From the standpoint of the infant industry argument, why should there be excess capacity in the steel, automobile and commercial airline industries in both industrialized and emerging nations?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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From the standpoint of advocates of the infant industry argument, it makes sense for there to be excess capacity in all of these areas.  This is because various developing countries should be protecting their own infant industries in these sectors.

In the developed world, these sectors have become mature and refined to the point where they outcompete those in the developing world.  However, the infant industry argument says that the developing nations should enact protectionist measures to protect growing domestic industries in these sectors.  This leads to excess capacity all over the world as each country builds its own versions of these industries.  This leads to a situation in which each country builds capacity that would not be needed if all countries simply bought from the developed countries.

Advocates of protecting infant industries say that the benefits of having domestic industries outweigh the drawbacks of having excess capacity.

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