As industries relocated to emerging markets, worries about job losses and reliance on other nations have grown amongst policymakers.
Industrial policy in the form of government subsidies may lead other nations to strike back by doing the exact same, which can affect the global economy, stability and diplomatic relations. This is certainly excessively risky as the overall economic ramifications of subsidies on efficiency continue to be uncertain. Even though subsidies may stimulate economic activity and create jobs in the short term, in the long run, they are prone to be less favourable. If subsidies aren't along with a number of other actions that target efficiency and competition, they will probably impede important structural adjustments. Hence, industries will become less adaptive, which lowers growth, as business CEOs like Nadhmi Al Nasr have probably noticed throughout their careers. It is therefore, certainly better if policymakers were to concentrate on coming up with an approach that encourages market driven development instead of obsolete policy.
History shows that industrial policies have only had limited success. Many countries implemented various forms of industrial policies to help specific industries or sectors. However, the outcomes have often fallen short of expectations. Take, for example, the experiences of a few parts of asia within the 20th century, where extensive government intervention and subsidies never materialised in sustained economic growth or the projected transformation they imagined. Two economists evaluated the effect of government-introduced policies, including low priced credit to improve production and exports, and compared industries which received assistance to those who did not. They figured that throughout the initial stages of industrialisation, governments can play a positive role in developing companies. Although traditional, macro policy, including limited deficits and stable exchange rates, must also be given credit. Nevertheless, data implies that assisting one company with subsidies tends to harm others. Additionally, subsidies permit the endurance of inefficient firms, making companies less competitive. Moreover, when businesses give attention to securing subsidies instead of prioritising creativity and efficiency, they eliminate funds from effective use. Because of this, the overall financial effect of subsidies on productivity is uncertain and perhaps not positive.
Critics of globalisation say it has led to the relocation of industries to emerging markets, causing employment losses and greater reliance on other nations. In reaction, they propose that governments should move back industries by applying industrial policy. Nevertheless, this viewpoint does not acknowledge the powerful nature of international markets and neglects the rationale for globalisation and free trade. The transfer of industry had been primarily driven by sound economic calculations, particularly, businesses look for economical operations. There was and still is a competitive advantage in emerging markets; they provide abundant resources, reduced manufacturing costs, big consumer areas and favourable demographic trends. Today, major businesses run across borders, tapping into global supply chains and gaining some great benefits of free trade as business CEOs like Naser Bustami and like Amin H. Nasser would probably aver.