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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 ?
Over three years, the entire area was completely deindustrialized.
Consider New Hampshire, which was deindustrialized during the 1990's.
Thus, the financial crisis that began in August 2007 and the serious underlying economic problems that are rarely spoken about as the world and a deindustrialized United States seek to pull themselves into a sound posture, have shown this sort of monetary policy to fall far short of what is needed (as would Friedman's for the same reasons).
Deindustrialized Saxony Anhalt, the setting for the first portion of Schorr's film, is one of the least successful federal states in Eastern Germany.
What if Detroit, the vacated and rusting shell of a deindustrialized city, turns out to be the hustling forefront of urban sustainability?
Similarly, scholars in a range of disciplines have produced a number of case studies focusing on the role of sport and urban spectacle in the regeneration of deindustrialized or economically depressed cities or city regions in a variety of locations across the developed world.
These are components of both modern living in a deindustrialized, post-Fordian, capitalist system and a globalized world that increasingly relies on telecommunications to conduct its business.
Without a command of Standard English, workers like Andrea Ellington have diminishing job prospects in the deindustrialized working world.
Proponents of a new way of eating are on shakier ground when they claim that a widespread turn toward small-scale and deindustrialized agriculture would not affect crop yields.
In the relatively few developed countries that have not deindustrialized as rapidly, emissions have remained relatively unchanged.
From rural America to the urban cores of deindustrialized cities, a military caste system is slowly taking shape.
Rendered invisible in deindustrialized communities far removed from the suburbs, barred from the tourist-laden sections of major cities, locked into understaffed nursing homes, interned in bulging prisons built in remote farm communities, hidden in decaying schools in rundown neighborhoods that bear the look of Third World slums, populations of poor black and brown citizens exist outside of the view of most Americans.