Deindustrialization

Further information: Deindustrialisation by country

Deindustrialization is a process of social and economic change caused by the removal or reduction of industrial capacity or activity in a country or region, especially of heavy industry or manufacturing industry.

Bethlehem Steel in Bethlehem, Pennsylvania, one of the world's leading steel manufacturers for most of the 20th century, discontinued most of its operations in 1982, declared bankruptcy in 2001, and was dissolved in 2003.

There are different interpretations of what deindustrialization is. Many associate American deindustrialization with the mass closing of automaker plants in the now so-called Rust Belt between 1980 and 1990.^[1][2] The US Federal Reserve raised interest and exchange rates beginning in 1979, and continuing until 1984, which automatically caused import prices to fall. Japan was rapidly expanding productivity during this time, and this decimated the US machine tool sector. A second wave of deindustrialization occurred between 2001 and 2009, culminating in the automaker bailout of GM and Chrysler.

Research has pointed to investment in patents rather than in new capital equipment as a contributing factor.^[3] At a more fundamental level, Cairncross and Lever offer four possible definitions of deindustrialization:^[4][5]

1. A straightforward long-term decline in the output of manufactured goods or in employment in the manufacturing sector.
2. A shift from manufacturing to the service sectors, so that manufacturing has a lower share of total employment. Such a shift may occur even if manufacturing employment is growing in absolute terms
3. That manufactured goods comprise a declining share of external trade, so that there is a progressive failure to achieve a sufficient surplus of exports over imports to maintain an economy in external balance
4. A continuing state of balance of trade deficit (as described in the third definition above) that accumulates to the extent that a country or region is unable to pay for necessary imports to sustain further production of goods, thus initiating a further downward spiral of economic decline.

Explanations

 

The former Packard Automotive Plant in Detroit, a recognizable symbol of the decline of the city's once vibrant automotive industry

Theories that predict or explain deindustrialization have a long intellectual lineage. Rowthorn^[6] argues that Marx's theory of declining (industrial) profit may be regarded as one of the earliest. This theory argues that technological innovation enables more efficient means of production, resulting in increased physical productivity, i.e., a greater output of use value per unit of capital invested. In parallel, however, technological innovations replace people with machinery, and the organic composition of capital decreases. Assuming only labor can produce new additional value, this greater physical output embodies a smaller and surplus value. The average rate of industrial profit therefore declines in the longer term.

Rowthorn and Wells^[7] distinguish between deindustrialization explanations that see it as a positive process of, for example, maturity of the economy, and those that associate deindustrialization with negative factors like bad economic performance. They suggest deindustrialization may be both an effect and a cause of poor economic performance.

Pitelis and Antonakis^[8] suggest that, to the extent that manufacturing is characterized by higher productivity, this leads, all other things being equal, to a reduction in relative cost of manufacturing products, thus a reduction in the relative share of manufacturing (provided manufacturing and services are characterized by relatively inelastic demand). Moreover, to the extent that manufacturing firms downsize through, e.g., outsourcing, contracting out, etc., this reduces manufacturing share without negatively influencing the economy. Indeed, it potentially has positive effects, provided such actions increase firm productivity and performance.

George Reisman^[9] identified inflation as a contributor to deindustrialization. In his analysis, the process of fiat money inflation distorts the economic calculations necessary to operate capital-intensive manufacturing enterprises, and makes the investments necessary for sustaining the operations of such enterprises unprofitable.

Institutional arrangements have also contributed to deindustrialization such as economic restructuring. With breakthroughs in transportation, communication and information technology, a globalized economy that encouraged foreign direct investment, capital mobility and labor migration, and new economic theory's emphasis on specialized factor endowments, manufacturing moved to lower-cost sites and in its place service sector and financial agglomerations concentrated in urban areas.^[10][11]

The term deindustrialization crisis has been used to describe the decline of labor-intensive industry in a number of countries and flight of jobs away from cities. One example is labor-intensive manufacturing. After free-trade agreements were instituted with less developed nations in the 1980s and 1990s, labor-intensive manufacturers relocated production facilities to third world countries with much lower wages and lower standards. In addition, technological inventions that required less manual labor, such as industrial robots, eliminated many manufacturing jobs.

