Analyze the impact of deindustrialization on a global and regional scale and the role of technology in deindustrialization

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Furthermore, deindustrialization prompts regional and national political changes: as regions find themselves deprived and economically depressed, regional and national governments may step in, implementing a plethora of new policies to regain control over the situation. To begin with, governments may seek to prevent, slow down or mitigate the impacts of deindustrialization by offering financial aid to heavy, struggling industries, introducing early retirement plans to those who would otherwise become unemployed (at the same time preventing the significant rise in short-term unemployment) and setting up apprenticeship schemes to facilitate the transition of young, profitable workers from the heavy industry to a lighter industry or even to the service sector. Additionally, to encourage renewed economic activity, the government may start aggressively promoting favored local industries, offering attractive incentives and subsidies to prospective businesses who, were they to settle in the region, would provide new jobs, rewriting laws holding back entrepreneurs, loosening labor laws to attract more investment and deregulating in order to encourage competition. These reforms would attract new businesses to the area, creating new jobs and fueling the local economy. If the introduction of these new businesses proves itself to be successful, Myrdal’s model would apply, encouraging further development and increasing the wealth of the region. Finally, in order to encourage reindustrialization, the government may set up regional economic planning, including the physical “makeover” of the region, the occasional transformation of disused industrial sites into touristic attractions and the decentralization of government branches relocated to these regions. These planning enable the “rebirth” of the region as an attractive, socially integrated and therefore attractive destination. A prime example of this would be the Ruhr region, in Germany. Formerly a mining and metalwork region, its heavy industries have been shutting down since the 1970s. However, starting in the 1960s, the German government had begun to encourage a shift in its economic structure: new universities and an improved transport system attracted new firms and businesses to the region. Certain parts of the region, with distinctive characteristics favoring certain businesses, have been particularly aimed at one type of industry. For example, Duisburg, a port city, has become a major logistics center. Additionally, the government has funded the cleaning up of brownfields and the now more attractive region has become a touristic destination for those wishing to learn more about its industrial past. Finally, the deindustrialization of the region has only benefitted the environment: Sulphur dioxide emissions dropped from 66 µg/m3 in 1981 to 8 µg/m3 in 1999. However, it is important to note that reindustrialization is not a uniform process: in the case of the Ruhr, the more heavily industrialized North is not faring as well as the South of the region.

Likewise, deindustrialization in countries belonging to a larger Union urges policy changes amongst these groups. The Unions often allocate funds geared at encouraging the smooth transition to a post-industrial society or mitigating the effects of or limiting deindustrialization. For example, the EU has encouraged the shift away from heavy industry in favor of a more environmentally sustainable and economically profitable industry. For this purpose, two of its organizations, the European Regional Developing Fund (or ERDF) and the European Social Fund (or ESF) have allocated funds to help the transition. The ERDF aims to redress regional disparities by financially supporting the conversion of declining industrial regions. In order to achieve its European 2020 Strategy for smart, sustainable and inclusive growth, it prioritizes research and innovation, information and communication technologies (ICTs), small and medium-sized enterprises (SMEs) and promotes a low-carbon economy. The EU hopes that the ERDF’s funds will smoothen the transition by reducing regional disparities caused by deindustrialization and stimulate more sustainable and profitable economic activities. Similarly, ESF redistributes money to local organizations that, in turn, support existing businesses and individuals opening their own and offers retraining to those who have lost their jobs as a result of deindustrialization. Thus, deindustrialization prompts affected Unions to hold a position over the issue, affecting their policies and their investments.

However, the process of deindustrialization is not entirely due to the relocation of industries to lower cost locations. In fact, technology plays a great role in this process, as the increasing reliance of manufacturers on new technologies has cut production costs, lowering prices and enabling the growth of the service industry. Indeed, the replacement of employees by machinery is highly profitable: long-term lower production costs (no salaries, no social charges…) and a higher production rate (longer working hours, no breaks, more efficient, no human error…). As a result of a larger, less expensive production, market prices have lowered, leaving the customer with more dispensable income, whilst profit and investment for new, profitable manufacturers have grown. With the increase in the customer’s dispensable income, the luxe and service sectors have noticeably increased: having met their material needs and desires, people turn to services such as travel or entertainment to raise their quality of life. As the service sector grows, new jobs are created, balancing out those lost with the demise of the industrial sector. Overall, technology has pushed deindustrialization and enabled the growth of the service sector through a more productive, less labor intensive manufacturing.

To conclude, deindustrialization generally results in short-term and sectorial (in this case industrial) unemployment. Regions affected by this process face economic and social deprivation. Consequently, regional/national governments and Unions are led to change their policies regarding these issues, granting funds and support to the regions and accompanying the transition through economic stimulation. Finally, technology enables a bigger, more cost effective production, lowering prices and stimulating the service sector.

Sources:

1/ Consequences of deindustrialization, Bert Altena, 4 April 2001 http://www.socialhistoryportal.org/news/articles/109474 Consulted 6 May 2017

2/ Deindustrialization occurs when a country or region loses industrial capacity due to relocation or increased efficiency, Author unknown, date unknown https://www.boundless.com/sociology/textbooks/boundless-sociology-textbook/economy-16/the-transformation-of-economic-systems-119/deindustrialization-670-3326