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.
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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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
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.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
References in periodicals archive ?
It firstly considers the impact of the deindustrialisation process on Playford.
Of particular importance is deindustrialisation and the shift to a service sector economy.
"Many of our towns and cities are still living in the shadow of deindustrialisation. Now is the time to kick-start a genuine economic recovery in Wales by investing in every part of our country.
[50.] Thirwall, A.P., 'Deindustrialisation in the United Kingdom', Issue no.
The term deindustrialisation refers to the process of socio-economic changes taking place due to reduction in the industrial capacity and/or the loss of industrial potential of an economy.
A major problem for the UK's regional cities was tackling the legacy of deindustrialisation, according to O'Neill.
No Tory MP complained in the 1980s when Margaret Thatcher sent the boys in blue to the coalfields as an occupying army, arresting miners in their thousands as they resisted 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.
But the chaos in the Labour Party during the 1980s was mainly due to the headlong defeat of the workers' movement in tandem with deindustrialisation and the ruthless determination of Margaret Thatcher's Conservative Party to destroy first the miners' and then the printers' unions.
'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.
This issue became one of the grounds for setting aside sale of steel mills that saved Pakistan from deindustrialisation, said Dr.