Economic restructuring
Encyclopedia
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 the corporate complex, specialized producer services, capital mobility, informal economy
, nonstandard work, and public outlays; as well as geographic spacing including the rise of world cities, spatial mismatch
, and metropolitan growth differentials.
affirms that a widening of the social hierarchy occurs where high-level, high-income, salaried professional jobs expands in the service industries alongside a greater incidence of low-wage, low-skilled jobs, usually filled by immigrants and minorities. A "missing middle" eventually develops in the wage structure. Several effects of this social polarization
include the increasing concentration of the poor, blacks, and Hispanics in large U.S. cities and distinct social forms such as the underclass
, informal economy
, and entrepreneurial immigrant communities. In addition, the declining manufacturing sector leaves behind strained blue-collared workers who endure chronic unemployment
, economic insecurity, and stagnation
due to the global economy's capital flight
. Wages and unionization rates for manufacturing jobs also decline. One other qualitative dimension involves the feminization
of the job supply as more and more women enter the labor force usually in the service sector.
Both costs and benefits are associated with economic restructuring. Greater efficiency, job creation, gentrification
, and enhanced national competitiveness are associated with social exclusion
and inclusion. The low-skilled, low-income population faces the loss of opportunities, full participation in society, lack of access in labor market and school, weak position in housing markets, limited political participation, and restricted social-cultural integration. Conversely, high-skilled, high-income professionals enjoy social inclusion with modern amenities, conveniences, social participation, and full access to public resources.
Furthermore, sociologist William Julius Wilson
argues that the deindustrialization
of manufacturing employment have exacerbated joblessness in the poor black community correlating with a rise in single-mother households, high premature mortality rates, and increasing incarceration
rates among black males. With privileged African Americans gaining professional upward mobility through affirmative action
and equal opportunity
sanctions in education
and employment
, the less-skilled, less-educated African Americans fall behind. This creates a growing economic class division within the black community accentuated by global economic restructuring without government response to the disadvantaged. Furthermore, Wilson asserts that as the black middle class
leave the predominantly black inner city
neighborhoods, informal employment information networks are eroded. This isolates poor, inner city residents from the labor market compouding the concentration of poverty, welfare dependency, rise of unemployment, and physical isolation in these areas.
City youth are also affected such as in New York City. The declines in education, health care, and social services and the dearth of jobs for those with limited education and training along with the decay of public environments for outdoor play and recreation have all contributed to fewer autonomous outdoor play or "hanging out" places for young people. This in turn affects their gross motor development, cultural build-up, and identity construction. Children become prisoners of home relying on television and other outlets for companionship. Contemporary urban environments restricts the opportunities for children to forge and negotiate peer culture or acquire necessary social skills. Overall, their ecologies have eroded in recent years brought about by global restructuring.
affected the world capitalist economy, economic restructuring was used to remedy the situation by geographically redistributing production, consumption, and residences.
City economies across the globe moved from goods-producing to service-producing outlets.
Breakthroughs in transportation and communications made industrial capital much more mobile. Soon, a quaternary or producer services emerged as a fourth basic economic sector
where routine low-wage service employment moved to low-cost sites and advanced corporate services centralized in cities. These technological upheavals brought about changes in institutional arrangements with the prominence of large corporations, allied business and financial services, nonprofit and public sector enterprises. Global cities such as New York and London become centers for international finance and headquarters for multinational corporations offering cross currency exchange services as well as buildup of foreign banking and trading. Other cities become regional headquarter centers of low-wage manufacturing. In all these urban areas the corporate complex grows offering banking, insurance, advertising, legal council, and other service functions. Economic restructuring allows markets to expand in size and capacity from regional to national to international scopes.
