Against the Tide by Douglas A. Irwin

Author:Douglas A. Irwin
Language: eng
Format: epub
Publisher: Princeton University Press
Published: 2020-06-15T00:00:00+00:00

Despite the intuitively appealing metaphor of “infant” industries, analytical progress in assessing this argument for protection has come extremely slowly since Mill’s qualified endorsement. Although hampered by a lingering sense of vagueness, the infant industry argument in modern treatments now relates to hurdles faced by new firms in acquiring knowledge or capital. To the extent that government intervention is called for it is to improve upon the existing conditions of appropriability of knowledge investments or improving the functioning of capital markets. Trade interventions are not directly appropriate because those improvements may be desirable regardless of whether the industry in question is involved in international trade. As a result, this particular argument for protection is not nearly as prevalent or supportable today as it was several decades ago. Still, the infant industry argument has been difficult to dismiss altogether and it continues to occupy an uneasy place in the theory of commercial policy.

1 See also Simonde de Sismondi ([1826] 1991, 327–42). This became an important theme in the classical critique. “In the infancy of any such employment, it is only by actual wealth, in the shape of additional capital, that any effectual assistance can be given to a new branch of industry,” Jeremy Bentham (1843 [1821], 96) stated. “By removal of competition, increase may indeed be given to the rate of profit, if profit be the result of the newly directed labour: but it is only by the employment of capital, which must necessarily be taken from other sources, that this result can be obtained; the prohibition of existing rival establishments will not create that capital.”

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