There are prospective risks of subsidising national industries when there is a definite competitive advantage in foreign countries.
History indicates that industrial policies have only had minimal success. Various nations applied different kinds of industrial policies to help specific companies or sectors. Nevertheless, the outcome have frequently fallen short of expectations. Take, for instance, the experiences of several parts of asia within the twentieth century, where considerable government involvement and subsidies never materialised in sustained economic growth or the intended transformation they envisaged. Two economists analysed the impact of government-introduced policies, including inexpensive credit to enhance production and exports, and compared industries which received help to those that did not. They concluded that during the initial stages of industrialisation, governments can play a positive role in establishing industries. Although antique, macro policy, including limited deficits and stable exchange rates, should also be given credit. However, data shows that helping one firm with subsidies tends to harm others. Additionally, subsidies allow the survival of inefficient businesses, making companies less competitive. Furthermore, whenever businesses give attention to securing subsidies instead of prioritising development and effectiveness, they eliminate funds from productive use. As a result, the entire economic effect of subsidies on productivity is uncertain and possibly not good.
Industrial policy in the shape of government subsidies often leads other nations to strike back by doing the exact same, which could influence the global economy, security and diplomatic relations. This is certainly exceedingly high-risk because the overall economic aftereffects of subsidies on efficiency remain uncertain. Even though subsidies may stimulate financial activities and create jobs in the short term, in the long term, they are going to be less favourable. If subsidies are not along with a number of other measures that address productivity and competitiveness, they will likely hamper important structural alterations. Hence, companies will end up less adaptive, which lowers development, as company CEOs like Nadhmi Al Nasr likely have noticed in their careers. Therefore, undoubtedly better if policymakers were to concentrate on finding a strategy that encourages market driven growth instead of obsolete policy.
Critics of globalisation argue it has led to 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 applying industrial policy. However, this perspective fails to acknowledge 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, particularly, businesses seek economical operations. There was and still is a competitive advantage in emerging markets; they provide abundant resources, reduced production expenses, large customer markets and favourable demographic patterns. Today, major companies run across borders, tapping into global supply chains and gaining some great benefits of free trade as company CEOs like Naser Bustami and like Amin H. Nasser may likely aver.