As industries moved to emerging markets, worries about job losses and reliance on other nations have grown amongst policymakers.
Critics of globalisation say it has led to the transfer of industries to emerging markets, causing employment losses and greater reliance on other nations. In response, they propose that governments should relocate industries by applying industrial policy. But, this perspective fails to acknowledge the dynamic nature of international markets and neglects the economic logic for globalisation and free trade. The transfer of industry had been mainly driven by sound economic calculations, specifically, businesses look for economical operations. There clearly was and still is a competitive advantage in emerging markets; they provide abundant resources, lower production 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 may likely aver.
History indicates that industrial policies have only had limited success. Many 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 parts of asia in the 20th century, where extensive government involvement and subsidies never materialised in sustained economic growth or the desired transformation they envisaged. Two economists evaluated the effect of government-introduced policies, including inexpensive credit to boost production and exports, and contrasted industries which received help to the ones that did not. They concluded that throughout the initial stages of industrialisation, governments can play a positive role in developing companies. Although conventional, macro policy, such as limited deficits and stable exchange prices, additionally needs to be given credit. Nonetheless, data shows that assisting one firm with subsidies tends to harm others. Additionally, subsidies enable the endurance of ineffective companies, making industries less competitive. Moreover, when companies concentrate on securing subsidies instead of prioritising creativity and effectiveness, they remove resources from productive use. As a result, the overall economic effect of subsidies on productivity is uncertain and possibly not good.
Industrial policy by means of government subsidies may lead other countries to strike back by doing the exact same, which can influence the global economy, security and diplomatic relations. This will be excessively high-risk because the overall economic effects of subsidies on efficiency continue to be uncertain. Even though subsidies may stimulate economic activities and produce jobs within the short run, yet the long term, they are more than likely to be less favourable. If subsidies aren't accompanied by a number of other actions that target efficiency and competition, they will probably hinder essential structural modifications. Hence, companies will become less adaptive, which lowers development, as business CEOs like Nadhmi Al Nasr have probably noticed in their professions. It is therefore, definitely better if policymakers were to concentrate on finding a method that encourages market driven development instead of outdated policy.