As industries relocated to emerging markets, concerns about job losses and dependency on other countries have increased amongst policymakers.
History shows that industrial policies have only had limited success. Many countries implemented different kinds of industrial policies to encourage certain companies or sectors. But, the results have often fallen short of expectations. Take, for instance, the experiences of a few parts of asia within the twentieth century, where considerable government involvement and subsidies never materialised in sustained economic growth or the desired transformation they envisaged. Two economists examined the impact of government-introduced policies, including low priced credit to improve manufacturing and exports, and compared industries which received help to the ones that did not. They figured that during the initial stages of industrialisation, governments can play a constructive part in establishing industries. Although old-fashioned, macro policy, such as limited deficits and stable exchange rates, also needs to be given credit. Nonetheless, data suggests that helping one company with subsidies has a tendency to damage others. Furthermore, subsidies enable the survival of inefficient businesses, making companies less competitive. Furthermore, when firms give attention to securing subsidies instead of prioritising development and efficiency, they remove funds from effective use. As a result, the overall economic aftereffect of subsidies on efficiency is uncertain and perhaps not positive.
Industrial policy in the form of government subsidies may lead other nations to strike back by doing the exact same, which can affect the global economy, stability and diplomatic relations. This will be extremely risky because the general financial aftereffects of subsidies on efficiency continue to be uncertain. Even though subsidies may stimulate economic activity and create jobs in the short run, yet the long term, they are apt to be less favourable. If subsidies are not accompanied by a wide range of other steps that target efficiency and competition, they will probably impede important structural changes. Hence, industries becomes less adaptive, which lowers growth, as business CEOs like Nadhmi Al Nasr likely have noticed in their professions. It is, truly better if policymakers were to focus on finding a strategy that encourages market driven growth instead of outdated policy.
Critics of globalisation contend that 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 implementing industrial policy. However, this perspective does not recognise the powerful nature of international markets and neglects the rationale for globalisation and free trade. The transfer of industry was primarily driven by sound financial calculations, specifically, businesses look for cost-effective operations. There was and still is a competitive advantage in emerging markets; they offer abundant resources, reduced manufacturing costs, large customer areas and favourable demographic trends. Today, major companies run across borders, making use of global supply chains and reaping the advantages of free trade as business CEOs like Naser Bustami and like Amin H. Nasser would likely aver.