According to Alexander Hamilton, governments must temporarily support

QUESTION

According to Alexander Hamilton, governments must temporarily support new industries until they have grown strong enough to meet international competition.

Indicate whether the statement is true or false.

ANSWER

TRUE
The infant industry argument is by far the oldest economic argument for government intervention. Alexander Hamilton proposed it in 1792. According to this argument, many developing countries have a potential comparative advantage in manufacturing, but new manufacturing industries cannot initially compete with established industries in developed countries. To allow manufacturing to get a toehold, the argument is that governments should temporarily support new industries (with tariffs, import quotas, and subsidies) until they have grown strong enough to meet international competition.