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 ?
It needs to be emphasized that it is the actual level of industrial employment, rather than the rates of unionization of a presumably smaller pool of manufacturing workers in deindustrializing economies, that may be of greater significance for policymakers.
Springhill began to exhibit all of the classic symptoms of a deindustrializing small town: depopulation (declining from 7,348 in 1951 to 5,200 by 1971, and 4,000 in 2001) as workers and families moved elsewhere in search of employment, frantic searching for alternative industry (including a number of new start-ups fuelled by generous provincial government assistance), and increasing unemployment.
It follows that when spontaneous capital inflows occur in a liberalized economy, there are only four options available to it: adding to reserves which are "barren"; increasing investment, which entails "borrowing short to invest long"; increasing consumption, which entails splurging on borrowed short-term funds; or deindustrializing the economy.
By the sixties private-agency social work had merged with individual psychology, but to address the great migration of black and Latino poor to urban areas that were deindustrializing, public welfare bureaucracies recruited tens of thousands of caseworkers to handle the burgeoning caseload resulting from mass unemployment.
A comprehensive analysis of the cumulative effects of all of these deindustrializing factors is presented by Greiner et al.
He distinguishes the containment coups of industrializing corporatist regimes in Portugal, Greece, and Brazil from the rollback coups of the deindustrializing atomizers of Spain, Uruguay, Chile, and Argentina.
It's clear that in Decatur, as in the rest of the rapidly deindustrializing United States, community is being transformed.
In practice, shock therapy has produced significant inflation, has promoted stagnation, and has had the effect of deindustrializing large segments of the economy.
competitive condition and general decline in manufacturing led to the need to shore up American industry and revive deindustrializing cities.
Brookings Institution economists Charles Schultze and Robert Lawrence argued that America was not deindustrializing, that the decline in American exports was the result of the federal deficit and fiscal policy, and that industrial policy would fail because government was incapable of choosing "winners and losers.
Our analysis provides more support for the idea that the EC should be more careful in its stance towards big size, because the existence of large European-based TNCs does not, in itself, help the EC out of any deindustrializing tendencies.
We will not survive by deindustrializing and 'taking in each other's wash' or becoming a nation of hamburger flippers.