Deindustrialization is a process of social
The term social refers to a characteristic of living organisms...

 and economic change caused by the removal or reduction of industrial
Industry refers to the production of an economic good or service within an economy.-Industrial sectors:There are four key industrial economic sectors: the primary sector, largely raw material extraction industries such as mining and farming; the secondary sector, involving refining, construction,...

 capacity or activity in a country or region, especially heavy industry or manufacturing industry. It is an opposite of industrialization
Industrialization is the process of social and economic change that transforms a human group from an agrarian society into an industrial one...


Multiple interpretations

There are multiple interpretations of what this process is. Cairncross (1982) and Lever (1991) offer four possible definitions of deindustrialization:
  1. A straightforward decline in the output of manufactured goods or in employment
    Employment is a contract between two parties, one being the employer and the other being the employee. An employee may be defined as:- Employee :...

     in the manufacturing sector. This, however, can be misleading because short-run or cyclical downturns may be misinterpreted as long-run deindustrialization
  2. A shift from manufacturing to the service sectors, so that manufacturing has a lower share of total output or employment. This may also be misleading, however, as such a shift may occur even if manufacturing is growing in absolute terms
  3. That manufactured goods comprise a declining share of external trade
    Trade is the transfer of ownership of goods and services from one person or entity to another. Trade is sometimes loosely called commerce or financial transaction or barter. A network that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and...

    , so that there is a progressive failure to achieve a sufficient surplus of exports over imports to maintain an economy in external balance
  4. A continuing state of balance of trade
    Balance of trade
    The balance of trade is the difference between the monetary value of exports and imports of output in an economy over a certain period. It is the relationship between a nation's imports and exports...

     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


Theories that predict or explain deindustrialization have a long intellectual lineage. Rowthorn
Robert Rowthorn
Robert Rowthorn, known as Bob is Emeritus Professor of Economics at the University of Cambridge and has been elected as a Life Fellow of King’s College.-Life:...

 (1992) argues that 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 value and surplus value. The average rate of industrial profit therefore declines in the longer term.

Rowthorn and Wells (1987) 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 (2003) 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
George Reisman
George Gerald Reisman is Professor Emeritus of Economics at Pepperdine University and author of Capitalism: A Treatise on Economics . He is also the author of an earlier book, The Government Against the Economy , which was praised by F.A...

 (2002) identified inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...

 as a contributor to deindustrialization. In his analysis, the process of fiat money
Fiat money
Fiat money is money that has value only because of government regulation or law. The term derives from the Latin fiat, meaning "let it be done", as such money is established by government decree. Where fiat money is used as currency, the term fiat currency is used.Fiat money originated in 11th...

 inflation distorts the economic calculations necessary to operate capital-intensive
Capital intensity
Capital intensity is the term in economics for the amount of fixed or real capital present in relation to other factors of production, especially labor...

 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 restructuring
Economic restructuring
Economic restructuring refers to the phenomenon of Western urban areas shifting from a manufacturing to a service sector economic base. This transformation has affected demographics including income distribution, employment, and social hierarchy; institutional arrangements including the growth of...

. With breakthroughs in transportation, communication and information technology, a globalized economy that encouraged foreign direct investment
Foreign direct investment
Foreign direct investment or foreign investment refers to the net inflows of investment to acquire a lasting management interest in an enterprise operating in an economy other than that of the investor.. It is the sum of equity capital,other long-term capital, and short-term capital as shown in...

, capital mobility and labor migration, and new economic theory's emphasis on specialized factor endowment
Factor endowment
In economics a country's factor endowment is commonly understood as the amount of land, labor, capital, and entrepreneurship that a country possesses and can exploit for manufacturing. Countries with a large endowment of resources tend to be more prosperous than those with a small endowment, all...

s, manufacturing moved to lower-cost sites and in its place service sector and financial agglomerations concentrated in urban areas (Bluestone & Harrison 1982, Logan & Swanstrom 1990).

De-industrialization crisis

The term de-industrialization crisis has been used to describe the decline of manufacturing
Manufacturing is the use of machines, tools and labor to produce goods for use or sale. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale...

 in a number of countries and the flight of jobs away from cities. One example is Detroit. Companies moved their production to other areas where wages and standards were lower. In addition, technological inventions that required less manual labor eliminated many manufacturing jobs.

Detroit and the auto-industry are highly regarded as the 'perfect' example of how de-industrialization can negatively impact an area and population. Once being centers of production and associated with a high standard of living,these areas are today associated with a high concentration of poverty, unemployment and noticeable racial isolation. Vast urban production complexes stand abandoned and over one third of the residents live below the poverty line.

The population of the United States has nearly doubled since the 1950s, adding approximately 150 million people. Yet, during this period (1950–2007), the population of the great manufacturing cities of the northeast has declined significantly: Detroit, Cleveland, Pittsburgh, St. Louis and Buffalo, NY, have all lost half their population or more in the past half-century. Baltimore
Baltimore is the largest independent city in the United States and the largest city and cultural center of the US state of Maryland. The city is located in central Maryland along the tidal portion of the Patapsco River, an arm of the Chesapeake Bay. Baltimore is sometimes referred to as Baltimore...

 lost almost a third of its population, and Philadelphia lost nearly a quarter of its own. During the 1950s, the nation's twenty largest cities held nearly a fifth of the US population. In 2006, this proportion has dropped to about one tenth of the population.