See also

• Brownfield land
• Center for Labor and Community Research
• Degrowth
• Deindustrialisation by country
• Dutch disease
• Industrialization
  • Great Divergence
  • Textile manufacture during the British Industrial Revolution
• Industrial Revolution
  • Industrial Revolution in the United States
• Jobless recovery
• Mechanization
• Newly industrialized country
• Post-industrial society
• Reindustrialization
• Rust Belt
• The End of Work
• Urban decay

References

1. Duggan, Marie Christine. "Deindustrialization in the Granite State: What Keene, New Hampshire Can Tell Us About the Roles of Monetary Policy and Financialization in the Loss of US Manufacturing Jobs" – via www.academia.edu.
2. Robert Forrant (2008) Metal Fatigue.
3. Kerwin Kofi Charles et al (2018)The Transformation of Manufacturing and the Decline in US Employment in U.S. Employment∗, National Bureau of Economic Research
4. Cairncross 1982.
5. Lever 1991.
6. Rowthorn 1992.
7. Rowthorn & Wells 1987.
8. Pitelis & Antonakis 2003.
9. Reisman 2002.
10. Bluestone & Harrison 1982.
11. Logan & Swanstrom 1990.

Further reading

• Afonso, A (2005). "When the Export of Social Problems is no Longer Possible: Immigration Policies and Unemployment in Switzerland". Social Policy and Administration. 39 (6): 653–668. doi:10.1111/j.1467-9515.2005.00462.x. S2CID 153889205.
• Baumol, W J (1967). "Macroeconomics of Unbalanced Growth: The Anatomy of Urban Crisis". The American Economic Review. 57 (3).
• Bluestone, B.; Harrison, B. (1982). The Deindustrialization of America: Plant Closings, Community Abandonment and the Dismantling of Basic Industry. New York: Basic Books.
• Brady, David; Beckfield, Jason; Zhao, Wei (2007). "The Consequences of Economic Globalization for Affluent Democracies". Annual Review of Sociology. 33: 313–34. doi:10.1146/annurev.soc.33.040406.131636.
• Byrne, David. "Deindustrialization and Dispossession: An Examination of Social Division in the Industrial City," Sociology 29#1 (1995): 95– 115.
• Cairncross, A. (1982). What is deindustrialization?. pp. 5–17. in: Blackaby, F.; (Ed.). Deindustrialization. London: Pergamon. {{cite book}}: |last2= has generic name (help)
• Cowie, J., Heathcott, J. and Bluestone, B. Beyond the Ruins: The Meanings of Deindustrialization Cornell University Press, 2003.
• Central Intelligence Agency. 2008. The CIA World Factbook
• Feinstein, Charles (1999). "Structural Change in the Developed Countries During the Twentieth Century". Oxford Review of Economic Policy. 15 (4): 35–55. doi:10.1093/oxrep/15.4.35.
• Fuchs, V R (1968) The Service Economy New York, National Bureau of Economic Research
• Lever, W F (1991). "Deindustrialization and the Reality of the Post-industrial City". Urban Studies. 28 (6): 983–999. doi:10.1080/00420989120081161. S2CID 154323502.^{[dead link]}
• Goldsmith, M; Larsen, H (2004). "Local Political Leadership: Nordic Style". International Journal of Urban and Regional Research. 28 (1): 121–133. doi:10.1111/j.0309-1317.2004.00506.x.
• High, Steven (2003). "Industrial Sunset: The Making of North America's Rust Belt, 1969–1984". Toronto. {{cite journal}}: Cite journal requires |journal= (help) On US and Canada.
• Koistinen, David. Confronting Decline: The Political Economy of Deindustrialization in Twentieth-Century New England. (University Press of Florida, 2013)
  • • Koistinen, David. "Business and Regional Economic Decline: The Political Economy of Deindustrialization in Twentieth-Century New England" Business and economic history online (2014) #12