Altogether, these institutional arrangements buttressed by improved technology reflect the interconnectedness and internationalization of firms and economic processes. Consequently, capital, goods, and people rapidly flow across borders. Where the mode of regulation began with Fordism
and Taylorization in the industrial age
then to mass consumption of Keynesian economics
policies, it evolves to differentiated and specialized consumption through international competition. Additionally, in the labor market, nonstandard work arrangements develop in the form of part-time work, temporary agency and contract company employment, short-term employment, contingent work
, and independent contracting. Global economic changes and technological improvements in communications and information systems encouraged competitive organizations to specialize in production easily and assemble temporary workers quickly for specific projects. Thus, the norm of standard, steady employment unravels beginning in the mid-1970s.
Another shift in institutional arrangement involves public resources. As economic restructuring encourages high-technology service and knowledge-based economies, massive public de-investment results. Across many parts of the U.S. and the industrialized Western nations, steep declines in public outlays occur in housing, schools, social welfare, education, job training, job creation, child care, recreation, and open space. To remedy these cutbacks, privatization
is installed as a suitable measure. Though it leads to some improvements in service production, privatization leads to less public accountability and greater unevenness in the distribution of resources. With this reform in privatizing public services, neoliberalism
has become the ideological platform of economic restructuring. Free market economic theory has dismantled Keynesian and collectivists’ strategies and promoted the Reagan
and Thatcher
politics of the 1980s. Soon free trade, flexible labor, and capital flight are used from Washington D.C. to London to Moscow. Moreover, economic restructuring requires decentralization
as states hand down power to local governments. Where the federal government focuses on mainly warfare-welfare concerns, local governments focus on productivity. Urban policy reflects this market-oriented shift from once supporting government functions to now endorsing businesses.
. Such transformations frustrate urban planning
and revitalization, fostering deviance in the forms of drug-related activity and vagrancy. Older, compact, industrial U.S. cities have been rendered obsolete. Urban spaces become playgrounds for the urban gentry, wastelands for low-paid service workers, and denizens for the underground economy
. In some areas, gentrification
projects have caused displacement of poverty-stricken residents. Sunbelt cities such as Miami and Atlanta rise to become key business centers while Snowbelt cities such as Buffalo
and Youngstown decline. Even housing markets respond to economic restructuring with decaying housing stocks, escalating housing prices, depleting tax base, changes in financing, and reduction in federal support for housing. Soon, spatial divisions among wealthy and poor households exacerbate. Moreover, with the movement of blue-collared employment from central cities, geographically entrenched housing discrimination, and suburban land use policy, African American youths in inner cities become victims of spatial mismatch
, where their residences provide only weak and negative employment growth and they usually lack access to intrametropolitan mobility. High-order services, an expanding sector in the industrialized world, become spatially concentrated in a relative small number of large metropolitan areas, particularly in suburban office agglomerations.
as its counterpart concerning flexible accumulation. Additionally, the term carries with it three core themes: historical, radical rupture into post-industrial economic order; priority of economic forces over social/political forces; and structure over agency where the process is independent of human will, as it takes place according to economic logic (Logan & Swanstrom 1990). In addition, economic restructuring demonstrates the increasing complex and human-capital intensive modern society in Western nations.
Restructuring
Restructuring is the corporate management term for the act of reorganizing the legal, ownership, operational, or other structures of a company for the purpose of making it more profitable, or better organized for its present needs...
refers to the phenomenon of Western urban areas shifting from a manufacturing
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...
to a service sector economic base. This transformation has affected demographics including income
Income
Income is the consumption and savings opportunity gained by an entity within a specified time frame, which is generally expressed in monetary terms. However, for households and individuals, "income is the sum of all the wages, salaries, profits, interests payments, rents and other forms of earnings...
distribution, employment
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 :...
, and social hierarchy; institutional arrangements including the growth of the corporate complex, specialized producer services, capital mobility, informal economy
Informal economy
The informal sector or informal economy as defined by governments, scholars, banks, etc. is the part of an economy that is not taxed, monitored by any form of government, or included in any gross national product , unlike the formal economy....
