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The theory of protectionism, as developed by Alexander Hamilton, is based in part on the concept of economic nationalism. As Secretary of the Treasury, Hamilton argued that the United States should use tariffs and other protectionist measures to foster economic self-sufficiency and promote domestic economic growth.
Hamilton first articulated his ideas about protectionism in his highly influential 1791 Report on Manufactures. In the report, Hamilton argued that protectionist measures, such as tariffs and subsidies, would help to protect and foster domestic industry. He believed that the the economy should be based on the production of domestic goods and services, rather than relying on imports. Hamilton proposed that the development of domestic manufacturing was essential to the nation’s economic and political independence.
He saw restrictions on imports as necessary to protect nascent American manufacturing from competition with British and European producers. This belief was based on the concept of “infant industry protection”, a notion developed by Adam Smith, an economist who argued that newly established businesses need time to become mature and competitive.
He also proposed that industry would be the basis for creating wealth, jobs and economic growth, asserting that the nation’s economic life should be reorganised “as to give scope for the operations of those principles of enlightened industry and self-interest, by which the industry of the nation can alone be advanced.”
In addition to protectionism, Hamilton also proposed a system of incentives for domestic industry -- subsidies, bounties, and bonuses -- that would spur productivity, create jobs, and ensure self-sufficiency. He argued that the government should use a combination of tariffs, subsidies, and bonuses to foster national economic growth.
His theories remain highly influential, particularly in American economic history. In particular, his ideas helped create a political environment in which protectionist measures could be effectively implemented. Today, many countries, including the United States, continue to use tariffs and other protectionist measures to promote economic self-sufficiency and protect domestic industry.