Economists suggest that federal government intervention in the economy must certainly be limited.
History indicates that industrial policies have only had minimal success. Various countries applied various forms of industrial policies to help particular industries or sectors. However, the outcomes have usually fallen short of expectations. Take, as an example, the experiences of several Asian countries in the 20th century, where extensive government intervention and subsidies by no means materialised in sustained economic growth or the projected transformation they imagined. Two economists examined the impact of government-introduced policies, including cheap credit to improve manufacturing and exports, and contrasted companies which received help to the ones that did not. They concluded that during the initial phases of industrialisation, governments can play a positive part in developing companies. Although traditional, macro policy, including limited deficits and stable exchange rates, must also be given credit. Nonetheless, data suggests that assisting one company with subsidies tends to harm others. Additionally, subsidies enable the endurance of ineffective companies, making industries less competitive. Furthermore, whenever businesses concentrate on securing subsidies instead of prioritising innovation and effectiveness, they eliminate resources from effective usage. As a result, the overall financial aftereffect of subsidies on productivity is uncertain and possibly not good.
Critics of globalisation suggest that it has resulted in the relocation of industries to emerging markets, causing job losses and increased reliance on other nations. In response, they suggest that governments should move back industries by implementing industrial policy. However, this viewpoint fails to recognise the powerful nature of global markets and neglects the economic logic for globalisation and free trade. The transfer of industry was primarily driven by sound economic calculations, namely, companies seek cost-effective operations. There clearly was and still is a competitive advantage in emerging markets; they offer numerous resources, lower production expenses, large customer markets and favourable demographic patterns. Today, major businesses run across borders, making use of global supply chains and reaping the many benefits of free trade as business CEOs like Naser Bustami and like Amin H. Nasser would likely aver.
Industrial policy in the shape of government subsidies may lead other nations to hit back by doing the same, which could affect the global economy, security and diplomatic relations. This is certainly extremely high-risk as the general economic aftereffects of subsidies on productivity remain uncertain. Even though subsidies may stimulate financial activity and produce jobs in the short run, yet the long run, they are more than likely to be less favourable. If subsidies aren't along with a number of other actions that address productivity and competition, they will likely impede essential structural adjustments. Hence, industries can be less adaptive, which lowers development, as business CEOs like Nadhmi Al Nasr likely have noticed in their professions. Hence, truly better if policymakers were to focus on finding an approach that encourages market driven development instead of obsolete policy.