, nonstandard work, and public outlays; as well as geographic spacing including the rise of world cities, spatial mismatch
Spatial mismatch
Spatial mismatch is the sociological, economic and political phenomenon associated with economic restructuring in which employment opportunities for low-income people are located far away from the areas where they live...
, and metropolitan growth differentials.
Demographic impact
As cities experience a loss of manufacturing jobs and growth of services, sociologist Saskia SassenSaskia Sassen
Saskia Sassen is a Dutch sociologist noted for her analyses of globalization and international human migration. She is currently Robert S. Lynd Professor of Sociology at Columbia University and Centennial visiting Professor at the London School of Economics. Sassen coined the term global city...
affirms that a widening of the social hierarchy occurs where high-level, high-income, salaried professional jobs expands in the service industries alongside a greater incidence of low-wage, low-skilled jobs, usually filled by immigrants and minorities. A "missing middle" eventually develops in the wage structure. Several effects of this social polarization
Social polarization
Social polarization is associated with the segregation within a society that may emerge from income inequality, real-estate fluctuations, economic displacements etc. and result in such differentiation that would consist of various social groups, from high-income to low-income.One of the earlier...
include the increasing concentration of the poor, blacks, and Hispanics in large U.S. cities and distinct social forms such as the underclass
Underclass
The term underclass refers to a segment of the population that occupies the lowest possible position in a class hierarchy, below the core body of the working class. The general idea that a class system includes a population under the working class has a long tradition in the social sciences...
, informal economy
Informal economy
The informal sector or informal economy as defined by governments, scholars, banks, etc. is the part of an economy that is not taxed, monitored by any form of government, or included in any gross national product , unlike the formal economy....
, and entrepreneurial immigrant communities. In addition, the declining manufacturing sector leaves behind strained blue-collared workers who endure chronic unemployment
Unemployment
Unemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...
, economic insecurity, and stagnation
Stagnation
Stagnation may refer to one of the following*Economic stagnation, slow or no economic growth*Era of Stagnation, a period of economic stagnation in Soviet Union*Stagnation in fluid dynamics, see "Stagnation point"*Water stagnation*Air stagnation...
due to the global economy's capital flight
Capital flight
Capital flight, in economics, occurs when assets and/or money rapidly flow out of a country, due to an economic event and that disturbs investors and causes them to lower their valuation of the assets in that country, or otherwise to lose confidence in its economic...
. Wages and unionization rates for manufacturing jobs also decline. One other qualitative dimension involves the feminization
Feminization
Feminization can refer to:*Feminization the hormonally induced development of female sexual characteristics*Feminization a sexual or lifestyle practice where a person assumes a female role...
of the job supply as more and more women enter the labor force usually in the service sector.
Both costs and benefits are associated with economic restructuring. Greater efficiency, job creation, gentrification
Gentrification
Gentrification and urban gentrification refer to the changes that result when wealthier people acquire or rent property in low income and working class communities. Urban gentrification is associated with movement. Consequent to gentrification, the average income increases and average family size...
, and enhanced national competitiveness are associated with social exclusion
Social exclusion
Social exclusion is a concept used in many parts of the world to characterise contemporary forms of social disadvantage. Dr. Lynn Todman, director of the Institute on Social Exclusion at the Adler School of Professional Psychology, suggests that social exclusion refers to processes in which...
and inclusion. The low-skilled, low-income population faces the loss of opportunities, full participation in society, lack of access in labor market and school, weak position in housing markets, limited political participation, and restricted social-cultural integration. Conversely, high-skilled, high-income professionals enjoy social inclusion with modern amenities, conveniences, social participation, and full access to public resources.
