Economists suggest that federal government intervention throughout the market ought to be limited.
History shows that industrial policies have only had minimal success. Many countries implemented different forms of industrial policies to encourage certain companies or sectors. But, the results have often fallen short of expectations. Take, as an example, the experiences of a few parts of asia within the 20th century, where considerable government involvement and subsidies never materialised in sustained economic growth or the desired transformation they envisaged. Two economists analysed the effect of government-introduced policies, including cheap credit to improve production and exports, and compared companies which received help to those that did not. They concluded that during the initial phases of industrialisation, governments can play a constructive part in developing industries. Although old-fashioned, macro policy, such as limited deficits and stable exchange rates, should also be given credit. Nevertheless, data implies that assisting one firm with subsidies tends to damage others. Additionally, subsidies enable the survival of inefficient businesses, making companies less competitive. Moreover, when businesses give attention to securing subsidies instead of prioritising innovation and efficiency, they remove resources from effective use. As a result, the entire financial aftereffect of subsidies on efficiency is uncertain and possibly not positive.
Industrial policy in the form of government subsidies may lead other nations to retaliate by doing exactly the same, that may influence the global economy, stability and diplomatic relations. This will be exceedingly high-risk as the general financial aftereffects of subsidies on productivity remain uncertain. Despite the fact that subsidies may stimulate economic activities and produce jobs within the short term, in the future, they are apt to be less favourable. If subsidies are not along with a number of other steps that target efficiency and competitiveness, they will likely hinder important structural changes. Thus, industries becomes less adaptive, which reduces development, as company CEOs like Nadhmi Al Nasr have probably noticed throughout their careers. It is, truly better if policymakers were to focus on finding an approach that encourages market driven growth instead of obsolete policy.
Critics of globalisation argue that it has led to the relocation of industries to emerging markets, causing employment losses and greater reliance on other countries. In response, they propose that governments should relocate industries by implementing industrial policy. Nonetheless, this perspective does not acknowledge the dynamic nature of international markets and neglects the basis for globalisation and free trade. The transfer of industry was mainly driven by sound economic calculations, particularly, businesses seek cost-effective operations. There was clearly and still is a competitive advantage in emerging markets; they provide numerous resources, reduced manufacturing costs, big customer areas and favourable demographic trends. Today, major companies run across borders, making use of global supply chains and gaining the advantages of free trade as business CEOs like Naser Bustami and like Amin H. Nasser would likely aver.