As industries moved to emerging markets, concerns about job losses and reliance on other nations have grown amongst policymakers.
History indicates that industrial policies have only had minimal success. Many countries applied various types of industrial policies to help specific industries or sectors. Nonetheless, the outcomes have frequently fallen short of expectations. Take, as an example, the experiences of several Asian countries within the twentieth century, where extensive government involvement and subsidies by no means materialised in sustained economic growth or the intended transformation they envisaged. Two economists analysed the effect of government-introduced policies, including cheap credit to improve manufacturing and exports, and contrasted industries which received help to the ones that did not. They figured that during the initial stages of industrialisation, governments can play a positive part in developing industries. Although antique, macro policy, including limited deficits and stable exchange prices, additionally needs to be given credit. Nevertheless, data shows that assisting one company with subsidies has a tendency to damage others. Additionally, subsidies allow the survival of ineffective businesses, making companies less competitive. Moreover, when firms concentrate on securing subsidies instead of prioritising development and effectiveness, they eliminate funds from productive use. As a result, the entire economic aftereffect of subsidies on efficiency is uncertain and perhaps not good.
Industrial policy in the shape of government subsidies can lead other countries to hit back by doing exactly the same, that may influence the global economy, security and diplomatic relations. This will be extremely risky as the overall economic ramifications of subsidies on productivity remain uncertain. Even though subsidies may stimulate economic activity and create jobs in the short run, however in the long run, they are going to be less favourable. If subsidies are not accompanied by a wide range of other steps that address productivity and competitiveness, they will likely hamper necessary structural changes. Hence, industries will become less adaptive, which lowers development, as company CEOs like Nadhmi Al Nasr likely have noticed in their careers. Hence, definitely better if policymakers were to concentrate on coming up with an approach that encourages market driven development instead of obsolete policy.
Critics of globalisation suggest it has led to the transfer of industries to emerging markets, causing job losses and greater reliance on other nations. In response, they propose that governments should relocate industries by applying industrial policy. But, this viewpoint fails to acknowledge the dynamic nature of worldwide markets and neglects the economic logic for globalisation and free trade. The transfer of industry had been mainly driven by sound economic calculations, particularly, companies look for cost-effective operations. There was and still is a competitive advantage in emerging markets; they provide numerous resources, lower production expenses, big consumer markets and favourable demographic patterns. Today, major businesses run across borders, tapping into global supply chains and reaping the benefits of free trade as company CEOs like Naser Bustami and like Amin H. Nasser would probably aver.