Furthermore, sociologist William Julius Wilson
William Julius Wilson
William Julius Wilson is an American sociologist. He worked at the University of Chicago 1972-1996 before moving to Harvard....
argues that the deindustrialization
Deindustrialization
Deindustrialization is a process of social and economic change caused by the removal or reduction of industrial capacity or activity in a country or region, especially heavy industry or manufacturing industry. It is an opposite of industrialization.- Multiple interpretations :There are multiple...
of manufacturing employment have exacerbated joblessness in the poor black community correlating with a rise in single-mother households, high premature mortality rates, and increasing incarceration
Incarceration
Incarceration is the detention of a person in prison, typically as punishment for a crime .People are most commonly incarcerated upon suspicion or conviction of committing a crime, and different jurisdictions have differing laws governing the function of incarceration within a larger system of...
rates among black males. With privileged African Americans gaining professional upward mobility through affirmative action
Affirmative action
Affirmative action refers to policies that take factors including "race, color, religion, gender, sexual orientation or national origin" into consideration in order to benefit an underrepresented group, usually as a means to counter the effects of a history of discrimination.-Origins:The term...
and equal opportunity
Equal opportunity
Equal opportunity, or equality of opportunity, is a controversial political concept; and an important informal decision-making standard without a precise definition involving fair choices within the public sphere...
sanctions in education
Education
Education in its broadest, general sense is the means through which the aims and habits of a group of people lives on from one generation to the next. Generally, it occurs through any experience that has a formative effect on the way one thinks, feels, or acts...
and employment
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 :...
, the less-skilled, less-educated African Americans fall behind. This creates a growing economic class division within the black community accentuated by global economic restructuring without government response to the disadvantaged. Furthermore, Wilson asserts that as the black middle class
Middle class
The middle class is any class of people in the middle of a societal hierarchy. In Weberian socio-economic terms, the middle class is the broad group of people in contemporary society who fall socio-economically between the working class and upper class....
leave the predominantly black inner city
Inner city
The inner city is the central area of a major city or metropolis. In the United States, Canada, United Kingdom and Ireland, the term is often applied to the lower-income residential districts in the city centre and nearby areas...
neighborhoods, informal employment information networks are eroded. This isolates poor, inner city residents from the labor market compouding the concentration of poverty, welfare dependency, rise of unemployment, and physical isolation in these areas.
City youth are also affected such as in New York City. The declines in education, health care, and social services and the dearth of jobs for those with limited education and training along with the decay of public environments for outdoor play and recreation have all contributed to fewer autonomous outdoor play or "hanging out" places for young people. This in turn affects their gross motor development, cultural build-up, and identity construction. Children become prisoners of home relying on television and other outlets for companionship. Contemporary urban environments restricts the opportunities for children to forge and negotiate peer culture or acquire necessary social skills. Overall, their ecologies have eroded in recent years brought about by global restructuring.
Institutional arrangements
When the 1973 oil crisis1973 oil crisis
The 1973 oil crisis started in October 1973, when the members of Organization of Arab Petroleum Exporting Countries or the OAPEC proclaimed an oil embargo. This was "in response to the U.S. decision to re-supply the Israeli military" during the Yom Kippur war. It lasted until March 1974. With the...
affected the world capitalist economy, economic restructuring was used to remedy the situation by geographically redistributing production, consumption, and residences.
City economies across the globe moved from goods-producing to service-producing outlets.
Breakthroughs in transportation and communications made industrial capital much more mobile. Soon, a quaternary or producer services emerged as a fourth basic economic sector
Economic sector
An economy may include several sectors , that evolved in successive phases.* The ancient economy was mainly based on subsistence farming....
where routine low-wage service employment moved to low-cost sites and advanced corporate services centralized in cities. These technological upheavals brought about changes in institutional arrangements with the prominence of large corporations, allied business and financial services, nonprofit and public sector enterprises. Global cities such as New York and London become centers for international finance and headquarters for multinational corporations offering cross currency exchange services as well as buildup of foreign banking and trading. Other cities become regional headquarter centers of low-wage manufacturing. In all these urban areas the corporate complex grows offering banking, insurance, advertising, legal council, and other service functions. Economic restructuring allows markets to expand in size and capacity from regional to national to international scopes.
