Thoughts, essays, and writings on Liberty. Written by the heirs of Patrick Henry.

“It is difficult to free fools from the chains they revere.”     Voltaire

March 16, 2009

Protectionism For Green Industries Is Unnecessary [And Bad]

by Brad Warbiany

The Economist Free Exchange Blog, responding to this pro-protectionism piece by Joe Weisenthal, half-heartedly suggests that maybe Joe meant that a little infant industry protection for green industries is in order:

I wonder if he is suggesting some sort of infant industry type policy to stimulate domestic manufacturing of more enviromental products. Interesting idea, but infant industry is tricky. The idea is that with time and protection from the global market (through subisdies and tariffs) the domestic country will gain a comparative advantage in that field. Korea pursued this policy with, arguably, some success in the 1950s. But it did not work so well elsewhere. It involves the government hand picking industries that need to be developed, rather than the market. It often leaves consumers paying more for mediocre goods that might not otherwise exist in the global market.

There are two problems trying to compare anything that America will do regarding infant industry protection for green industries with any other nations who have tried protection:

First, the protectionist nation must be an underdog. America engaged in protectionism at the beginning of the industrial revolution to protect itself from Europe, and eventually rose to a dominant place. Because we are now the most technologically advanced, innovating nation on the planet, we need not protect our own industries from those overseas. They’re the ones playing catch-up, and they’re the ones trying to protect their own infant industries against our established industries. Now, there can be a debate over instituting retaliatory trade impediments to counter those protections other less developed countries are enacting (and I’d come down on the side against doing so personally), but there’s no reason to protect ourselves from them.

Second, protecting infant industries is only necessary when you’re protecting them from established industries. There are no established green industries. This is an infant industry worldwide, and on a worldwide basis, we’re in just as strong of a competitive position as any other country. I understand places like Korea enacting a protectionist, when they’re trying to achieve the same sort of efficiencies on heavy industry of more advanced countries. But here, there’s nobody who has figured it out. Infant industry protectionism arguably may be a good way for industries to catch up with mature foreign industries, but in this case there are no mature foreign industries. There’s no catching up to do when we’re all just out of the gates.

Now, this was separate from Weisenthal’s main point, which is that we should use “green protectionism” as a ruse to introduce some rather traditional forms of protectionism. He sees protectionism as an alternative to welfare, because even if we get higher-priced, less-well-made goods in the US, that keeps those US manufacturing workers employed. I suspect he’d be in favor of banning motor-driven plows, too, so that we can go back to high farming employment? Instead, I suggest that we stop trying to limit competition, and actually stop our own impediments to engaging in competition. If we want to win, perhaps we should get out of our own way instead of trying to trip our competitors.

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1 Comment

  1. Protecting industry is a bad thing in almost all cases, and especially in this economic climate.

    Idiots start businesses too, and by protecting an industry, you are protecting the idiots who would otherwise go out of business and have their market share taken over by competent businessmen.

    Back when the steel industry was young, tariffs were put in place to protect it. In 2002 (2003?,) Bush singed tariffs to protect the steel industry, too . . . . In no ways could the steel industry be called young.

    He did not protect the industry, he only managed to drive up costs for all the manufacturers who used steel and bought it from overseas because the supply over here was not enough to meet the demand.

    Comment by Merf — March 16, 2009 @ 10:48 am

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