Deindustrialization

Deindustrialization, which refers to the loss of manufacturing jobs and facilities and the movement of capital out of basic industrial production, has occurred several times in the history of the United States. The movement of the textile industry out of New England early in the 20th century is an early example. However, contemporary usage of the term generally refers to the loss of manufacturing plants, jobs, and capital in America starting in the 1970s. Deindustrialization often occurred in conjunction with the decentralization of manufacturing facilities and jobs out of cities during the same period. Deindustrialization occurred in the United States earlier than in other countries, but other industrial societies, including those in Europe and Asia, later experienced it. With deindustrialization, the percentage of manufacturing jobs in the nation's economy fell, while the percentage in the service sector rose.

There have been numerous debates on the causes, processes, and consequences of deindustrialization, and the topic remains controversial. Barry Bluestone and Bennett Harrison give an early, penetrating analysis of the process in The Deindustrialization of America: Plant Closings, Community Abandonment, and the Dismantling of Basic Industry (1982). Their book's subtitle makes their view of the dimensions of the process clear. In addition to the loss of jobs, other important effects of the process include abandoned buildings and ripple effects of deindustrialization such as disinvestment in local urban communities, impoverishment of public services, heightened social polarization and disorder, increasing unemployment, and declines in real income. In terms of the national economy, the consequences include shifts to a service economy. In addition to understanding the causes of deindustrialization at the level of the national economy and the effects of the process at the national and local levels, deindustrialization also should be viewed within the context of the global economy and changes in it brought about by globalization of production and capital.

The causes of deindustrialization have been much debated. By the late 1970s, the postwar economic boom in the United States had slowed down dramatically. The growth of the economy slowed and productivity fell. Unemployment rates climbed and imports increased. Some scholars argue that rather than investing in basic industry and modernizing aging plant facilities, corporations invested in mergers, acquisitions, and foreign investment, thus leading to declining manufacturing production in the United States. American manufacturing found it difficult to compete with other industrial countries which had more modern industrial plant facilities. These conditions, part of a worldwide process in which corporations seek to invest capital in order to bolster their profits, set the stage for widespread deindustrialization beginning in [Page 210]the late 1970s. Other scholars link this analysis to the globalization of markets and production and to the development of trade between the more developed and the less developed countries. Some argue that these transformations led to the relocation of basic industry to less developed countries. Other influential economists argue that deindustrialization has little to do with trade between developed and less developed areas, but is primarily a consequence of successful economic development in which higher levels of manufacturing productivity lead to less need for jobs in the manufacturing sector, as noted by Robert Rowthorn and Ramana Ramaswamy in 1997. Others, including Paul Krugman in 1994, noted that slackening demand for manufactured goods also plays a role.

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