Altogether, these institutional arrangements buttressed by improved technology reflect the interconnectedness and internationalization of firms and economic processes. Consequently, capital, goods, and people rapidly flow across borders. Where the mode of regulation began with Fordism
Fordism
Fordism, named after Henry Ford, is a modern economic and social system based on industrial mass production. The concept is used in various social theories about production and related socio-economic phenomena. It has varying but related meanings in different fields, as well as for Marxist and...
and Taylorization in the industrial age
Industrial Age
Industrial Age may refer to:*Industrialisation*The Industrial Revolution...
then to mass consumption of Keynesian economics
Keynesian economics
Keynesian economics is a school of macroeconomic thought based on the ideas of 20th-century English economist John Maynard Keynes.Keynesian economics argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and, therefore, advocates active policy responses by the...
policies, it evolves to differentiated and specialized consumption through international competition. Additionally, in the labor market, nonstandard work arrangements develop in the form of part-time work, temporary agency and contract company employment, short-term employment, contingent work
Contingent work
Contingent work, also sometimes known as casual work, is a neologism which describes a type of employment relationship between an employer and employee...
, and independent contracting. Global economic changes and technological improvements in communications and information systems encouraged competitive organizations to specialize in production easily and assemble temporary workers quickly for specific projects. Thus, the norm of standard, steady employment unravels beginning in the mid-1970s.
Another shift in institutional arrangement involves public resources. As economic restructuring encourages high-technology service and knowledge-based economies, massive public de-investment results. Across many parts of the U.S. and the industrialized Western nations, steep declines in public outlays occur in housing, schools, social welfare, education, job training, job creation, child care, recreation, and open space. To remedy these cutbacks, privatization
Privatization
Privatization is the incidence or process of transferring ownership of a business, enterprise, agency or public service from the public sector to the private sector or to private non-profit organizations...
is installed as a suitable measure. Though it leads to some improvements in service production, privatization leads to less public accountability and greater unevenness in the distribution of resources. With this reform in privatizing public services, neoliberalism
Neoliberalism
Neoliberalism is a market-driven approach to economic and social policy based on neoclassical theories of economics that emphasizes the efficiency of private enterprise, liberalized trade and relatively open markets, and therefore seeks to maximize the role of the private sector in determining the...
has become the ideological platform of economic restructuring. Free market economic theory has dismantled Keynesian and collectivists’ strategies and promoted the Reagan
Reaganomics
Reaganomics refers to the economic policies promoted by the U.S. President Ronald Reagan during the 1980s, also known as supply-side economics and called trickle-down economics, particularly by critics...
and Thatcher
Thatcherism
Thatcherism describes the conviction politics, economic and social policy, and political style of the British Conservative politician Margaret Thatcher, who was leader of her party from 1975 to 1990...
politics of the 1980s. Soon free trade, flexible labor, and capital flight are used from Washington D.C. to London to Moscow. Moreover, economic restructuring requires decentralization
Decentralization
__FORCETOC__Decentralization or decentralisation is the process of dispersing decision-making governance closer to the people and/or citizens. It includes the dispersal of administration or governance in sectors or areas like engineering, management science, political science, political economy,...
as states hand down power to local governments. Where the federal government focuses on mainly warfare-welfare concerns, local governments focus on productivity. Urban policy reflects this market-oriented shift from once supporting government functions to now endorsing businesses.
Geographic impact
Urban landscapes especially in the U.S. have significantly altered in response to economic restructuring. Cities such as Baltimore, Detroit, St. Louis and others face population losses which result in thousands of abandoned homes, unused buildings, and vacant lots, contributing to urban decayUrban decay
Urban decay is the process whereby a previously functioning city, or part of a city, falls into disrepair and decrepitude...
