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A situation in which an economy begins producing more services than goods. An analyst may say that deindustrialization is occurring when decreases in manufacturing are accompanied by increases in consulting companies. This can be beneficial to some sectors; indeed, some investors look for evidence of deindustrialization to know what industries are likely to be profitable. However, deindustrialization can be detrimental to some workers and regions. For example, as the United States has deindustrialized, the city of Detroit, which is home to many automakers, has lost approximately half of its population, and consistently maintains a high unemployment rate relative to the rest of the country.


A shift in an economy from producing goods to producing services. Such a shift is most likely to occur in mature economies such as that of the United States. This shift has considerable impact on investors' view of the attractiveness of various industries.
Deindustrializationclick for a larger image
Fig. 38 Deindustrialization. The distribution of gross national product shows how the industrial sector in advanced economies grows more slowly than the service sector. The figures for industry include those for manufacturing. Source: World Development Report, World Bank, 2004.


a sustained fall in the proportion of national output accounted for by the industrial and manufacturing sectors of the economy, a process that is often accompanied by a decline in the number of people employed in industry (compare INDUSTRIALIZATION).

There is a well-established trend in advanced economies for the industrial sector to grow more slowly than the service sector, as shown in Fig. 38. For the UK, the share of industry in GDP fell from 43% in 1960 to 29% in 2002, while the share of services increased from 54% to 70%. Over the same period, employment in industry in the UK fell from 11.8 million in 1960 to 3.7 million in 2003.

Changes in sector shares may simply reflect changes in the pattern of final demand for goods and services over time, and as such may be considered a ‘natural’ development associated with a maturing economy. On the other hand, deindustrialization that stems from supply-side deficiencies (high costs, an overvalued exchange rate, lack of investment and innovation) which put a country at a competitive disadvantage in international trade (see IMPORT PENETRATION) is a more serious matter. In this case, deindustrialization often brings with it a fall in national output, rising unemployment and balance of payments difficulties.

The extent of deindustrialization in the UK was even more marked in the early 1980s because of Britain's artificially high exchange rate, bolstered by UK oil exports, which caused Britain to lose overseas markets.


References in periodicals archive ?
The affect of deindustrialisation has been significantly more negative on jobs than on production.
Generally, deindustrialisation is considered as the natural outcorrte of economic development because it involves the transformation from primitive agriculture-based economy to the modern industrial-based.
Scotland was not immune to the eclipse of 'socialism' as an organising rhetoric and economic programme, and the rapid deindustrialisation of the 1980s had undercut a left political sociology that was grounded solely on the agency of the industrial working class.
So, we have arrived in 2012 with the financial services sector facing the same issues: advance economies debt burden and the negative effects of their deindustrialisation.
During 1946 and 1947, however, it became clear that the Morgenthau Plan was causing serious economic problems in Germany: deindustrialisation caused agricultural productivity to plummet.
In Flagrante describes the communities in Northern England that were devastated by the deindustrialisation common to policies carried out by Mrs Thatcher and her predecessors starting in the mid-1970s.
The Fabulous Ruins of Detroit', a website dedicated to the landscape of deindustrialisation in one of the most famous 'bare, ruined choirs' in the United States, offers a digital view of what those who live in the city see on a regular basis: the hulking empty buildings and skeletal structures of a once great industrial metropolis.
Given that the processes of deindustrialisation and reinvention of inner-city regions has been underway for more than thirty years--more than a generation--it is time for urban historians to bring our methods to this phenomenon and to document and historicize this latest period of urban change.
In a post-Fordist context, a better understanding of the historical significance of inherited landscapes of industrial production, rendered obsolete by deindustrialisation and economic restructuring, can lead to more appropriate forms of conversion.
By the 1980s, with significant deindustrialisation, this became an increasing problem.
More British cities are experiencing "resurgence" after years of deindustrialisation than in any other European country.
The existence of abandoned industrial facilities is what many European countries have to deal with, in order to avoid the negative consequences of deindustrialisation such as environment harm, reduction of economic activities and urban degradation.