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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 ?
Deindustrialisation has tended to increase inequality for two reasons.
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.
UKPRwire, Wed May 29 2013] In a reflection of the growing global concern with the unresolved Eurozone crisis and the threat of deindustrialisation in Europe, volume growth slowed considerably in major appliances in Germany during 2012.
This will lead to a deindustrialisation in Pakistan as there were shortages of energy for the industrial sector, along with high cost of doing business.
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.
After decades of deindustrialisation, the last pit, a deep mine in South Wales, has closed.
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.
Gray examines census evidence drawn from a period that marks the final years of her (somewhat elusive) 'long eighteenth century' chronology, and explores uneven patterns of deindustrialisation in County Cavan.
By the 1980s, with significant deindustrialisation, this became an increasing problem.
21) Conversely, scholarship on rural and small-town deindustrialisation has focused on material artifacts and industrial archaeology rather than the uses of the industrial past in a heritage discourse.
More British cities are experiencing "resurgence" after years of deindustrialisation than in any other European country.