For much of the last three decades, following the end of the Cold War, governments were encouraged to step back and let markets decide. Growth, we were told, would follow efficiency, openness and integration.
In 2026, that advice no longer reflects how industry grows or how economic success is shaped. This is not because markets have failed. Markets still matter, but they no longer operate in isolation from public policy.
A sequence of shocks from the global financial crisis to the pandemic exposed the limits of relying on efficiency alone to deliver resilience, inclusion and long-term growth.
By early 2020s, it became clear that leaving growth entirely to markets was no longer sufficient. As economist Dani Rodrik has observed, in An Industrial Policy for Good Jobs (2022, governments played a role in shaping economies but what has changed is that industrial policy is now being pursued more openly and deliberately.
Across the world, production decisions are being influenced by incentives, standards, public procurement, domestic content rules and long-term national priorities.
For business leaders, this means the environment in which firms operate is becoming more structured, more directional, and more consequential.
This shift is evident in everything from large-scale clean energy incentives in advanced economies to local content requirements in infrastructure and manufacturing across emerging markets.
The old industrial logic assumed that firms would naturally locate where costs were lowest and regulations were lightest. Today, that assumption is giving way to a more complex reality.
Governments are actively steering growth towards priority sectors such as clean energy, advanced manufacturing, food systems, life sciences, the digital economy, and digital infrastructure.
They are doing so, not to replace markets, but to address vulnerabilities such as supply disruptions, skills shortages and infrastructure gaps.
As a result, growth is being shaped by where ecosystems exist, not just where costs are cheapest. Firms are looking for places with reliable power, skilled workers, policy stability, access to finance and credible long-term demand. Countries that organise these elements effectively are being pulled ahead.
What does this mean for business? In 2026, companies will be rewarded for a deeper understanding of policy environments. Strategic decisions about where to invest, expand, or source inputs will depend not only on commercial calculations, but also on how governments signal priorities and enforce rules.
This does not mean business aligning politically. It means business must become more policy literate. Understanding incentive schemes, regulatory trajectories and national development strategies is now a core commercial skill.
Firms that treat public policy as background noise risk misreading markets. Those who engage constructively while remaining commercially disciplined will be better positioned to manage risk and capture opportunity.
For developing and emerging economies, the changing growth model presents both opportunity and risk.
On the one hand, the reorganisation of global production is opening space for new industrial hubs. Countries that can offer credible strategies, targeted support and predictable rules are attracting investment into manufacturing, processing and services that were previously out of reach.
On the other hand, the margin for error is narrowing for governments. Competing purely on low costs is no longer sufficient. Nor is offering open-ended incentives without building underlying capabilities.
Growth in 2026 will increasingly favour countries that are deliberate, focused and disciplined in how they support industry.
This places a premium on industrial strategy as a practical framework that aligns incentives, skills, infrastructure, finance and regulation around a small number of priorities.
One of the most important shifts underway is the changing role of the state. Governments are not just regulating markets; they are helping organise them. This requires a different kind of public capacity as successful industrial strategies depend on coordination across government, engagement with the private sector, and the ability to adapt when conditions change.
In 2026, the countries that succeed will be those that govern best. Policy consistency, institutional credibility and execution capacity will matter more than headline incentives or grand promises.
It is tempting to view the current moment as temporary or as a response to recent disruptions that will fade as conditions stabilise. That would be a mistake. What is unfolding is a structural shift in how growth is organised.
Industry is now being shaped deliberately and selectively, placing a premium on quality of strategy and execution. For business leaders, this requires rethinking how risk and opportunity are assessed.
For policymakers, it demands moving beyond slogans to execution.
For countries seeking sustainable growth, it means recognising that 2026 is not just another year, but a moment when policy choices, investment decisions and institutional capabilities begin to lock in industrial trajectories for years to come.
The choices made in 2026 will determine which economies build durable industrial capabilities and which fall behind.
The writer is an Eisenhower Fellow and an Advocate of the High Court of Kenya with extensive experience in industrial policy, governance and private sector development.
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