Deindustrialization

Further information: Deindustrialisation by country

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 of heavy industry or manufacturing industry.

Research has pointed to investment in patents rather than in new capital equipment as a contributing factor. At a more fundamental level, Cairncross and Lever offer four possible definitions of deindustrialization:

  1. A straightforward long-term decline in the output of manufactured goods or in employment in the manufacturing sector.
  2. A shift from manufacturing to the service sectors, so that manufacturing has a lower share of total employment. Such a shift may occur even if manufacturing employment is growing in absolute terms
  3. That manufactured goods comprise a declining share of external trade, 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 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.
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