Many small and mid-sized manufacturing cities in the Manufacturing Belt experience similar fates. For instance the city of Cumberland, Maryland
Cumberland, Maryland
Cumberland is a city in the far western, Appalachian portion of Maryland, United States. It is the county seat of Allegany County, and the primary city of the Cumberland, MD-WV Metropolitan Statistical Area. At the 2010 census, the city had a population of 20,859, and the metropolitan area had a...

 declined from a population of
39,483 in the 1940s to a population of 20,915 in 2005.

As Americans migrated away from the manufacturing centers, they formed sprawling
Urban sprawl
Urban sprawl, also known as suburban sprawl, is a multifaceted concept, which includes the spreading outwards of a city and its suburbs to its outskirts to low-density and auto-dependent development on rural land, high segregation of uses Urban sprawl, also known as suburban sprawl, is a...

 suburbs, and many former small cities such as Phoenix, Arizona
Phoenix, Arizona
Phoenix is the capital, and largest city, of the U.S. state of Arizona, as well as the sixth most populated city in the United States. Phoenix is home to 1,445,632 people according to the official 2010 U.S. Census Bureau data...

 have grown tremendously in the last 50 years. In 2005 alone, Phoenix has grown by 43,000 people, an increase in population greater than any other city in the United States. Contrast that with the fact that in 1950, Phoenix was only the 99th largest city in the nation with a population of 107,000. In 2005, the population has grown to 1.5 million, ranking as the fifth largest city in the US.


Although literature (Brady et al. 2007, Feinstein 1999, and Lee 2005) indicates the occurrence of deindustrialisation in Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...

, industrial employment and output in the country have been steady. Industrial output has been stable since 1975, according to OECD (2008) data, and has been increasing gradually since 2001. Industrial employment has also been stable since 1964, actually increasing since 2001. It is notable that employment in the service sector has been increasing substantially since 1964, with the most dramatic rises occurring from 1995 onward. At the same time, employment in agriculture was steady from 1964 until 2000 when it began to decrease. These contradictions imply that Australia is not deindustrialising. The country has shifted to service oriented production however, with 70% of the GDP resulting from the service sector and only 26% from the industrial sector.


Austria has many indicators that justifies labeling them as a deindustrializing country. Data collected from the OECD for Austria has shown that since 1956 total employment did grow until 1994 and since then has remained relatively steady. Employment in industry and construction, however, has declined steadily as service sector employment has steadily increased. Data also shows that even as employment in industry and construction has decreased, industry productivity has continued to grow. Austrian unemployment has steadily increased since 1983 due to deindustrialization. Austria was one of countries in a study that showed that increasing overall unemployment was significantly related to manufacturing unemployment. Austria's foreign and domestic policy has made deindustrialization possible. High labor taxes and high withholding taxes repel low skill immigration as low capital taxes enables domestic capital investment. Stern banking secrecy policies, no withholding taxes for non-residents, joining the European Union, and adopting the Euro enabled substantial growth in Austria's services sector.


Data taken from the OECD website shows that industrial employment in Belgium rose between 1999 and 2000 and then declined until 2003, rising again until 2006. The overall trend in industrial employment in Belgium, however, is still a decline. OECD data also shows that production and sales of total industry in Belgium has been on the rise since 1955 with the exception of small declines during a few years. Despite this trend, deindustrialization is occurring at fairly rapid rates in Belgium. Variables such as large population increases and regional discrepancies account for these misleading statistics. Deindustrialization is hitting the region of Wallonia much harder than the region of Flanders. Wallonia remains much more impoverished and has an unemployment rate of about 17% (twice that of the unemployment rate in Flanders). Other Statistics displaying the effects of deiundustrialization in Belgium is the rise in employment in the service sector from 1999 until 2006. Today, industry is much less significant in Belgium than it has been in previous years.


Much of the academic literature pertaining to Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...

 hints at deindustrialization as a problem. However over the past fifty years, according to 2008 OECD data, industrial production and employment have been steadily increasing. Industrial production leveled off a bit between 2004–2007, but its production levels are the highest that they've ever been. The perception of deindustrialization that the literature refers to deals with the fact that although employment and economic production have risen, the economy has shifted drastically from manufacturing jobs to service sector jobs. Only 13% of the current Canadian population has a job in the industrial sector. Technological advancements in industry over the past fifty years have allowed for industrial production to keep rising during the Canadian economic shift to the service sector. 69% of the GDP of Canada comes from the service sector. (CIA World Factbook 2008)


Regarding Denmark’s industry, the country does not appear to be deindustrialising as a whole. Literature (Goldsmith and Larsen 2004) has stated that perhaps Denmark’s size and “Nordic style” of governing has allowed it to hide from the detrimental effects of globalization. Both men’s and women’s labor statistics (OECD data 2008) show a steady increase over the past decade. Despite a slight dip from 2001 to 2003, overall employment in Denmark has been at a steady increase since 1995. Denmark’s total industry output has also been on the rise since the 1974, despite an economic recession from 1987 to 1993. The country’s high employment and low unemployment rates have improved the production industry and the high tax rates have strengthened the economy.


