Monday, June 20, 2005

Protecting Infant Industries

One of the most popular arguments for protectionism is that new and developing industries should be protected so they can grow to a point where they can compete on par with foreign industries. A paper from Professor Jagdish Bhagwati suggests otherwise. I would like to add my own criticism of this argument from a Public Choice perspective. Protectionism is more likely to benefit already-established and politically powerful firms (such as large agri-businesses) instead of small, developing firms that have no political influence. So even if, for the sake of argument, protectionism worked it's not likely that these firms with little political influence would ever get protected.