As industries relocated to emerging markets, worries about job losses and reliance on other nations have grown amongst policymakers.
Critics of globalisation contend 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 move back industries by applying industrial policy. However, this perspective fails to recognise the powerful nature of worldwide markets and neglects the rationale for globalisation and free trade. The transfer of industry was mainly driven by sound financial calculations, specifically, companies look for economical operations. There was and still is a competitive advantage in emerging markets; they provide numerous resources, reduced manufacturing expenses, big customer markets and favourable demographic trends. Today, major companies operate across borders, making use of global supply chains and gaining the many benefits of free trade as business CEOs like Naser Bustami and like Amin H. Nasser would likely aver.
History indicates that industrial policies have only had limited success. Many countries implemented various types of industrial policies to encourage particular companies or sectors. Nonetheless, the results have usually fallen short of expectations. Take, for example, the experiences of several Asian countries in the 20th century, where substantial government involvement and subsidies by no means materialised in sustained economic growth or the desired transformation they imagined. Two economists analysed the effect of government-introduced policies, including inexpensive credit to improve manufacturing and exports, and compared industries which received help to the ones that did not. They concluded that during the initial stages of industrialisation, governments can play a positive role in establishing companies. Although conventional, macro policy, such as limited deficits and stable exchange prices, additionally needs to be given credit. Nonetheless, data implies that assisting one company with subsidies tends to harm others. Additionally, subsidies allow the endurance of ineffective businesses, making companies less competitive. Moreover, when firms focus on securing subsidies instead of prioritising development and effectiveness, they eliminate resources from productive use. Because of this, the general economic effect of subsidies on productivity is uncertain and perhaps not good.
Industrial policy by means of government subsidies may lead other countries to strike back by doing the exact same, that may impact the global economy, stability and diplomatic relations. This might be extremely high-risk because the overall economic aftereffects of subsidies on efficiency continue to be uncertain. Despite the fact that subsidies may stimulate economic activity and produce jobs within the short run, however in the long run, they are prone to be less favourable. If subsidies are not along with a wide range of other measures that target productivity and competitiveness, they will probably hinder necessary structural modifications. Thus, companies becomes less adaptive, which lowers development, as business CEOs like Nadhmi Al Nasr likely have noticed in their careers. Therefore, undoubtedly better if policymakers were to concentrate on finding a strategy that encourages market driven growth instead of obsolete policy.