Based on the data from the OECD website, Finland has been industrialising according to industrial employment and industrial production statistics. Finland has been considered very resilient based on its remarkable economic comeback after their recession in 1990 due to the fall of the Soviet Union. During this time production of total industry and civilian employment in industry declined rapidly. Finland has been ranked number one three times in the World Economic Forum competitiveness studies as one of the most developed IT economies since 2000. Since the 1990 recession, which was one of the largest in European history, Finland has managed to soar back to the top of the economic ladder. Finland has done so by focusing strongly on education. After their recession, Finland invested its money on boosting R&D, education, and retraining workers that had lost their job due to the recession. With its investment in education, Finland has succeeded in increasing some of its industries. For example, the forest industry now specializes in high-quality papers. As a result of investment in education and technology, Finland is now one of the world’s largest producers of paper-making machinery. According to the statistics on the OECD website, Finland is not deindustrialising.


Data for France indicates that while employment in industry relative to the total French economy has decreased, there is a lack of sound evidence pointing to an overall trend of deindustrialisation. Research (Lee 2005, Feinstein 1999) shows that at the same time relative employment in industry is decreasing, total production in industry has almost quadrupled since the mid 20th century, leveling off only since about the year 2000 (OECD 2008). Lee shows that between 1962 and 1995, employment in industry in France fell 13.1% (2005:table 1).Advances in technology that allow for higher output by fewer employees, coupled with a change in the type of products manufactured domestically, such as the high-tech electronics now manufactured in France, explain negative relationship of employment and output in French industry. Thus, it may feel like deindustrialisation is occurring because of the relative decrease of employment or highly publicised cases of outsourcing, yet the data suggest industry production in France is not suffering.


In occupied Germany after World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...

 the Morgenthau Plan
Morgenthau Plan
The Morgenthau Plan, proposed by United States Secretary of the Treasury Henry Morgenthau, Jr., advocated that the Allied occupation of Germany following World War II include measures to eliminate Germany's ability to wage war.-Overview:...

 was implemented, although not in its most extreme version. The plan was present in the U.S. occupation directive JCS 1067 and in the Allied "industrial disarmament" plans.
On February 2, 1946, a dispatch from Berlin reported:
Some progress has been made in converting Germany to an agricultural and light industry economy, said Brigadier General William H. Draper, Jr., chief of the American Economics Division, who emphasised that there was general agreement on that plan.
He explained that Germany’s future industrial and economic pattern was being drawn for a population of 66,500,000. On that basis, he said, the nation will need large imports of food and raw materials to maintain a minimum standard of living.
General agreement, he continued, had been reached on the types of German exports — coal
Coal is a combustible black or brownish-black sedimentary rock usually occurring in rock strata in layers or veins called coal beds or coal seams. The harder forms, such as anthracite coal, can be regarded as metamorphic rock because of later exposure to elevated temperature and pressure...

, coke
Coke (fuel)
Coke is the solid carbonaceous material derived from destructive distillation of low-ash, low-sulfur bituminous coal. Cokes from coal are grey, hard, and porous. While coke can be formed naturally, the commonly used form is man-made.- History :...

, electrical equipment, leather
Leather is a durable and flexible material created via the tanning of putrescible animal rawhide and skin, primarily cattlehide. It can be produced through different manufacturing processes, ranging from cottage industry to heavy industry.-Forms:...

 goods, beer
Beer is the world's most widely consumed andprobably oldest alcoholic beverage; it is the third most popular drink overall, after water and tea. It is produced by the brewing and fermentation of sugars, mainly derived from malted cereal grains, most commonly malted barley and malted wheat...

, wine
Wine is an alcoholic beverage, made of fermented fruit juice, usually from grapes. The natural chemical balance of grapes lets them ferment without the addition of sugars, acids, enzymes, or other nutrients. Grape wine is produced by fermenting crushed grapes using various types of yeast. Yeast...

s, spirits, toys, musical instruments, textiles and apparel — to take the place of the heavy industrial products that formed most of Germany's pre-war exports.

According to some historians the U.S. government abandoned the Morgenthau plan as policy in September 1946 with Secretary of State
United States Secretary of State
The United States Secretary of State is the head of the United States Department of State, concerned with foreign affairs. The Secretary is a member of the Cabinet and the highest-ranking cabinet secretary both in line of succession and order of precedence...

 James F. Byrnes
James F. Byrnes
James Francis Byrnes was an American statesman from the state of South Carolina. During his career, Byrnes served as a member of the House of Representatives , as a Senator , as Justice of the Supreme Court , as Secretary of State , and as the 104th Governor of South Carolina...

' speech Restatement of Policy on Germany
Restatement of Policy on Germany
"Restatement of Policy on Germany" is a famous speech by James F. Byrnes, the United States Secretary of State, held in Stuttgart on September 6, 1946.Also known as the "Speech of hope" it set the tone of future U.S...


