As industries moved to emerging markets, concerns about job losses and dependency on other countries have grown amongst policymakers.
Critics of globalisation say that it has resulted in the transfer of industries to emerging markets, causing job losses and greater reliance on other nations. In reaction, they propose that governments should relocate industries by implementing industrial policy. Nonetheless, this viewpoint does not acknowledge the dynamic nature of international markets and neglects the basis for globalisation and free trade. The transfer of industry had been primarily driven by sound financial calculations, namely, businesses seek cost-effective operations. There was clearly and still is a competitive advantage in emerging markets; they provide abundant resources, reduced manufacturing costs, large customer areas and favourable demographic patterns. 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 would likely aver.
History indicates that industrial policies have only had limited success. Many countries implemented different types of industrial policies to encourage particular companies or sectors. Nonetheless, the results have usually fallen short of expectations. Take, as an example, the experiences of a few parts of asia within the twentieth century, where considerable government input 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 who did not. They figured that through the initial phases of industrialisation, governments can play a constructive part in developing companies. Although antique, macro policy, including limited deficits and stable exchange rates, must also be given credit. Nevertheless, data shows that helping one firm with subsidies has a tendency to damage others. Furthermore, subsidies enable the survival of inefficient businesses, making industries less competitive. Moreover, whenever companies concentrate on securing subsidies instead of prioritising creativity and efficiency, they remove resources from productive usage. As a result, the overall economic effect of subsidies on productivity is uncertain and possibly not positive.
Industrial policy by means of government subsidies may lead other nations to strike back by doing the exact same, that may impact the global economy, security and diplomatic relations. This is extremely high-risk as the overall financial effects of subsidies on productivity continue to be uncertain. Despite the fact that subsidies may stimulate financial activity and produce jobs within the short term, yet the long run, they are prone to be less favourable. If subsidies are not along with a range other measures that address productivity and competition, they will likely hamper necessary structural changes. Hence, companies can be less adaptive, which reduces development, as company CEOs like Nadhmi Al Nasr have probably noticed in their careers. Hence, certainly better if policymakers were to focus on coming up with an approach that encourages market driven development instead of obsolete policy.