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

Henry George

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 …

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.