Others have argued that credit should be given to former U.S.President Herbert Hoover
Herbert Hoover
Herbert Clark Hoover was the 31st President of the United States . Hoover was originally a professional mining engineer and author. As the United States Secretary of Commerce in the 1920s under Presidents Warren Harding and Calvin Coolidge, he promoted partnerships between government and business...

 who in one of his reports from Germany
The President's Economic Mission to Germany and Austria
The President's Economic Mission to Germany and Austria was a series of reports commissioned by US President Harry S. Truman and written by former US President Herbert Hoover....

, dated March 18, 1947, argued for a change in occupation policy, amongst other things stating:
"There is the illusion that the New Germany left after the annexations can be reduced to a 'pastoral state'. It cannot be done unless we exterminate or move 25,000,000 people out of it."

Worries about the sluggish recovery of the European economy, which before the war had depended on the German industrial base, and growing Soviet influence amongst a German population subject to food shortages and economic misery, caused the Joint Chiefs of Staff
Joint Chiefs of Staff
The Joint Chiefs of Staff is a body of senior uniformed leaders in the United States Department of Defense who advise the Secretary of Defense, the Homeland Security Council, the National Security Council and the President on military matters...

, and Generals Clay
Lucius D. Clay
General Lucius Dubignon Clay was an American officer and military governor of the United States Army known for his administration of Germany immediately after World War II. Clay was deputy to General Dwight D. Eisenhower, 1945; deputy military governor, Germany 1946; commander in chief, U.S....

 and Marshall
George Marshall
George Catlett Marshall was an American military leader, Chief of Staff of the Army, Secretary of State, and the third Secretary of Defense...

 to start lobbying the Truman
Harry S. Truman
Harry S. Truman was the 33rd President of the United States . As President Franklin D. Roosevelt's third vice president and the 34th Vice President of the United States , he succeeded to the presidency on April 12, 1945, when President Roosevelt died less than three months after beginning his...

 administration for a change of policy.

In July 1947, President Harry S. Truman
Harry S. Truman
Harry S. Truman was the 33rd President of the United States . As President Franklin D. Roosevelt's third vice president and the 34th Vice President of the United States , he succeeded to the presidency on April 12, 1945, when President Roosevelt died less than three months after beginning his...

 rescinded on "national security grounds" the punitive occupation directive JCS 1067, which had directed the U.S. forces of occupation in Germany to "take no steps looking toward the economic rehabilitation of Germany [or] designed to maintain or strengthen the German economy", it was replaced by JCS 1779, which instead noted that "[a]n orderly, prosperous Europe requires the economic contributions of a stable and productive Germany."

It had taken over two months for General Clay to overcome continued resistance to the new directive JCS 1779, but on July 10, 1947, it was finally approved at a meeting of the SWNCC. The final version of the document "was purged of the most important elements of the Morgenthau plan."

Dismantling of (West) German industry ended in 1951, but "industrial disarmament" lingered in restrictions on actual German Steel production, and production capacity, as well as on restriction on key industries. All remaining restrictions were finally rescinded on May 5, 1955. "The last act of the Morgenthau drama occurred on that date or when the Saar
Saar (protectorate)
The Saar Protectorate was a German borderland territory twice temporarily made a protectorate state. Since rejoining Germany the second time in 1957, it is the smallest Federal German Area State , the Saarland, not counting the city-states Berlin, Hamburg and Bremen...

 was returned to Germany."

Vladimir Petrov concluded: "The victorious Allies … delayed by several years the economic reconstruction of the war torn continent, a reconstruction which subsequently cost the US billions of dollars."


While unemployment in Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...

 is very high, industrial output is steadily increasing. Germany's startling unemployment rate of roughly seven percent (OECD, 2008) is by and large due to the continuing struggles with the reunification process between East and West Germany that began in 1990. However, the unemployment rate has been declining since 2005, when it reached its peak of over ten percent. Despite this high rate of unemployment, Germany's economy was ranked third largest in the world (measured by GDP, Wikipedia, 2008), and exports over a trillion dollars worth of goods every year. This notion of deindustrialization may be an inaccurate label for what is really happening in Germany. Germany is producing more with less labor; a product of improving efficiency. Another factor that is camouflaged by deindustrialization is that the labour market has shifted from industry to service. On the surface, it appears that deindustrialisation is occurring in Germany (and all over the world), but it may be just a shift in interests that are generating these statistics. 33.4% of Germany's workforce is in the industrial sector, whereas 63.8% work in the service sector (and the remainder work in agriculture). Germany's recent history has made quite a difference in its economic standing; it has been through a lot of peaks and valleys over the past few decades.


Ireland has yet to de-industrialise. Industrial employment and production and sales in industry have increased since 1990 according to OECD data. The increase in industry coincided with the introduction of Intel to the Irish economy in late 1989. Though one may not think of Intel as industry in the same sense as steel production, it is considered to be industry. Intel is now the largest company by turnover in Ireland. This was the beginning of what was called the “Celtic Tiger
Celtic Tiger
Celtic Tiger is a term used to describe the economy of Ireland during a period of rapid economic growth between 1995 and 2007. The expansion underwent a dramatic reversal from 2008, with GDP contracting by 14% and unemployment levels rising to 14% by 2010...

