The relocation of industries to emerging markets have divided economists and policymakers.
Industrial policy in the shape of government subsidies may lead other countries to retaliate by doing the same, which could affect the global economy, security and diplomatic relations. This is excessively high-risk because the overall economic aftereffects of subsidies on productivity remain uncertain. Even though subsidies may stimulate financial activities and create jobs in the short term, in the long run, they are likely to be less favourable. If subsidies aren't along with a range other steps that address efficiency and competition, they will probably hamper necessary structural corrections. Thus, industries becomes less adaptive, which reduces development, as business CEOs like Nadhmi Al Nasr have probably noticed in their careers. Hence, definitely better if policymakers were to concentrate on finding a strategy that encourages market driven growth instead of outdated policy.
Critics of globalisation contend it has led to the transfer of industries to emerging markets, causing job losses and greater reliance on other countries. In response, they suggest that governments should move back industries by implementing industrial policy. Nonetheless, this perspective fails to acknowledge the dynamic nature of global markets and neglects the economic logic for globalisation and free trade. The transfer of industry had been mainly driven by sound economic calculations, specifically, companies look for cost-effective operations. There clearly was and still is a competitive advantage in emerging markets; they offer abundant resources, lower manufacturing costs, big consumer areas and favourable demographic trends. Today, major businesses 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 would probably aver.
History indicates that industrial policies have only had minimal success. Many nations applied different forms of industrial policies to help specific companies or sectors. Nonetheless, the outcomes have usually fallen short of expectations. Take, for instance, the experiences of a few parts of asia in the twentieth century, where extensive government input and subsidies never materialised in sustained economic growth or the desired transformation they envisaged. Two economists analysed the impact of government-introduced policies, including inexpensive credit to boost production and exports, and contrasted companies which received help to the ones that did not. They figured that during the initial phases of industrialisation, governments can play a positive role in establishing companies. Although antique, macro policy, such as limited deficits and stable exchange prices, should also be given credit. Nonetheless, data suggests that helping one company with subsidies has a tendency to harm others. Furthermore, subsidies allow the survival of inefficient firms, making companies less competitive. Furthermore, whenever companies give attention to securing subsidies instead of prioritising development and effectiveness, they eliminate resources from productive usage. Because of this, the entire economic aftereffect of subsidies on productivity is uncertain and possibly not good.