Deindustrialization

Deindustrialization is the process by which a country or region moves from a manufacturing-based economy to a service economy or information economy. Deindustrialization is typically accompanied by the erosion of social stability, and by an increase in structural unemployment.

The primary cause of deindustrialization is capital flight: during periods of liberalization in the world economy (1880s-1930s, 1980s-present), manufacturers of commodities as diverse as textiles, automobiles and steel have tended to relocate production facilities from countries or regions with relatively high labor costs to countries or regions with relatively low labor costs.

Examples

Excellent examples of deindustrialization include:

• Northern England (particularly the cities of Manchester, Leeds and Bradford) in the 1980s. Previously a global center of textile manufacturing, the region was subject to a long period of decline culminating in the 1980s, as the industry shifted to countries in South Asia, Southeast Asia and China.

• Detroit, Michigan and surrounding areas in the late 1980s. Its economy dominated by the automotive manufacturing industry, the region was devastated when companies such as General Motors relocated many of their production facilities to Mexico.