. Such transformations frustrate urban planning
Urban planning
Urban planning incorporates areas such as economics, design, ecology, sociology, geography, law, political science, and statistics to guide and ensure the orderly development of settlements and communities....
and revitalization, fostering deviance in the forms of drug-related activity and vagrancy. Older, compact, industrial U.S. cities have been rendered obsolete. Urban spaces become playgrounds for the urban gentry, wastelands for low-paid service workers, and denizens for the underground economy
Underground economy
A black market or underground economy is a market in goods or services which operates outside the formal one supported by established state power. Typically the totality of such activity is referred to with the definite article as a complement to the official economies, by market for such goods and...
. In some areas, gentrification
Gentrification
Gentrification and urban gentrification refer to the changes that result when wealthier people acquire or rent property in low income and working class communities. Urban gentrification is associated with movement. Consequent to gentrification, the average income increases and average family size...
projects have caused displacement of poverty-stricken residents. Sunbelt cities such as Miami and Atlanta rise to become key business centers while Snowbelt cities such as Buffalo
Buffalo, New York
Buffalo is the second most populous city in the state of New York, after New York City. Located in Western New York on the eastern shores of Lake Erie and at the head of the Niagara River across from Fort Erie, Ontario, Buffalo is the seat of Erie County and the principal city of the...
and Youngstown decline. Even housing markets respond to economic restructuring with decaying housing stocks, escalating housing prices, depleting tax base, changes in financing, and reduction in federal support for housing. Soon, spatial divisions among wealthy and poor households exacerbate. Moreover, with the movement of blue-collared employment from central cities, geographically entrenched housing discrimination, and suburban land use policy, African American youths in inner cities become victims of spatial mismatch
Spatial mismatch
Spatial mismatch is the sociological, economic and political phenomenon associated with economic restructuring in which employment opportunities for low-income people are located far away from the areas where they live...
, where their residences provide only weak and negative employment growth and they usually lack access to intrametropolitan mobility. High-order services, an expanding sector in the industrialized world, become spatially concentrated in a relative small number of large metropolitan areas, particularly in suburban office agglomerations.
Meaning
In cultural terms, economic restructuring has been associated with postmodernityPostmodernity
Postmodernity is generally used to describe the economic or cultural state or condition of society which is said to exist after modernity...
as its counterpart concerning flexible accumulation. Additionally, the term carries with it three core themes: historical, radical rupture into post-industrial economic order; priority of economic forces over social/political forces; and structure over agency where the process is independent of human will, as it takes place according to economic logic (Logan & Swanstrom 1990). In addition, economic restructuring demonstrates the increasing complex and human-capital intensive modern society in Western nations.
See also
- ManufacturingManufacturingManufacturing 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...
- Service sector
- Global cityGlobal cityA global city is a city that is deemed to be an important node in the global economic system...
- Spatial mismatchSpatial mismatchSpatial mismatch is the sociological, economic and political phenomenon associated with economic restructuring in which employment opportunities for low-income people are located far away from the areas where they live...
- Informal economyInformal economyThe informal sector or informal economy as defined by governments, scholars, banks, etc. is the part of an economy that is not taxed, monitored by any form of government, or included in any gross national product , unlike the formal economy....
- Capital flightCapital flightCapital flight, in economics, occurs when assets and/or money rapidly flow out of a country, due to an economic event and that disturbs investors and causes them to lower their valuation of the assets in that country, or otherwise to lose confidence in its economic...
- GentrificationGentrificationGentrification and urban gentrification refer to the changes that result when wealthier people acquire or rent property in low income and working class communities. Urban gentrification is associated with movement. Consequent to gentrification, the average income increases and average family size...
- Social exclusionSocial exclusionSocial exclusion is a concept used in many parts of the world to characterise contemporary forms of social disadvantage. Dr. Lynn Todman, director of the Institute on Social Exclusion at the Adler School of Professional Psychology, suggests that social exclusion refers to processes in which...
- Upward mobility
- SuburbanizationSuburbanizationSuburbanization a term used to describe the growth of areas on the fringes of major cities. It is one of the many causes of the increase in urban sprawl. Many residents of metropolitan regions work within the central urban area, choosing instead to live in satellite communities called suburbs...
- Social hierarchy