Question

5. Infant Industry protection is a key solution for the growth of industrialization of developing countries. Discuss your answer by using a graph below and any other graphs that you can deem appropriate. Can I have different answers other than that have been posted with graph please.

Answer 1

Infant Industry.: In economics, infant industry refers to new industries in the domestic economy that do not have the needed capacity to tackle the competitive pressure by international market.

Protection.: Protection means protecting such indistries from the external pressures through tariffs, subsidies and imports restrictions.

Developing countries face alot of issues like inflation, unemployment, etc. To solve these problems it is necessary for them to adopt protectionism. Only when the domestic industries grow, will there be an increase in production at a low price, optimal utilization of the available resources. There will also be a substantial growth in job opportunites, whoch will lead to an increase in income earning people and thus enhance the economy by minimizing poverty. But infant industries need a lot of support as they would not be able to compete with the international market immediately. Offering various subsidies, tax protections and instilling import restrictions will help them build their capability and thus enable them to mature in a healthy manner. Almost all developed countries have experienced some level of protectionism in the past which has enabled them to grow in their sucess. Protectionism is the only mechanism to curb income gaps and substantial inquity among economies. Over the time these industries will mature and they will become effecient and benefit from economies of scale when the tariffs are reduced and subsidies are provided.