Deindustrialization

Deindustrialization refers to the large-scale loss of manufacturing jobs, a process of capital abandonment that generally leaves devastated communities in its wake. The process reflects the mobility of capital, its constant and restless search to minimize costs and maximize profits, and its mounting ability to pit places against one another and force workers to make concessions in wage rates and benefits. The traditional view is that deindustrialization in some places and industrialization in others are mirror images of each other. Industrial growth and decline are offsetting tendencies, representing a zero-sum, or even a positive, global game. The shift of production processes from the industrial heartland to the periphery releases a skilled labor force for more sophisticated forms of production in developed countries and allows labor in the developing countries to move from relatively unproductive employment to more highly productive employment in industry. The shift may lead to some transitional unemployment, but job losses in the industrial heartland are of little significance compared with the enormous rewards attached to a global reallocation of production. Typically it witnesses steep declines in manufacturing as a proportion of the GDP and the labor force (see Figure 1).

The process of deindustrialization, often held to be synonymous with the collapse of Fordist systems of production in the late 20th century, began in earnest in the 1970s, especially in Britain and the United States and then in numerous other industrialized countries as well. In Britain, the decline of textiles, iron, and steel production, coal mining, and automobile firms devastated many once-prosperous cities of Northern England and Scotland.

Several factors contributed to the deindustrialization of the United States. Between 1945 and 1960, most United States–based companies were content to produce in the old industrial districts. But by 1960, Western European countries and Japan had become competitors. Mounting international competition and falling profit rates at home coerced American companies to decentralize not only within the United States but also abroad. Thus domestic restructuring and internationalization can be seen as two sides of the same coin. By 1980, the 500 largest U.S.-based corporations employed an international labor force almost equivalent to the size of their labor force within the United States. The rise of foreign competitors, many with lower labor costs, state-of-the-art technologies, and public subsidies, led to burgeoning trade deficits in many critical sectors, especially steel, automobiles, textiles, industrial parts, tool and die, agricultural and medical equipment, and merchant ships. U.S. corporate reinvestment, including research and development, tended to lag behind its competitors, as did productivity growth. Others note that technological change and capital intensification would have generated manufacturing job loss even without mounting international competition.

The United States experienced massive industrial devolution in the 1970s and 1980s, a period during which its share of world manufacturing output decreased significantly. This trend was accompanied by the growth of manufacturing employment and output in other countries, especially the newly industrializing countries in Eastern Asia. Inside the United States, a major corporate crisis led to declining rates of profit, inducing ever-more mobile firms to switch capital in space, going global in an effort to restore profitability: 500,000 manufacturing jobs per year were lost between 1978 and 2002. Toy production, for example, has largely moved into East Asia, particularly China. The textile industry fled much of the South for cheaper sites in Taiwan, Hong Kong, Singapore, and, now, China. The automobile industry, caught by the petrocrisis and cheap, fuel-efficient imports, gradually gave way to competitors from Japan and Europe. Steel offers another compelling example of the decline in industrial capacity. Between 1970 and 2005, the North American and Western European proportion of total global steel production declined from 67% to 42%, whereas developing countries’ production levels increased from 10% to more than 30%. Many steel-manufacturing firms have gone out of business as the global steel production capacity exceeds global demand. Because of government subsidies, steel mills in some countries, especially in Europe, have remained open in the face of dwindling quotas. The U.S. government, [Page 701]however, has been less willing to pay unemployment compensation to displaced workers and has allowed the U.S. steel industry to decline. Since the 1970s, U.S. production has decreased by 33%, whereas employment in the steel industry has declined by 66%.

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