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The idea that protectionism is bad needs to be qualified. Whilst the successful Asian countries that are cited here (eg. Japan, Korea, Taiwan, etc) are export-o

The idea that protectionism is bad needs to be qualified. Whilst the successful Asian countries that are cited here (eg. Japan, Korea, Taiwan, etc) are export-oriented and encouraged trade, they were all quite protectionist early on. Big companies like Toyota, LG, Hyundai, Samsung were all heavily subsidised by their governments in the early years, and were aided by other protectionist measures (such as local content requirements, import tariffs, etc). In these cases, protectionism served a purpose - which is to protect local industry until it is globally competitive (ie. infant industry protection). Notwithstanding, these protectionist policies don't always work out (eg. see Indonesia's airplane industry). Furthermore, Korea and Japan have had (and still have) an extremely difficult time reversing protectionist policies due to the lobby groups that represent the vested interests of the now successful companies.

michaelkeenan 17y ago
Are there any well-regarded economists who think the infant industry argument is a good argument? Mankiw mentions it briefly in The Principles of Economics[1], which if I recall correctly is the most widely-used economics textbook, saying "Economists are often skeptical about such claims, largely because the infant-industry argument is difficult to implement in practice...many economists are skeptical about the infant-industry argument in principle...Protection is not necessary for an infant industry to grow." Paul Krugman spends a few pages on it in International Economics: Theory and Policy[2], saying "The infant industry argument seems highly plausible, and in fact it has been persuasive to many governments. Yet economists have pointed out many pitfalls in the argument, suggesting that it must be used cautiously. First, it is not always good to try to move today into the industries that will have a comparative advantage in the future...Second, protecting manufacturing does no good unless the protection itself helps make industry competitive ... More generally, the fact that it is costly and time-consuming to build up an industry is not an argument for government intervention unless there is some domestic market failure. If an industry is supposed to be able to earn high enough returns for capital, labor, and other factors of production to be worth developing, then why don't private investors develop the industry without government help? ... In practice it is difficult to evaluate which industries really warrant special treatment, and there are risks that a policy intended to promote development will end up being captured by special interests." [1] Mankiw's textbook: http://books.google.com/books?id=oRgQ2goeFzwC&pg=PT222&lpg=PT222&dq=%22infant+industry%22+economists&source=bl&ots=4p9M-dph-8&sig=65O2mZ_1QIDP25Wiq79Zoc1P00g&hl=en&ei=enfNSpW6K86DkAX_wNT6Aw&sa=X&oi=book_result&ct=result&resnum=8&ved=0CDIQ6AEwBw#v=onepage&q=%22infant%20industry%22%20economists&f=false http://books.google.com/books?id=oRgQ2goeFzwC&pg=PT222&#... [2] http://books.google.com/books?id=L5DaCeXtNq0C&pg=PA257&lpg=PA257&dq=%22infant+industry%22+economists&source=bl&ots=e_GU4cYD3R&sig=jDZQ-AqQ0IMRykUwxgKjT-TI2oM&hl=en&ei=6HTNSqqUOcGOkQX1oeyBBA&sa=X&oi=book_result&ct=result&resnum=2&ved=0CBgQ6AEwAQ#v=onepage&q=%22infant%20industry%22%20economists&f=false http://books.google.com/books?id=L5DaCeXtNq0C&pg=PA257&#...
laut 17y ago
Argentina is a good example of how much government can screw up a country. The anti-capitalism regime is not attractive for new investment, local or foreign, and existing capital flees the country. I live in the region and see it with my own eyes. Protectionism is bad. The reason it's still here is that individual politicians and rent seekers can still benefit at the expense of the rest of society. Protecting local industry until it is globally competitive is not a good idea and not without costs. Economists have known about this for centuries. Look at the work of David Ricardo. Do you think Ricardo is wrong, since you don't think protectionism is bad?

michaelkeenan 17y ago

Are there any well-regarded economists who think the infant industry argument is a good argument? Mankiw mentions it briefly in The Principles of Economics[1], which if I recall correctly is the most widely-used economics textbook, saying "Economists are often skeptical about such claims, largely because the infant-industry argument is difficult to implement in practice...many economists are skeptical about the infant-industry argument in principle...Protection is not necessary for an infant industry to grow." Paul Krugman spends a few pages on it in International Economics: Theory and Policy[2], saying "The infant industry argument seems highly plausible, and in fact it has been persuasive to many governments. Yet economists have pointed out many pitfalls in the argument, suggesting that it must be used cautiously. First, it is not always good to try to move today into the industries that will have a comparative advantage in the future...Second, protecting manufacturing does no good unless the protection itself helps make industry competitive ... More generally, the fact that it is costly and time-consuming to build up an industry is not an argument for government intervention unless there is some domestic market failure. If an industry is supposed to be able to earn high enough returns for capital, labor, and other factors of production to be worth developing, then why don't private investors develop the industry without government help? ... In practice it is difficult to evaluate which industries really warrant special treatment, and there are risks that a policy intended to promote development will end up being captured by special interests." [1] Mankiw's textbook: http://books.google.com/books?id=oRgQ2goeFzwC&pg=PT222&lpg=PT222&dq=%22infant+industry%22+economists&source=bl&ots=4p9M-dph-8&sig=65O2mZ_1QIDP25Wiq79Zoc1P00g&hl=en&ei=enfNSpW6K86DkAX_wNT6Aw&sa=X&oi=book_result&ct=result&resnum=8&ved=0CDIQ6AEwBw#v=onepage&q=%22infant%20industry%22%20economists&f=false http://books.google.com/books?id=oRgQ2goeFzwC&pg=PT222&#... [2] http://books.google.com/books?id=L5DaCeXtNq0C&pg=PA257&lpg=PA257&dq=%22infant+industry%22+economists&source=bl&ots=e_GU4cYD3R&sig=jDZQ-AqQ0IMRykUwxgKjT-TI2oM&hl=en&ei=6HTNSqqUOcGOkQX1oeyBBA&sa=X&oi=book_result&ct=result&resnum=2&ved=0CBgQ6AEwAQ#v=onepage&q=%22infant%20industry%22%20economists&f=false http://books.google.com/books?id=L5DaCeXtNq0C&pg=PA257&#...

laut 17y ago

Argentina is a good example of how much government can screw up a country. The anti-capitalism regime is not attractive for new investment, local or foreign, and existing capital flees the country. I live in the region and see it with my own eyes. Protectionism is bad. The reason it's still here is that individual politicians and rent seekers can still benefit at the expense of the rest of society. Protecting local industry until it is globally competitive is not a good idea and not without costs. Economists have known about this for centuries. Look at the work of David Ricardo. Do you think Ricardo is wrong, since you don't think protectionism is bad?