As industries relocated to emerging markets, worries about job losses and reliance on other nations have grown amongst policymakers.
Critics of globalisation suggest it has resulted in the transfer of industries to emerging markets, causing employment losses and increased reliance on other countries. In response, they propose that governments should move back industries by applying industrial policy. However, this viewpoint does not recognise the dynamic nature of international markets and neglects the economic logic for globalisation and free trade. The transfer of industry was primarily driven by sound economic calculations, specifically, companies look for cost-effective operations. There was clearly and still is a competitive advantage in emerging markets; they provide numerous resources, reduced manufacturing expenses, large consumer markets and favourable demographic trends. Today, major businesses run across borders, making use of global supply chains and gaining the benefits of free trade as business CEOs like Naser Bustami and like Amin H. Nasser may likely aver.
History has shown that industrial policies have only had minimal success. Various nations applied different kinds of industrial policies to help certain companies or sectors. However, the outcomes have often fallen short of expectations. Take, for example, the experiences of several Asian countries in the 20th century, where extensive government intervention and subsidies never materialised in sustained economic growth or the intended transformation they envisaged. Two economists examined the impact of government-introduced policies, including cheap credit to boost production and exports, and compared industries which received help to those that did not. They concluded that through the initial phases of industrialisation, governments can play a constructive part in developing companies. Although conventional, macro policy, such as limited deficits and stable exchange rates, should also be given credit. However, 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 companies concentrate on securing subsidies instead of prioritising creativity and effectiveness, they remove resources from effective usage. As a result, the entire economic effect of subsidies on productivity is uncertain and possibly not positive.
Industrial policy in the form of government subsidies can lead other countries to retaliate by doing the same, which can affect the global economy, stability and diplomatic relations. This might be exceedingly risky as the overall economic effects of subsidies on efficiency continue to be uncertain. Despite the fact that subsidies may stimulate financial activity and create jobs in the short term, in the future, they are apt to be less favourable. If subsidies aren't along with a wide range of other steps that address efficiency and competition, they will probably hinder essential structural modifications. Hence, industries will become less adaptive, which reduces development, as business CEOs like Nadhmi Al Nasr have probably noticed throughout their professions. It is, definitely better if policymakers were to concentrate on coming up with an approach that encourages market driven growth instead of obsolete policy.