In economics, an infant industry is a new

industry Industry may refer to: Economics * Industry (economics), a generally categorized branch of economic activity * Industry (manufacturing), a specific branch of economic activity, typically in factories with machinery * The wider industrial sector ...

, which in its early stages experiences relative difficulty or is absolutely incapable in competing with established

competitors Competition is a rivalry where two or more parties strive for a common goal which cannot be shared: where one's gain is the other's loss (an example of which is a zero-sum game). Competition can arise between entities such as organisms, indi ...

abroad. Governments are sometimes urged to support the development of infant industries, protecting home industries in their early stages, usually through

subsidies A subsidy, subvention or government incentive is a type of government expenditure for individuals and households, as well as businesses with the aim of stabilizing the economy. It ensures that individuals and households are viable by having acce ...

tariffs A tariff or import tax is a duty imposed by a national government, customs territory, or supranational union on imports of goods and is paid by the importer. Exceptionally, an export tax may be levied on exports of goods or raw materials and is ...

. Subsidies may be indirect, as in when import duties are imposed or some prohibition against the import of a raw or finished material is imposed. Economists argue that state support for infant industries is justified only if there are external benefits. That is underscored by the fact that the original bastions of the infant industry argument argued that external benefits aside, it is undeniable that both the US and Britain rose to become relative superpowers in economic terms by following their approach for an extended period of time. Britain was one of the first nations to pursue such an approach in their early development with regard to their raw wool industry. Among other measures, the nation ensured that competition was not allowed to import into their market especially when the destined goods were of superior quality. After about 100 years of

protectionism Protectionism, sometimes referred to as trade protectionism, is the economic policy of restricting imports from other countries through methods such as tariffs on imported goods, import quotas, and a variety of other government regulations ...

of this wool industry, the country finally decided that duties on exports would be lifted. As for the US, in 1789 one of the first acts of the

US Congress The United States Congress is the legislature, legislative branch of the federal government of the United States. It is a Bicameralism, bicameral legislature, including a Lower house, lower body, the United States House of Representatives, ...

was to impose tariffs on a variety of imports including cotton, leather, and various forms of clothing, in an effort to protect the American

textile industry The textile industry is primarily concerned with the design, production and distribution of textiles: yarn, cloth and clothing. Industry process Cotton manufacturing Cotton is the world's most important natural fibre. In the year 2007, th ...

. Many mistakenly credit

Friedrich List Daniel Friedrich List (6 August 1789 – 30 November 1846) was a German entrepreneur, diplomat, economist and political theory, political theorist who developed the Economic nationalism, nationalist theory of political economy in both Europe and t ...

as the first individual to propose or set out an infant industry argument for the United States. Actually, it was

Alexander Hamilton Alexander Hamilton (January 11, 1755 or 1757July 12, 1804) was an American military officer, statesman, and Founding Fathers of the United States, Founding Father who served as the first U.S. secretary of the treasury from 1789 to 1795 dur ...

, the first Secretary of the Treasury who was the pioneer of the infant industry argument. Although List eventually accepted this argument, it did not come until his exile from the US. For further detail one should refer to the Reports of the Secretary of the Treasury on the Subject of Manufacturers (1791) regarding infant industries. Basically, his arguments dictated that new or "infant" industries in the US could not become competitive with others in the international market unless the government offered them subsidies or allowances (often called bounties previously) at least for some initial time period. Hamilton specifically suggested that this aid could likewise be offered by stamping out competition through import duties or, in an extreme case, the banning of imported products of that type completely. What began with Hamilton and was carried forward with others continued when Abraham Lincoln came into power in the US. Following the North's victory in the

American Civil War The American Civil War (April 12, 1861May 26, 1865; also known by Names of the American Civil War, other names) was a civil war in the United States between the Union (American Civil War), Union ("the North") and the Confederate States of A ...

, the US became the top follower of this approach until at least the time of

World War I World War I or the First World War (28 July 1914 – 11 November 1918), also known as the Great War, was a World war, global conflict between two coalitions: the Allies of World War I, Allies (or Entente) and the Central Powers. Fighting to ...

and, to a great extent, until

World War II World War II or the Second World War (1 September 1939 – 2 September 1945) was a World war, global conflict between two coalitions: the Allies of World War II, Allies and the Axis powers. World War II by country, Nearly all of the wo ...

References

{{Reflist Industrialisation Protectionism

See also

References