deindustrialization


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Deindustrialization

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.

deindustrialization

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.

deindustrialization

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.

See STRUCTURE OF INDUSTRY, STRUCTURAL UNEMPLOYMENT.

References in periodicals archive ?
Introduction to Crumbling Cultures: Deindustrialization, Class, and Memory.
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Detroit, Michigan, was once a thriving city but was sent into a tailspin by the deindustrialization of the United States, white flight, and institutional racism which blamed black people who were in fact the victims of catastrophe.
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Though Detroit has been notorious for deindustrialization, abandonment, urban decay, and economic decline, today's artists strive to bring hope through creativity.
Ruins: Poems and Paintings of a Vanishing America is a contemplative reflection on how America has changed in the twenty-first century, particularly with regard to deindustrialization.
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Much like the first wave of big city, Northern, Black mayors who confronted an urban landscape ravaged by deindustrialization, shrinking budgets, white flight, underfunded school systems, and tense police-community relations in the 1960s and 1970s, nearly fifty years later the first Black president would confront two on-going wars, a stagnant economy, rising levels of inequality, and a sinking standard of living for the majority of Americans.