” economy. Dell
Dell, Inc. is an American multinational information technology corporation based in 1 Dell Way, Round Rock, Texas, United States, that develops, sells and supports computers and related products and services. Bearing the name of its founder, Michael Dell, the company is one of the largest...

 and Microsoft
Microsoft Corporation is an American public multinational corporation headquartered in Redmond, Washington, USA that develops, manufactures, licenses, and supports a wide range of products and services predominantly related to computing through its various product divisions...

 also followed Intel to Ireland, creating a large software industry. As is evidenced by these 3 companies, a majority of the industries that exist in Ireland are a result of foreign direct investment
Foreign direct investment
Foreign direct investment or foreign investment refers to the net inflows of investment to acquire a lasting management interest in an enterprise operating in an economy other than that of the investor.. It is the sum of equity capital,other long-term capital, and short-term capital as shown in...

. The top 3 FDIs are the U.S., the U.K., and Germany.


Overall, Italy
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...

 does not seem to be deindustrialising. According to OECD (2008) data, the rate of industrial employment is at an all-time high, although, in general, it has stayed relatively consistent since 1956. The rate of industrial production is also on the rise after a small dip in recent years; even though production rates are still at almost 2 percent less than they were in 2000, the 2005 rate is eighty percent more than what it was in 1955. These figures, however, do not make the distinction between different regions of the country: according to Rowthorn and Ramaswamy (1999), most manufacturing plants are located in cities such as Genoa
Genoa |Ligurian]] Zena ; Latin and, archaically, English Genua) is a city and an important seaport in northern Italy, the capital of the Province of Genoa and of the region of Liguria....

 and Milan
Milan is the second-largest city in Italy and the capital city of the region of Lombardy and of the province of Milan. The city proper has a population of about 1.3 million, while its urban area, roughly coinciding with its administrative province and the bordering Province of Monza and Brianza ,...

 in Northern Italy, and the unemployment rate in the south is significantly higher than in the north. Prior to World War II, Italy's economy was mainly agricultural, but it has since shifted to become one of the largest industrial economies in the world. In general, Italy is continuing to experience a period of industrialisation that has been taking place since the shift.


To further remove Japan as a potential future military threat after World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...

, the Far Eastern Commission
Far Eastern Commission
It was agreed at the Moscow Conference of Foreign Ministers, and made public in communique issued at the end of the conference on December 27, 1945 that the Far Eastern Advisory Commission would become the Far Eastern Commission , it would be based in Washington, and would oversee the Allied...

 decided that Japan must partly de-industrialized. Dismantling of Japanese industry was foreseen to have been achieved when Japanese standards of living were reduced to those between 1930 and 1934. (see Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...

) In the end the adopted program of de-industrialisation in Japan was implemented to a lesser degree than the similar U.S. "industrial disarmament" program in Germany.


A notable event began in the 1990s as the economy of Japan
Economy of Japan
The economy of Japan, a free market economy, is the third largest in the world after the United States and the People's Republic of China, and ahead of Germany at 4th...

 suddenly stagnated after three decades of tremendous economic growth. This could be construed as directly linked to deindustrialization, as this phenomenon began to be recognized in developed countries of the world around this same time. However, Japan had larger economic problems, the effects of which can still be seen in the country's low economic growth today. According to data from the Organisation for Economic Co-operation and Development
Organisation for Economic Co-operation and Development
The Organisation for Economic Co-operation and Development is an international economic organisation of 34 countries founded in 1961 to stimulate economic progress and world trade...

 (2008), deindustrialization is occurring in Japan. However, although industrial employment
Employment is a contract between two parties, one being the employer and the other being the employee. An employee may be defined as:- Employee :...

 as a percentage of total employment has dropped over the last couple of decades in Japan, total employment has not. Unemployment was fairly low at 3.5% in 2007 (CIA World Factbook 2008) and the economy is relatively stable. Literature (Matsumoto 1996) has stated that the service sector has been expanding and providing jobs for those that have been displaced from industry. Strong union membership has also played a role in keeping employment rates stable. Although outsourcing and industrial decline may contribute to job loss in industry, the shift in modern economies from industry to service may help reduce negative effects.


Much like many other OECD countries, the Netherlands is not experiencing deindustrialisation in the usual way one might think of it. While the OECD’s Annual Labor Force Statistics Survey may show that industrial employment opportunities in the Netherlands have significantly decreased in the past 50 years, the OECD’s Production and Sales MEI for Industry and Service Statistics shows that the overall production in the industrial sector has actually improved. Meaning, the Netherlands, like many other countries, has advanced to produce more with less.

Also, perhaps in response to the decline in industrial sector employment, the service industry of the Netherlands has grown and expanded its employment opportunities. The timely response of alternatives for employment may have had something to do with the progressive policies the Netherlands has in place to complement the changes in industry. An example might include tax breaks for families where the father works full time and the mother works part time, also referred to as the “one-and-a-half breadwinner” policy.

