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Deindustrialization is a process of
social Social organisms, including human(s), live collectively in interacting populations. This interaction is considered social whether they are aware of it or not, and whether the exchange is voluntary or not. Etymology The word "social" derives from ...
and
economic An economy is an area of the production, distribution and trade, as well as consumption of goods and services. In general, it is defined as a social domain that emphasize the practices, discourses, and material expressions associated with th ...
change caused by the removal or reduction of industrial capacity or activity in a country or region, especially of heavy industry or manufacturing industry. 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 The Rust Belt is a region of the United States that experienced industrial decline starting in the 1950s. The U.S. manufacturing sector as a percentage of the U.S. GDP peaked in 1953 and has been in decline since, impacting certain regions an ...
" between 1980 and 1990. The
US Federal Reserve The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after ...
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.Kerwin Kofi Charles et al (201
The Transformation of Manufacturing and the Decline in US Employment
in U.S. Employment∗, National Bureau of Economic Research
At a more fundamental level, Cairncross and Lever offer four possible definitions of deindustrialization: # A straightforward long-term decline in the output of manufactured goods or in employment in the manufacturing sector. # 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 # That manufactured goods comprise a declining share of external
trade Trade involves the transfer of goods and services from one person or entity to another, often in exchange for money. Economists refer to a system or network that allows trade as a market. An early form of trade, barter, saw the direct exc ...
, so that there is a progressive failure to achieve a sufficient surplus of exports over
imports An import is the receiving country in an export from the sending country. Importation and exportation are the defining financial transactions of international trade. In international trade, the importation and exportation of goods are limited ...
to maintain an economy in external balance # A continuing state of
balance of trade The balance of trade, commercial balance, or net exports (sometimes symbolized as NX), is the difference between the monetary value of a nation's exports and imports over a certain time period. Sometimes a distinction is made between a balance ...
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

Theories that predict or explain deindustrialization have a long intellectual lineage. Rowthorn 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 increases. Assuming only labor can produce new additional value, this greater physical output embodies a smaller value and surplus value. The average rate of industrial profit therefore declines in the longer term. Rowthorn and Wells 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 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 identified
inflation In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduct ...
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 Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analyze ...
'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. 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 Manufacturing is the creation or production of goods with the help of equipment, labor, machines, tools, and chemical or biological processing or formulation. It is the essence of secondary sector of the economy. The term may refer to ...
. 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 robot An industrial robot is a robot system used for manufacturing. Industrial robots are automated, programmable and capable of movement on three or more axes. Typical applications of robots include welding, painting, assembly, disassembly, pick ...
s, eliminated many manufacturing jobs.


See also

* Center for Labor and Community Research * Degrowth * Deindustrialization by country * Jobless recovery * Reindustrialization * Post-industrial society * Urban decay *
Industrial Revolution The Industrial Revolution was the transition to new manufacturing processes in Great Britain, continental Europe, and the United States, that occurred during the period from around 1760 to about 1820–1840. This transition included going f ...
* Industrialization ** Great Divergence ** Textile manufacture during the British Industrial Revolution * '' The End of Work'' *
Rust Belt The Rust Belt is a region of the United States that experienced industrial decline starting in the 1950s. The U.S. manufacturing sector as a percentage of the U.S. GDP peaked in 1953 and has been in decline since, impacting certain regions an ...
*
Dutch disease In economics, the Dutch disease is the apparent causal relationship between the increase in the economic development of a specific sector (for example natural resources) and a decline in other sectors (like the manufacturing sector or agricult ...
* Mechanization * Newly industrialized country *
Brownfield land In urban planning, brownfield land is any previously developed land that is not currently in use. It may be potentially contaminated, but this is not required for the area to be considered brownfield. The term is also used to describe land pre ...


References


Further reading

* *
Boulhol, H (2004) 'What is the impact of international trade on deindustrialization in OECD countries?' Flash No.2004-206 Paris, CDC IXIS Capital Markets
* * * Byrne, David. "Deindustrialization and Dispossession: An Examination of Social Division in the Industrial City," ''Sociology'' 29#1 (1995): 95– 115. * in: * 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'' * * Fuchs, V R (1968) ''The Service Economy'' New York, National Bureau of Economic Research * * * 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). * * Linkon, Sherry Lee and John Russo. ''Steeltown USA: Work and Memory in Youngstown'' (UP of Kansas, 2002). * * * * * * * * *
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*Sachs, J D and Shatz, H J (1995) 'Trade and Jobs in US Manufacturing' ''Brookings Papers on Economic Activity'' No. 1 * *Vicino, Thomas, J. ''Transforming Race and Class in Suburbia: Decline in Metropolitan Baltimore.'' New York: Palgrave Macmillan, 2008. ;Historiography * * 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


"The Qualitative Shift in European Integration: Towards Permanent Wage Pressures and a 'Latin-Americanization' of Europe?"
Erik S. Reinert
Deindustrialization in Sub-Saharan Africa: Myth or Crisis?
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