Deindustrialization is the shift away from manufacturing production in an economy, often caused by outsourcing of labor-intensive jobs to countries with cheaper labor. The service sector, including jobs providing a service rather than creating a product, is a common replacement. Industrialization, on the other hand, is the movement towards an economy organized around industry, such as the changes experienced by Britain in the 18th and 19th centuries. The information economy has also emerged, with jobs based solely on knowledge. Access to natural resources and high wages in developed countries can drive deindustrialization.
Deindustrialization refers to a shift away from industrial or manufacturing production in an economy. Contrast with industrialization, the movement towards an economy organized around industry. A loss of manufacturing jobs in a country may be accompanied by an increase in service-oriented jobs, or jobs geared towards proving a service rather than creating a product. A common cause of deindustrialization is the outsourcing of labour-intensive jobs to countries with cheaper labour.
Industrialization generally refers to the type of change in economic organization experienced by Britain in the 18th and 19th centuries. Improvements in agricultural efficiency have enabled many farmers to pursue other tasks. Coal-fired technology has allowed the main source of manufacturing energy to move away from draft animals and to mechanized power plants. Coal also opened up the railway and steamship trade, which stimulated further technological innovation. The second industrial revolution was a peak of industrialization, powered by electricity and the internal combustion engine.
One source of deindustrialization is a shift of jobs from manufacturing to the service sector. The service sector includes jobs that are concerned with providing a service to a customer rather than simply producing a good. Examples include restaurants, casinos, home repairs and financial services. As a society gets richer, the demand for services tends to increase. High-income individuals tend to be more willing to pay for entertainment and consulting services in addition to physical goods.
Improvements in digital and communication technology in recent decades have allowed many new jobs to be based solely on knowledge. Companies are increasingly hiring contractors to provide them with the specific information they need to attract and serve customers. This trend underlies the concept of the “information economy”. When jobs involve the generation of information itself, they are considered part of the service industry.
A particular country may experience deindustrialization because manufacturing jobs are outsourced to other countries. This is often because poorer countries have cheaper labor or easier access to natural resources. Workers in highly developed countries tend to demand high wages to support high living standards, which provides an incentive for companies to find cheaper sources of employment. Furthermore, access to natural resources in developed countries is often heavily regulated by the government. Therefore, a deindustrialization trend in one country does not necessarily indicate a global trend.
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