The Influence of Protective Tariffs on the Industrial Development of the United States

Joseph A. Schumpeter’s 1940 essay “The Influence of Protective Tariffs on the Industrial Development of the United States” treats American protectionism as a historical institution rather than a merely technical departure from free trade. Its argument is passage-driven and contextual: tariffs must be judged in relation to national independence, continental expansion, industrial maturation, and geopolitical vulnerability.

Hence I must devote time, which I sorely need for that purely economic aspect, to what I may term the political setting in which the practical question of protection always has presented, and is now presenting, itself to the people of this country.

Schumpeter begins by placing protection inside the American political imagination. He argues that the tariff tradition preceded the republic and became inseparable from the effort to make independence economically real. The issue was not only whether domestic producers could compete with foreign producers, but whether a new nation could secure freedom of action in a world still organized by imperial power, war, and commercial pressure.

Attempts at protection, thwarted by the vetoes of colonial governors, were made even before the War of Independence.

This framing lets Schumpeter reinterpret early tariff history. Protection was not simply a concession to sectional interests, though he recognizes that tariffs generate such interests and that export-oriented groups resisted them. In the revolutionary and early national periods, he sees protection as one expression of the wish to avoid dependence on Europe and to build an internally coherent economy.

Protection—or non-intercourse acts and so on—then was simply the economic complement of political independence or of the will to buttress that independence.

The essay’s economic argument is qualified rather than doctrinaire. Schumpeter does not deny the standard objections to protection: it can raise costs, shelter inefficiency, promote political bargaining, and distort investment. Yet he contends that the United States was an unusually favorable case for the infant-industry argument. Its resources, internal market, and continental scale meant that tariff shelter often accelerated industries that were likely to emerge anyway, rather than creating a wholly artificial industrial structure.

Schumpeter therefore distinguishes between protection as a universal economic doctrine and protection as a historically situated instrument. In the American case, tariffs helped speed industrial organization, deepen domestic markets, and raise profit expectations in sectors still acquiring scale and technique. He concedes exceptions, including high-cost industries such as wool and sugar, and he does not claim that all tariff schedules were rational. His broader judgment is developmental: the tariff mainly hastened the rise of an industrial organism whose foundations were already present.

The later sections extend the argument into the twentieth century. Schumpeter reads post-Civil War and post-1918 protection in relation to capital flows, popular nationalism, and resistance to Wilsonian internationalism. By 1940, he suggests, the old infant-industry rationale is less central than the strategic function of shielding an established industrial order from external shocks. Protection may no longer be a growth engine in the earlier sense, but it remains an instrument of economic security in an unstable world.

But barring that, the fundamental rationale of American protectionism is as strong today as it ever was.

The essay’s importance lies in its refusal of a simple free-trade-versus-protection binary. Schumpeter knows that his reasoning will not satisfy economists who want tariff policy assessed by abstract welfare criteria alone. But he insists that the American case cannot be understood apart from state-building, autonomy, industrial timing, continental scale, and international conflict. His conclusion is not an unqualified defense of tariffs; it is a historically specific claim that American protectionism helped accelerate industrial development and remained intelligible as a policy of national self-preservation in a mercantilist and bellicose world.