As industries moved to emerging markets, concerns about job losses and dependency on other nations have increased amongst policymakers.
Critics of globalisation contend that it has resulted in the transfer of industries to emerging markets, causing employment losses and greater reliance on other countries. In reaction, they propose that governments should relocate industries by applying industrial policy. Nevertheless, this viewpoint fails to acknowledge the powerful nature of global markets and neglects the economic logic for globalisation and free trade. The transfer of industry was primarily driven by sound economic calculations, particularly, businesses look for economical operations. There clearly was and still is a competitive advantage in emerging markets; they offer numerous resources, lower manufacturing costs, large consumer areas and favourable demographic patterns. Today, major companies operate across borders, making use of global supply chains and gaining the benefits of free trade as company CEOs like Naser Bustami and like Amin H. Nasser would probably aver.
History has shown that industrial policies have only had limited success. Various nations applied various forms of industrial policies to encourage certain companies or sectors. Nevertheless, the outcome have usually fallen short of expectations. Take, for example, the experiences of several Asian countries within the twentieth century, where considerable government intervention and subsidies never materialised in sustained economic growth or the desired transformation they imagined. Two economists examined the impact of government-introduced policies, including inexpensive credit to enhance manufacturing and exports, and compared industries which received help to the ones that did not. They figured that through the initial phases of industrialisation, governments can play a positive role in establishing companies. Although conventional, macro policy, including limited deficits and stable exchange rates, additionally needs to be given credit. Nevertheless, data suggests that assisting one company with subsidies has a tendency to harm others. Also, subsidies enable the endurance of inefficient firms, making industries less competitive. Furthermore, whenever companies give attention to securing subsidies instead of prioritising development and efficiency, they remove resources from productive use. 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 countries to hit back by doing the exact same, which could influence the global economy, security and diplomatic relations. This might be extremely risky as the general economic effects of subsidies on productivity continue to be uncertain. Despite the fact that subsidies may stimulate economic activities and create jobs within the short term, however in the long run, they are prone to be less favourable. If subsidies aren't along with a wide range of other steps that address efficiency and competition, they will likely hamper important structural alterations. Thus, industries becomes less adaptive, which lowers development, as company CEOs like Nadhmi Al Nasr have probably noticed in their careers. It is therefore, certainly better if policymakers were to focus on coming up with a method that encourages market driven development instead of outdated policy.