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Deindustrialization is the move away from industrial production in an economy, often caused by outsourcing labor-intensive jobs to countries with cheaper labor. The shift from manufacturing to service-oriented jobs is also a cause. The concept of the “information economy” has emerged due to improvements in digital and communication technology.
Deindustrialization refers to a move away from industrial production, or manufacturing, in an economy. It contrasts with industrialization – the move 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 providing a service rather than creating a product. A common cause of deindustrialization is the outsourcing of labor-intensive jobs to countries with cheaper labor.
Industrialization generally refers to the type of change in economic organization experienced by Britain in the 18th and 19th centuries. Improvements in agricultural efficiency freed many farmers to pursue other businesses. Coal-burning technology allowed the main source of manufacturing energy to shift from draft animals to mechanized power plants. Coal also opened up rail and steam trade, which spurred 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 the shift of jobs from the manufacturing sector to the service sector. The service sector includes jobs concerned with providing a service to a customer, rather than simply producing a good. Examples include restaurants, casinos, home repair and financial services. As a society becomes richer, the demand for services tends to increase. People with high incomes tend to be more willing to pay for entertainment and consulting services in addition to material goods.
Improvements in digital and communication technology over the last few decades have allowed many new jobs to be based solely on knowledge. Businesses are increasingly hiring service providers to provide the specific information needed to attract and serve customers. This trend is behind the concept of the “information economy”. When jobs involve generating information, they are considered part of the service sector.
A particular country may experience de-industrialization because manufacturing work is being outsourced to other countries. This is usually 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 encourages companies to find cheaper sources of labor. Furthermore, access to natural resources in developed countries is often highly regulated by the government. Thus, a trend towards deindustrialization in one country does not necessarily indicate a global trend.
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