• Krugman, Paul. "Domestic Distortions and the Deindustrialization Hypothesis." NBER Working Paper 5473, NBER & Stanford University, March 1996.
• Kucera, D. and Milberg, W (2003) "Deindustrialization and Changes in Manufacturing Trade: Factor Content Calculations for 1978–1995." Review of World Economics 2003, Vol.139(4).
• Lee, Cheol-Sung (2005). "International Migration, Deindustrialization and Union Decline in 16 Affluent OECD Countries, 1962–1997". Social Forces. 84: 71–88. doi:10.1353/sof.2005.0109. S2CID 154879443.
• Linkon, Sherry Lee and John Russo. Steeltown USA: Work and Memory in Youngstown (UP of Kansas, 2002).
• Logan, John R.; Swanstrom, Todd (1990). Beyond City Limits: Urban Policy and Economic Restructuring in Comparative Perspective. Temple University Press. ISBN 9780877227335. JSTOR j.ctt14bt6br.
• Matsumoto, Gentaro (1996). "Deindustrialization in the UK: A Comparative Analysis with Japan". International Review of Applied Economics. 10 (2): 273–87. doi:10.1080/02692179600000020.
• Matthews, R.C.O.; Feinstein, C.H.; Odling-Smee, J.C. (1982). British Economic Growth. Oxford University Press.
• OECD (2008). Stat Extracts.
• Pitelis, Christos; Antonakis, Nicholas (2003). "Manufacturing and competitiveness: the case of Greece". Journal of Economic Studies. 30 (5): 535–547. doi:10.1108/01443580310492826.
• O'Reilly, Jacqueline; et al. (October 2016). "Brexit: understanding the socio-economic origins and consequences (discussion forum)" (PDF). Socio-Economic Review. 14 (4): 807–854. doi:10.1093/ser/mww043.
• Reisman, George (2002). Profit Inflation by the US Government.
• Doyle, Rodger (May 2002). . Scientific American magazine. Archived from the original on November 4, 2006. Retrieved February 20, 2008.
• Rowthorn, Robert E. (December 1992). "A Review of W. J. Baumol, S. A. B. Blackman and E. N. Wolff, Productivity and American Leadership: The Long View". Review of Income and Wealth. 38 (4): 475–495. doi:10.1111/j.1475-4991.1992.tb00456.x. Pdf.
• Rowthorn, Robert E.; Wells, J.R. (1987). Deindustrialization and foreign trade. Cambridge Cambridgeshire New York: Cambridge University Press. ISBN 9780521263603.
• Rowthorn, Robert E.; Ramaswamy, Ramana (September 1997). "Deindustrialization – its causes and implications". IMF Working Paper. International Monetary Fund. WP/97/42. Pdf.
• Rowthorn, Robert E.; Ramaswamy, Ramana (March 1999). "Growth, trade, and deindustrialization". IMF Staff Papers. International Monetary Fund. 46 (1): 18–41. Pdf.
• Sachs, J D and Shatz, H J (1995) 'Trade and Jobs in US Manufacturing' Brookings Papers on Economic Activity No. 1
• Thorleifsson, Cathrine (2016). "From coal to Ukip: the struggle over identity in post-industrial Doncaster". History and Anthropology. 27 (5): 555–568. doi:10.1080/02757206.2016.1219354. S2CID 151745925.
• Vicino, Thomas, J. Transforming Race and Class in Suburbia: Decline in Metropolitan Baltimore. New York: Palgrave Macmillan, 2008.

Historiography

• High, Steven (November 2013). ""The wounds of class": a historiographical reflection on the study of deindustrialization, 1973–2013". History Compass. 11 (11): 994–1007. doi:10.1111/hic3.12099.
• Strangleman, Tim, James Rhodes, and Sherry Linkon, "Introduction to crumbling cultures: Deindustrialization, class, and memory." International Labor and Working-Class History 84#1 (2013): 7–22. online

External links

• , Erik S. Reinert