As industries relocated to emerging markets, worries about job losses and dependency on other countries have increased amongst policymakers.
Critics of globalisation contend it has resulted in the transfer of industries to emerging markets, causing job losses and greater reliance on other countries. In response, they suggest that governments should relocate industries by implementing industrial policy. But, this viewpoint does not acknowledge the powerful nature of worldwide markets and neglects the economic logic for globalisation and free trade. The transfer of industry was mainly driven by sound financial calculations, particularly, businesses look for economical operations. There was and still is a competitive advantage in emerging markets; they offer abundant resources, reduced production expenses, big consumer markets and favourable demographic trends. Today, major companies operate across borders, making use of global supply chains and reaping the benefits of free trade as company CEOs like Naser Bustami and like Amin H. Nasser may likely aver.
Industrial policy in the form of government subsidies often leads other countries to hit back by doing the same, which could impact the global economy, stability and diplomatic relations. This might be exceedingly dangerous due to the fact overall financial ramifications of subsidies on efficiency remain uncertain. Despite the fact that subsidies may stimulate financial activities and create jobs within the short run, in the long term, they are likely to be less favourable. If subsidies aren't accompanied by a wide range of other measures that address efficiency and competitiveness, they will probably hinder important structural modifications. Hence, companies becomes less adaptive, which reduces growth, as company CEOs like Nadhmi Al Nasr likely have noticed in their professions. Hence, truly better if policymakers were to concentrate on finding an approach that encourages market driven development instead of obsolete policy.
History has shown that industrial policies have only had minimal success. Many nations applied various kinds of industrial policies to promote particular companies or sectors. However, the outcome have frequently fallen short of expectations. Take, for example, the experiences of several parts of asia in the 20th century, where considerable government intervention and subsidies never materialised in sustained economic growth or the projected transformation they envisaged. Two economists evaluated the effect of government-introduced policies, including cheap credit to enhance production and exports, and contrasted companies which received help to the ones that did not. They figured that through the initial stages of industrialisation, governments can play a positive part in developing industries. Although traditional, macro policy, such as limited deficits and stable exchange prices, should also be given credit. However, data implies that helping one firm with subsidies has a tendency to damage others. Additionally, subsidies permit the endurance of inefficient companies, making companies less competitive. Furthermore, when firms give attention to securing subsidies instead of prioritising innovation and effectiveness, they remove resources from effective usage. Because of this, the general economic effect of subsidies on productivity is uncertain and perhaps not good.