New Zealand

New Zealand, along with other affluent global economies, is in a phase of deindustrialisation, starting in the late 1990s. The evidence for this phenomenon is apparent in the decrease of economic output, a shift from employment in the manufacturing sector to the service sector (which may be due to an increase in tourism), the dissipation of unions caused by immigration and individual work contracts, along with the influence on culture by highbrow mass media (like the internet) and technology. It is possible to interpret these trends in a different way due to the complex nature of the data and the difficulty in quantifying and calculating reliable results. These trends are important to study, because they might occur in waves that could help predict economic and cultural outcomes in the future.


In Poland, as in many other former communist countries, deindustrialisation occurred rapidly in the years after the fall of communism in 1989, with many unprofitable industries going bankrupt with the switch to the market economy
Market economy
A market economy is an economy in which the prices of goods and services are determined in a free price system. This is often contrasted with a state-directed or planned economy. Market economies can range from hypothetically pure laissez-faire variants to an assortment of real-world mixed...


Soviet Union

Prior to its dissolution in 1991, the USSR had the second largest economy in the world
Economy of the Soviet Union
The economy of the Union of Soviet Socialist Republics was based on a system of state ownership of the means of production, collective farming, industrial manufacturing and centralized administrative planning...

 after the United States. The economy of the Soviet Union was the modern world's first centrally planned economy. It was based on a system of state ownership and managed through Gosplan
Gosplan or State Planning Committee was the committee responsible for economic planning in the Soviet Union. The word "Gosplan" is an abbreviation for Gosudarstvenniy Komitet po Planirovaniyu...

 (the State Planning Commission), Gosbank
Gosbank was the central bank of the Soviet Union and the only bank whatsoever in the entire Union from the 1930s until the year 1987. Gosbank was one of the three Soviet economic authorities, the other two being "Gosplan" and "Gossnab"...

 (the State Bank) and the Gossnab
Gossnab of USSR, State Supplies of the USSR was active in 1948-1953, 1965-1991. It was the state committee for material technical supply in the Soviet Union...

 (State Commission for Materials and Equipment Supply). Economic planning was through a series of Five-Year Plans. The emphasis was put on a very fast development of heavy industry and the nation became one of the world's top manufacturers of a large number of basic and heavy industrial products, but it lagged behind in the output of light industrial production and consumer durables.

As the Soviet economy grew more complex, it required more and more complex disaggregation of control figures (plan targets) and factory inputs. As it required more communication between the enterprises and the planning ministries, and as the number of enterprises, trusts, and ministries multiplied, the Soviet economy started stagnating. The Soviet economy was increasingly sluggish when it came to responding to change, adapting cost−saving technologies, and providing incentives at all levels to improve growth, productivity and efficiency.

Most information in the Soviet economy flowed from the top down and economic planning was often done based on faulty or outdated information, particularly in sectors with large numbers of consumers. As a result, some goods tended to be underproduced, leading to shortages, while other goods were overproduced and accumulated in storage. Some factories developed a system of barter and either exchanged or shared raw materials and parts, while consumers developed a black market for goods that were particularly sought after but constantly underproduced.

Conceding the weaknesses of their past approaches in solving new problems, the leaders of the late 1980s, headed by Mikhail Gorbachev
Mikhail Gorbachev
Mikhail Sergeyevich Gorbachev is a former Soviet statesman, having served as General Secretary of the Communist Party of the Soviet Union from 1985 until 1991, and as the last head of state of the USSR, having served from 1988 until its dissolution in 1991...

, were seeking to mold a program of economic reform to galvanize the economy. However, by 1990 the Soviet government had lost control over economic conditions. Government spending increased sharply as an increasing number of unprofitable enterprises required state support and consumer price subsidies to continue.

The industrial production system in the Soviet Union suffered a political and economic collapse in 1991, after which a transition from centrally planned to market-driven economies occurred. With the collapse of the Soviet Union, the economic integration of the Soviet republics was dissolved, and overall industrial activity declined substantially. A lasting legacy remains in the physical infrastructure created during decades of combined industrial production practices.


Sweden , officially the Kingdom of Sweden , is a Nordic country on the Scandinavian Peninsula in Northern Europe. Sweden borders with Norway and Finland and is connected to Denmark by a bridge-tunnel across the Öresund....

’s industrial sector presents diverging information in production output and industrial employment levels. Using OECD (2008) data, specific statements can be made about these elements. With this data, it can be seen that production output within the industrial sector has been constantly rising. Contrastingly, employment within industry has been steadily declining since the 1970s, as service sector employment rates increase. Though the decline in industrial employment points to a deindustrialising economy, the increasing levels of production output state otherwise.

Sweden’s industrial sector remains intact as it relies on its resource base of timber
Timber may refer to:* Timber, a term common in the United Kingdom and Australia for wood materials * Timber, Oregon, an unincorporated community in the U.S...

, hydropower
Hydropower, hydraulic power, hydrokinetic power or water power is power that is derived from the force or energy of falling water, which may be harnessed for useful purposes. Since ancient times, hydropower has been used for irrigation and the operation of various mechanical devices, such as...

