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Henry George on the scramble to get government favors known as trade “protection” (1886)

The late 19th century American free trader Henry George (1839-1897) dismisses the argument that governments can identify which industries truly deserve government favors like trade protection. Instead we are likely to see a “scramble” for such favors at the pubic trough:

All experience shows that the policy of encouragement, once begun, leads to a scramble in which it is the strong, not the weak; the unscrupulous, not the deserving, that succeed. What are really infant industries have no more chance in the struggle for governmental encouragement than infant pigs have with full grown swine about a meal tub. Not merely is the encouragement likely to go to industries that do not need it, but it is likely to go to industries that can only be maintained in this way …

As an abstract proposition it is not, I think, to be denied that there may be industries to which temporary encouragement might profitably be extended. Industries capable, in their development, of much public benefit have often to struggle under great disadvantages in their beginnings, and their development might sometimes be beneficially hastened by judicious encouragement. But there are insuperable difficulties in the way of discovering what industries would repay encouragement. There are, doubtless, in every considerable community some men of exceptional powers who, if provided at public expense with an assured living and left free to investigate, to invent, or to think, would make to the public most valuable returns. But it is certain that, under any system yet devised, such livings, if instituted, would not be filled by men of this kind; but by the pushing and influential, by flatterers and dependents of those in power or by respectable nonentities. The very men who would give a good return in such places would, by virtue of their qualities, be the last to get them.

So it is with the encouragement of struggling industries. All experience shows that the policy of encouragement, once begun, leads to a scramble in which it is the strong, not the weak; the unscrupulous, not the deserving, that succeed. What are really infant industries have no more chance in the struggle for governmental encouragement than infant pigs have with full grown swine about a meal tub. Not merely is the encouragement likely to go to industries that do not need it, but it is likely to go to industries that can only be maintained in this way, and thus to cause absolute loss to the community by diverting labor and capital from remunerative industries. On the whole, the ability of any industry to establish and sustain itself in a free field is the measure of its public utility, and that “struggle for existence” which drives out unprofitable industries is the best means of determining what industries are needed under existing conditions and what are not. Even promising industries are more apt to be demoralized and stunted than to be aided in healthy growth by encouragement that gives them what they do not earn, just as a young man is more likely to be injured than benefited by being left a fortune. The very difficulties with which new industries must contend not merely serve to determine which are really needed, but also serve to adapt them to surrounding conditions and to develop improvements and inventions that under more prosperous circumstances would never be sought for.

Thus, while it may be abstractly true that there are industries that it would be wise to encourage, the only safe course is to give to all “a fair field and no favor.” Where there is a conscious need for the making of some invention or for the establishment of some industry which, though of public utility, would not be commercially profitable, the best way to encourage it is to offer a bounty conditional upon success.

About this Quotation:

In this chapter Henry George examines two common arguments for government favours to “protect” industry from competition. One is the “infant industry” argument, and the other is the “support of domestic industry” argument. Concerning the former, he raises the “knowledge problem” which any government faces in trying to identify out of the myriad of existing industries (not to mention the industries which do not yet exist) which one would repay such “investment” on the part of the government (or rather the taxpayers). He also notes that in the pushing and shoving of would-be recipients of such favors the winners are more likely to the politically “influential” and the “flatterers and dependents of those in power.” Concerning the latter, George notes the “malinvestments” or distortions which the trade protection causes. Investments are diverted from more productive and profitable activities and towards industries which may never become profitable without ongoing government support. He concludes that the struggle to survive in an open and free market teaches firms to adapt and improve the services they provide to consumers. The alternative in his view is the prospect of seeing more and more industries behaving like young pigs squabbling over who gets to the food trough first.

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