In: Operations Management
Explain why the Infant-Industry argument is valid.
An Infant industry term is used in economics to describe an industry that is newly established and in the developing stage. These industries lack experience for competition with the larger organization or Industries which produce same kind of stock or goods. These Industries lack competitiveness, Efficiency, and has a high vulnerability to market situations.
Infant Industry argument is a theory in International Trade which states that new industries require protection from international competitors till these industries become mature and stable and they have the potential to compete.
Infant Industry Argument was coined by Alexander Hamilton when he argued for the protection of US-based industries from Europe Industries.
The various reasons behind the Infant Industry Argument.
Infant Industry Argument is really helpful for the industries that are newly established.
For example, If there is any startup that is newly established or created which produces goods that re unique in that country but the same goods are available in various countries at lower prices.
If this is not protected, And the governments or people encourage using foreign goods produced by the organizations. This will impact the industry in the local area and ends up shutting the company.
Goods that are imported from the foreign may be very less in cost but all the people get habituated using the imported items. This will create less market for the local business and shows the impact on the revenue generation for that area.
Using locally produced items improves the economy of the country and also creates lot of opportunities.
Hence, Based on the above points we can conclude that the Infant Industry Argument is valid.