, and iron ore as a large economic contributor (CIA World Factbook 2008). Because of its increased production rates in industry, it can be ascertained that deindustrialisation has not occurred in Sweden
Sweden , officially the Kingdom of Sweden , is a Nordic country on the Scandinavian Peninsula in Northern Europe. Sweden borders with Norway and Finland and is connected to Denmark by a bridge-tunnel across the Öresund....

. The decrease in industrial employment has been countered by an increase in efficiency and automation, increasing output levels in the industrial sector.


Deindustrialisation is a phenomenon that has been occurring in Switzerland
Switzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition....

 since the mid 1970s. Civilian employment in industry has been in decline since 1975 according to OECD (2008) data due to a major recession in the market. Literature (Afonso 2005) has stated that this is due to large numbers of migrant workers being forced to leave the country thanks to nonrenewable working permits, the industry, heavily based in foreign labour suffered greatly and those losses are still observed in the present. Globalisation has also had a negative effect in the employment market. Production of total industry has been increasing consistently at a slow rate since a slight decline in 1974.

United Kingdom

The United Kingdom has experienced many possible signs of deindustrialisation such a shift in employment from the manufacturing sector to the service sector. However, United Kingdom manufacturing output has not declined. According to the OECD, the workforce in industry has declined substantially since 1967. Although the employment in industry has declined, the OECD shows the total sales and production in the United Kingdom has increased over the past fifty years. The correlation between the decrease in industrial employment and the increase in national production and sales implies an increase in productivity.

United States

According to OECD (2008) data, real industrial production
Manufacturing is the use of machines, tools and labor to produce goods for use or sale. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale...

 rose in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

 in every year from 1983 to 2007, with the exception of 1991, 2001 and 2002. Manufacturing output has followed a similar pattern. Total industrial employment has been roughly constant at around 30 million people since the late 1970s (though there has been a steady decline since the all-time peak of 31.5 million in 2000).

The widespread perception of deindustrialization in the United States is due to shifting patterns in the geography and political geography of production (from the heavily unionized Northeast
Northeastern United States
The Northeastern United States is a region of the United States as defined by the United States Census Bureau.-Composition:The region comprises nine states: the New England states of Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont; and the Mid-Atlantic states of New...

 and Midwest
Midwestern United States
The Midwestern United States is one of the four U.S. geographic regions defined by the United States Census Bureau, providing an official definition of the American Midwest....

 towards the right-to-work states of the Southeast
Southeastern United States
The Southeastern United States, colloquially referred to as the Southeast, is the eastern portion of the Southern United States. It is one of the most populous regions in the United States of America....

 and the high supply of workers (largely immigrant, first-generation, and second-generation) willing to accept low wages in the Southwest
Southwestern United States
The Southwestern United States is a region defined in different ways by different sources. Broad definitions include nearly a quarter of the United States, including Arizona, California, Colorado, Nevada, New Mexico, Oklahoma, Texas and Utah...

), along with increasing labor productivity, which has led to higher levels of output without increases in the total number of workers. In addition, though total industrial employment has been relatively stable over the past forty years, the overall labor force has increased dramatically, resulting in a massive reduction in the percent of the labor force engaged in industry (from over 35% in the late 1960s to under 20% today). Industry (and specifically manufacturing) is thus less prominent in American life and the American economy now than in over a hundred years.

Changes in industrial production have varied greatly between a number of sectors in recent years; since 2000, for instance, while overall output has remained roughly flat, the production of electronic equipment has risen by over 50%, while that of clothing has fallen by over 60%. Following a moderate downturn, industrial production grew slowly but steadily between 2003 and 2007. The sector, however, averaged less than 1% growth annually from 2000 to 2007; from early 2008, moreover, industrial production again declined, and by June 2009, had fallen by over 15% (the sharpest decline since the great depression). Output thereafter began to recover.

See also

  • Economic restructuring
    Economic restructuring
    Economic restructuring refers to the phenomenon of Western urban areas shifting from a manufacturing to a service sector economic base. This transformation has affected demographics including income distribution, employment, and social hierarchy; institutional arrangements including the growth of...

  • Jobless recovery
    Jobless recovery
    A jobless recovery or jobless growth is an economic phenomon in which a macroeconomy experiences growth while maintaining or decreasing its level of employment...

  • Reindustrialization
    Reindustrialization is the economic, social, and political process of organizing national resources for the purpose of re-establishing deteriorated industries or change declining or contaminant industries to emerging or cleaner ones. The process often proceeds as a result of a need to reinvigorate...

  • Post-industrial society
    Post-industrial society
    If a nation becomes "post-industrial" it passes through, or dodges, a phase of society predominated by a manufacturing-based economy and moves on to a structure of society based on the provision of information, innovation, finance, and services.-Characteristics:...

  • Urban decay
    Urban decay
    Urban decay is the process whereby a previously functioning city, or part of a city, falls into disrepair and decrepitude...

  • Industrialisation
    Industrialization is the process of social and economic change that transforms a human group from an agrarian society into an industrial one...

  • Industrial revolution
    Industrial Revolution
    The Industrial Revolution was a period from the 18th to the 19th century where major changes in agriculture, manufacturing, mining, transportation, and technology had a profound effect on the social, economic and cultural conditions of the times...

