Many argue that governments should provide protection for domestic industries through imposing trade barriers and offering financial support because it helps struggling industries to grow and operate efficiently, whereas others claim that free trade is more beneficial since it offers equal competition among businesses. It is my firm belief that whether a country imposes trade barriers and provides subsidies or lets the industries compete freely will depend on nation’s size and capacity of the market.
On the one hand, in most developing countries many new businesses struggle to find their place in the market without any assistance from the government, even though they are led by great ambition. Supporting such promising but struggling businesses will benefit a country in various ways. The imposition of trade barriers such as lowering income tax and investing sums would enable start-ups to flourish rapidly. One of the crucial positive outcomes would be less import dependency. For instance, after the collapse of the Soviet Union, many of its former autonomous countries were heavily dependent on the Russian Federation. As a result of a decade-long consistent government assistance, those countries, including Hungary, Poland and the Czech Republic gained their financial and economic independency from Russia.
On the other hand, in countries that have massive economies, free trade would be a more efficient way to keep growing their markets while not granting any privilege to others. In such nations, there are always plenty of investors investing their money in unicorns in order to grow their wealth. Silicon Valley, where big tech companies are constantly born, is the perfect example of this phenomenon. Investors from across the US and even all over the world supply a large sum of money, which means government support is unnecessary.
In conclusion, assistance from a state can be a fundamental encouragement for growth of promising start-ups in less wealthy countries; however, in wealthier countries with bigger markets letting the competition be equal can be a better policy.