Economists claim that federal government intervention in the economy ought to be limited.
History has shown that industrial policies have only had limited success. Various countries applied various kinds of industrial policies to promote certain industries or sectors. But, the outcomes have usually fallen short of expectations. Take, for example, the experiences of a few Asian countries within the 20th century, where substantial government input and subsidies never materialised in sustained economic growth or the desired transformation they imagined. Two economists examined the effect of government-introduced policies, including cheap credit to improve manufacturing and exports, and compared companies which received help to the ones that did not. They concluded that throughout the initial phases of industrialisation, governments can play a positive role in developing industries. Although traditional, macro policy, such as limited deficits and stable exchange rates, also needs to be given credit. Nonetheless, data suggests that assisting one company with subsidies tends to harm others. Furthermore, subsidies allow the survival of ineffective businesses, making industries less competitive. Moreover, whenever businesses focus on securing subsidies instead of prioritising creativity and effectiveness, they remove resources from effective usage. As a result, the entire financial aftereffect of subsidies on productivity is uncertain and perhaps not good.
Industrial policy in the form of government subsidies may lead other nations to strike back by doing the same, which could affect the global economy, stability and diplomatic relations. This will be excessively risky as the overall financial ramifications of subsidies on productivity remain uncertain. Even though subsidies may stimulate economic activity and create jobs in the short run, however in the long run, they are likely to be less favourable. If subsidies are not accompanied by a wide range of other measures that address productivity and competitiveness, they will probably impede important structural corrections. Thus, companies will become less adaptive, which reduces development, as company CEOs like Nadhmi Al Nasr have probably noticed throughout their professions. Therefore, truly better if policymakers were to focus on coming up with an approach that encourages market driven growth instead of obsolete policy.
Critics of globalisation say it has resulted in the relocation of industries to emerging markets, causing employment losses and increased reliance on other nations. In response, they suggest that governments should move back industries by applying industrial policy. Nonetheless, this perspective fails to recognise the dynamic nature of global markets and neglects the economic logic for globalisation and free trade. The transfer of industry had been primarily driven by sound economic calculations, namely, companies seek economical operations. There was clearly and still is a competitive advantage in emerging markets; they offer numerous resources, lower production expenses, big consumer areas and favourable demographic trends. Today, major businesses run across borders, tapping into global supply chains and gaining some great benefits of free trade as business CEOs like Naser Bustami and like Amin H. Nasser would likely aver.