  • The End of Work
    The End of Work
    The End of Work: The Decline of the Global Labor Force and the Dawn of the Post-Market Era is a non-fiction book by American economist Jeremy Rifkin, published in 1995 by Putnam Publishing Group....

Further reading

  • Afonso, A (2005) 'When the Export of Social Problems is no Longer Possible: Immigration Policies and Unemployment in Switzerland' Social Policy and Administration, Vol. 39, No. 6, Pp. 653–668
  • Baumol, W J (1967) ‘Macroeconomics of Unbalanced Growth: The Anatomy of Urban Crisis’ The American Economic Review, Vol. 57, No. 3
  • Boulhol, H (2004) ‘What is the impact of international trade on deindustrialisation in OECD countries?’ Flash No.2004-206 Paris, CDC IXIS Capital Markets§ion=21
  • Brady, David, Jason Beckfield, and Wei Zhao. 2007. “The Consequences of Economic Globalization for Affluent Democracies.” Annual Review of Sociology 33: 313-34.
  • Bluestone, B. and Harrison, B. The Deindustrialization of America: Plant Closings, Community Abandonment and the Dismantling of Basic Industry. New York: Basic Books, 1982.
  • Cairncross, A (1982) 'What is deindustrialisation?' Pp. 5–17 in: Blackaby, F (Ed.) Deindustrialisation, London: Pergamon
  • Cowie, J.,Heathcott, J. and Bluestone, B. "Beyond the Ruins: The Meanings of Deindustrialization." Cornell University Press, 2003.
  • Central Intelligence Agency. 2008. “Japan.” Washington, D.C.: Central Intelligence Agency. Retrieved January 22, 2008 (
  • CIA World Factbook (2008) 'Sweden'
  • The CIA World Factbook (2008) 'Canada'
  • Feinstein, Charles. 1999. “Structural Change in the Developed Countries During the Twentieth Century.” Oxford Review of Economic Policy 15: 35-55.
  • Fuchs, V R (1968) The Service Economy New York, National Bureau of Economic Research
  • Lever, W F (1991) ‘Deindustrialisation and the Reality of the Post-industrial City’ Urban Studies, Vol. 28, No. 6, Pp. 983-999
  • Goldsmith, M and Larsen, H (2004) "Local Political Leadership: Nordic Style." International Journal of Urban and Regional Research Vol. 28.1, Pp. 121–133.
  • Krugman, Paul. "Domestic Distortions and the Deindustrialization Hypothesis." NBER Working Paper 5473, NBER & Stanford University, March 1996.
  • Kucera, D. and Milberg, W (2003) "Deindustrialization and Changes in Manufacturing Trade: Factor Content Calculations for 1978-1995." Review of World Economics 2003, Vol.139(4).
  • Lee, Cheol-Sung. 2005. “International Migration, Deindustrialization and Union Decline in 16 Affluent OECD Countries, 1962-1997.” Social Forces 84: 71-88.
  • Logan, John R. and Swanstrom, Todd, Beyond City Limits: Urban Policy and Economic Restructuring in Comparative Perspective, Temple University Press, 1990.
  • Matsumoto, Gentaro. 1996. “Deindustrialization in the UK: A Comparative Analysis with Japan.” International Review of Applied Economics 10:273-87.
  • Matthews, R C O, Feinstein, C H and Odling-Smee, J C (1982) British Economic Growth,, Oxford: Oxford University Press
  • OECD Stat Extracts (2008)
  • Pitelis, C and Antonakis, N (2003) ‘Manufacturing and competitiveness: the case of Greece’ Journal of Economic Studies, Vol. 30, No. 5, Pp. 535–547
  • Reisman, G (2002) Profit Inflation by the US Government
  • Rowthorn, R (1992) ‘Productivity and American Leadership – A Review…’ Review of Income and Wealth Vol. 38, No. 4
  • Rowthorn, R E and Wells, J R (1987) De-industrialisation and Foreign Trade, Cambridge: Cambridge University Press
    Cambridge University Press
    Cambridge University Press is the publishing business of the University of Cambridge. Granted letters patent by Henry VIII in 1534, it is the world's oldest publishing house, and the second largest university press in the world...

  • Rowthorn, R E and Ramaswamy, R (1997) Deindustrialization–Its Causes and Implications, IMF Working Paper WP/97/42.
  • Rowthorn, Robert and Ramana Ramaswamy (1999) 'Growth, Trade, and Deindustrialization' IMF Staff Papers, 46:18-41.
  • Sachs, J D and Shatz, H J (1995) ‘Trade and Jobs in US Manufacturing’ Brookings Papers on Economic Activity No. 1
  • Vicino, Thomas, J. Transforming Race and Class in Suburbia: Decline in Metropolitan Baltimore. New York: Palgrave Macmillan, 2008.
  • Rodger Doyle, Deindustrialization: Why manufacturing continues to decline, Scientific American
    Scientific American
    Scientific American is a popular science magazine. It is notable for its long history of presenting science monthly to an educated but not necessarily scientific public, through its careful attention to the clarity of its text as well as the quality of its specially commissioned color graphics...

     magazine - May, 2002

External links

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