Deindustrialization

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Further information: Deindustrialisation by country

Bethlehem Steel in Bethlehem, Pennsylvania, one of the world's leading steel manufacturers for most of the 20th century, discontinued most of its operations in 1982, declared bankruptcy in 2001, and was dissolved in 2003.

Deindustrialization is a process of

manufacturing industry
.

There are different interpretations of what deindustrialization is. Many associate

automaker bailout of GM and Chrysler
.

Research has pointed to investment in patents rather than in new capital equipment as a contributing factor.[3] At a more fundamental level, Cairncross and Lever offer four possible definitions of deindustrialization:[4][5]

  1. A straightforward long-term decline in the output of manufactured goods or in
    manufacturing sector
    .
  2. A shift from manufacturing to the service sectors, so that manufacturing has a lower share of total employment. Such a shift may occur even if manufacturing employment is growing in absolute terms
  3. That manufactured goods comprise a declining share of external
    imports
    to maintain an economy in external balance
  4. A continuing state of balance of trade deficit (as described in the third definition above) that accumulates to the extent that a country or region is unable to pay for necessary imports to sustain further production of goods, thus initiating a further downward spiral of economic decline.

Explanations

decline of the city's once vibrant automotive industry

Theories that predict or explain deindustrialization have a long intellectual lineage.

Marx
's theory of declining (industrial) profit may be regarded as one of the earliest. This theory argues that technological innovation enables more efficient means of production, resulting in increased physical productivity, i.e., a greater output of use value per unit of capital invested. In parallel, however, technological innovations replace people with machinery, and the organic composition of capital decreases. Assuming only labor can produce new additional value, this greater physical output embodies a smaller and surplus value. The average rate of industrial profit therefore declines in the longer term.

Rowthorn and Wells[7] distinguish between deindustrialization explanations that see it as a positive process of, for example, maturity of the economy, and those that associate deindustrialization with negative factors like bad economic performance. They suggest deindustrialization may be both an effect and a cause of poor economic performance.

Pitelis and Antonakis[8] suggest that, to the extent that manufacturing is characterized by higher productivity, this leads, all other things being equal, to a reduction in relative cost of manufacturing products, thus a reduction in the relative share of manufacturing (provided manufacturing and services are characterized by relatively inelastic demand). Moreover, to the extent that manufacturing firms downsize through, e.g., outsourcing, contracting out, etc., this reduces manufacturing share without negatively influencing the economy. Indeed, it potentially has positive effects, provided such actions increase firm productivity and performance.

George Reisman[9] identified inflation as a contributor to deindustrialization. In his analysis, the process of fiat money inflation distorts the economic calculations necessary to operate capital-intensive manufacturing enterprises, and makes the investments necessary for sustaining the operations of such enterprises unprofitable.

Institutional arrangements have also contributed to deindustrialization such as

economic theory's emphasis on specialized factor endowments, manufacturing moved to lower-cost sites and in its place service sector and financial agglomerations concentrated in urban areas.[10][11]

The term deindustrialization crisis has been used to describe the decline of labor-intensive industry in a number of countries and flight of jobs away from cities. One example is labor-intensive

third world countries with much lower wages and lower standards. In addition, technological inventions that required less manual labor, such as industrial robots
, eliminated many manufacturing jobs.

See also

References

  1. ^ Duggan, Marie Christine. "Deindustrialization in the Granite State: What Keene, New Hampshire Can Tell Us About the Roles of Monetary Policy and Financialization in the Loss of US Manufacturing Jobs" – via www.academia.edu.
  2. ^ Robert Forrant (2008) Metal Fatigue.
  3. ^ Kerwin Kofi Charles et al (2018)The Transformation of Manufacturing and the Decline in US Employment in U.S. Employment∗, National Bureau of Economic Research
  4. ^ Cairncross 1982.
  5. ^ Lever 1991.
  6. ^ Rowthorn 1992.
  7. ^ Rowthorn & Wells 1987.
  8. ^ Pitelis & Antonakis 2003.
  9. ^ Reisman 2002.
  10. ^ Bluestone & Harrison 1982.
  11. ^ Logan & Swanstrom 1990.

Further reading

Historiography

External links

Library resources about
Deindustrialization
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