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For decades, the global economy operated under the assumption that open markets, free trade and minimal state intervention were the most efficient path toward growth, News.Az reports.
The era of globalization that dominated the 1990s and 2000s seemed to confirm this belief, as supply chains stretched across continents and companies treated national borders as mere administrative details. But in the last few years, a major shift has taken place: governments are reclaiming an active role in economic planning, investment and industrial development. The return of industrial policy has become one of the most significant political and economic transformations of the 21st century.
Industrial policy, once considered outdated or even harmful by many Western economists, refers to government strategies aimed at supporting specific industries considered vital for national development and security. Today, countries are no longer leaving strategic sectors entirely to the forces of the global market. Instead, they are choosing to protect, subsidize, regulate and sometimes nationalize essential industries. This shift is driven by geopolitical competition, technological rivalry and the recognition that supply chains built purely on efficiency can become dangerous vulnerabilities.
The COVID-19 pandemic exposed the fragility of global supply chains. When factories shut down in Asia, Europe and North America found themselves unable to access basic products ranging from medical masks to computer chips. The shock revealed how deeply dependent even the most advanced economies were on foreign production. As shortages disrupted everything from car manufacturing to healthcare systems, policymakers realized that national resilience required building more robust domestic capabilities.
But the return of industrial policy is not only about preventing shortages. It is also about the global race for technological leadership. The world is entering an era defined by artificial intelligence, semiconductors, electric vehicles, renewable energy, biotechnology and quantum computing. These technologies will shape economic power and national security for decades to come. As a result, governments are investing billions to support domestic industries and ensure that they do not fall behind.
The United States provides a vivid example of the scale of this transformation. With the CHIPS and Science Act, the US government committed tens of billions of dollars to boost domestic semiconductor manufacturing. Washington also passed the Inflation Reduction Act, which includes massive subsidies for electric vehicles, batteries and green energy technologies. These policies mark a dramatic reversal from decades of laissez-faire ideology. The government is now directly shaping industrial development, and the private sector is responding with aggressive investment in new factories.
The European Union has adopted its own industrial strategy, focusing heavily on green technologies, critical minerals and semiconductor independence. The EU’s Carbon Border Adjustment Mechanism imposes tariffs on products from countries with weaker climate regulations, effectively using industrial policy as a tool of geopolitical influence. European governments are providing subsidies for battery gigafactories, hydrogen production facilities and renewable energy infrastructure. At the same time, Europe is seeking to reduce its dependence on external suppliers for energy and raw materials, especially after the destabilizing effects of the Russia–Ukraine conflict.
China, of course, has been practicing state-driven industrial development for decades. Its “Made in China 2025” strategy and long-range technological plans have helped the country become a global leader in solar energy, electric vehicles, high-speed rail and telecommunications. Beijing views industrial policy as a central pillar of national security, and this has fueled global competition. The United States and Europe now see Chinese dominance in certain sectors as a strategic threat, pushing them to respond with their own interventionist policies.
What is new today is not that China uses industrial policy, but that many other countries—some of which previously championed free market doctrines—are adopting similar strategies. India has launched the Production-Linked Incentive scheme to stimulate domestic manufacturing in electronics, pharmaceuticals, solar components and automotive technologies. Japan and South Korea are investing heavily in semiconductor resilience and green technologies. The Gulf states are using oil revenues to diversify into renewable energy, logistics, aerospace and digital industries. Even smaller economies such as Azerbaijan, Kazakhstan, Estonia and Singapore are implementing targeted investment programs aimed at boosting technological competitiveness and reducing vulnerability to external shocks.
Economic nationalism, once associated mainly with protectionist rhetoric, has evolved into a practical policy framework implemented across the world. Governments are not turning away from global trade altogether; rather, they are adopting a new model often described as “open strategic autonomy” or “friend-shoring.” The idea is to maintain global economic ties while prioritizing security, resilience and national interest. Supply chains are being reorganized to rely on trusted partners instead of adversarial or unstable suppliers. For example, the United States is encouraging semiconductor production in allied countries such as Japan and South Korea, while the European Union is deepening cooperation with Canada, Norway and Australia for critical minerals.
The shift toward economic nationalism is also reshaping political discourse. Public expectations have changed: citizens now demand that governments ensure economic security, protect jobs and support industries that create long-term value. Decades of deindustrialization in Western countries created political pressures that are now pushing leaders to rebuild manufacturing capacity. At the same time, the global push for green technology—solar, wind, hydrogen, electric vehicles—requires massive industrial investment that governments are eager to coordinate.
In developing regions, industrial policy is seen as essential for escaping resource dependency. Many energy-rich countries in the Middle East and Eurasia now aim to diversify their economies away from oil and gas. Saudi Arabia’s Vision 2030, the UAE’s industrial transformation programs, and Azerbaijan’s efforts to expand renewable energy and digital infrastructure all reflect a broader global trend: national strategies that combine economic diversification, technological innovation and geopolitical ambition.
However, the return of industrial policy also introduces new risks. One of them is the possibility of subsidy wars. When governments compete to attract investment by offering increasingly generous incentives, global markets can become distorted. Another risk is fragmentation of the global economy into competing blocs. If countries prioritize trade with allies and restrict exports to strategic rivals, global efficiency may decline and geopolitical tensions could worsen. A third risk is the concentration of economic power in the hands of governments, which may reduce competition or limit entrepreneurial innovation.
Despite these risks, the momentum behind industrial policy is unlikely to slow down. The future of global politics will increasingly revolve around competition for technology, energy security, supply chain control and industrial capacity. Countries that invest early and strategically may gain a significant advantage. Those that fail to adapt could find themselves dependent on others for critical technologies, leaving them vulnerable in times of crisis.
What makes this theme evergreen is that the forces driving it are structural and long-term. The demand for technological sovereignty will not disappear. The geopolitical rivalry between major powers will continue to intensify. Climate transition will require trillions of dollars in new infrastructure. And public expectations of economic security will remain high. As long as these conditions hold, industrial policy will remain at the center of political debate.
The world is entering a new era in which governments play a far more active role in shaping economic outcomes. The old model of unregulated globalization is giving way to a strategic, resilient and politically driven form of economic management. Middle powers and major powers alike are rewriting the rules of industrial development, investing in national capabilities and seeking to control the indispensable technologies of the future. In this environment, economic power is inseparable from political power, and industrial policy has become the new language of global competition.
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