. ... Friedrich List (August 6, 1789 - November 30, 1846) was a leading 19th Century German economist who believed in the National System. // He was born at Reutlingen, Württemberg. ...

Reasons for protectionism

Protectionism allows an industry to develop until it is able to compete in international trade. History provides numerous examples of the benefits of protecting infant industries. In the 1830's the average tariff of the USA was 40%, the highest in the world, allowing the development of manufacturing industries until World War 2 when the manufacturing supremacy of the States was absolute. More recently in 1939 Japan kicked out General Motors to protect Toyota which at the time was uncompetitive in the global market. The economic miracle of Taiwan has occurred with a state sector one and a half times the world average. ^[1] German soldiers at the Battle of Stalingrad World War II was the most extensive and costly armed conflict in the history of the world, involving the great majority of the worlds nations, being fought simultaneously in several major theatres, and costing tens of millions of lives. ... General Motors Corporation, also known as GM or The General, an American multinational conglomerate corporation, is the worlds largest auto company by annual production volume for 2006, and the second largest by sales volume as of the first half of 2007, behind Toyota Motor Corporation. ... This article is about the automaker. ...

Reasons against protectionism

Infant industries are by definition those that are not strong enough to survive open competition — they are dependent on government largesse and protectionism in order to survive. At a given point in time, protectionist policy, along with inefficient industries leads to higher prices and lower quality goods for the consumer than if the good or service produced by the industry was produced on the international market. For a characteristic of many gods, see omnibenevolence For the phrenological faculty, see Benevolence (Phrenology) Look up Benevolence in Wiktionary, the free dictionary. ...

For these reasons the infant industry argument is often criticized. Firstly it is hard for government to know which industries will ultimately turn out to have growth potential. A lack of domestic capacity or unforeseen emergence of (even more superior) foreign rivals may, in fact, prohibit industries from becoming competitive in the long run. It is often the case that rather than developing or innovating, the protected industry becomes complacent, due to a lack of competition from the international market.

Since countries that put up barriers to imports will often face retaliatory barriers to exports, protectionism could hurt certain infant industries because the size of their potential market would be smaller.

Infant industry argument in popular culture

A Thomas Nast cartoon was showing the Democrats wanting to do away with protective tariffs. Nast appeared to make his cartoon against protectionism. A "Democrat donkey" is seen looking furiously at a rolled-up bill, which is dressed in a head covering and made to look like a nanny. The "nanny bill" is seen holding a full grown man marked with "infant industries", and exclaims to the donkey "Brute! Would you strike me with the child in my arms?" The point of this cartoon, particularly with an adult male marked "infant industries", was that the "infancy" of these industries has matured to a point where they no longer require protection. Thomas Nast (September 27, 1840 – December 7, 1902) was a famous German-American caricaturist and editorial cartoonist in the 19th century and is considered to be the father of American political cartooning. ... A nanny is a person who looks after the child or children of one family in their -- the childs -- home. ...

References

Chang, H,J (July 2007). Protecting the global poor. Prospect Magazine. Retrieved on 15/11/04.

1. ^ http://www.prospect-magazine.co.uk/article_details.php?id=9653