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What is an Infant Industry?

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  • Written By: Mary McMahon
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  • Last Modified Date: 20 August 2016
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An infant industry is a new industry that is in the process of developing. Infant industries are very vulnerable to competition and weakness in the market because they are not well established. Some economists argue that they should be protected as they develop, under the infant industry argument or infant industry theory. Others believe that infant industries should be allowed to fend for themselves and make their own way in the world.

Especially in developing nations, infant industries are very common. These industries arise to fill a need or to provide a domestic source of a product or service. In nations with growing economies, infant industries develop in response to perceived economic opportunities. Some governments actively encourage the development of new industries with grants, tax credits, and other incentives, such as counseling from business planners designed to make it easier for new businesses to get started.

Infant industries can represent an important part of a growing economy. If an infant industry starts to thrive, it can quickly contribute to the overall growth of the economy by providing jobs, as well as business, for suppliers and dealers. These industries can also promote self sufficiency for a developing nation by providing the country with an internal source of a needed product or service. This can be appealing for countries that are trying to reduce reliance on imported goods.

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In nations with protectionist trade policies, infant industries may be protected with quotas, tariffs, and other limits on goods from foreign competitors. These give an infant industry a chance to get off its feet and develop. In the early stages, such industries cannot compete with well established companies that have developed supplier relationships, efficient manufacturing techniques, and reserves of capital that can be used for support during rocky economic periods. Protection allows an infant industry to flourish and develop so that it can catch up with competitors.

Other people argue that protectionism actually harms infant industries because they are not forced to adapt and move quickly with the market. These advocates suggest that industries should be able to come up with creative ways to counter foreign competitors. This attitude can create a tough business climate for new industries, as it may make the market difficult to get into. A new car manufacturer, for example, cannot realistically hope to compete with an established foreign producer of cars that can make cars cheaply and more efficiently.

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Misscoco
Post 4

@BabaB - What an inspiring story. This kind of approach to economically helping third world countries really makes sense.

There are so many niches or things that are needed in developing countries. Like the idea - give them milk or meat and they will drink and eat, but give them a cow, and they will eat and drink and maybe learn to be a farmer.

I'm sure that there are many items that are being made in cottage industries. They need a little help in turning them into infant industries.

tigers88
Post 3

The whole debate about whether to support infant industries or to let them filter through the marketplace on their own is an endlessly interesting one. It gets right to the heart of how markets should work and what the relationship between government and markets should be.

I'm not sure where I come down. I've studied economics and am aware of a number of market theories. I have never been fully convinced by either side. I think for me it would depend a lot on the industry. If I supported it I would likely support giving it a foot up in the marketplace. If I opposed it I would leave it to it's own devices.

BabaB
Post 2

On television, I saw a story about how an infant industry was developing in one of the very poor countries in Africa.

There was a definite need for strong desks in a school, as the children had to sit on the hard ground for five to six hours a day.

A newscaster from the United States had visited this small village and met a furniture maker. He asked him if he could make some desks for the school,if he was paid well for them. He agreed.

The newscaster thought he could raise some money by telling his story on TV, and then asking for donations. So many people send in donations - there was more than enough money to buy the desks for the kids. I hope this continued on to other villages.

truman12
Post 1

One industry that immediately comes to mind is the renewable energy industry, especially wind and solar. There seems to be a number of different start up companies with a lot of interesting ideas, but no big company that dominates the market.

This is one instance when I think there should be some kind of special privileged or advantage for infant industries. Look at their competition, oil and coal companies which are some of the oldest, strongest and most profitable in the world. How can they hope to compete in any meaningful way?

If this industry is allowed to flounder it could cost us dearly in the long run. We need to think hard about our energy future and a huge part of that will be renewable sources. The more research development and market expansion that goes into this the better set we are moving forward. I hope we can get on track with this.

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