Industrialization, Deindustrialization, and Manufacturing

Industrialization is the shift of an economy from mainly agriculture to manufacturing, deindustrialization is the decline in the share of manufacturing in jobs and output, and manufacturing is the making of goods from raw materials or parts, by hand or by machine. In brief: industrialization began in Britain in the late 18th century, spread to Europe, North America and Japan, and later to newly industrializing countries such as South Korea and China. Many older industrial regions, such as northern England and the US Rust Belt, later lost manufacturing jobs through automation, competition from lower-cost countries and the shift to services.

Industrial change reshapes cities, regions and lives, bringing growth and sometimes decline. This guide explains the causes and stages of industrialization, the reasons and effects of deindustrialization, types of manufacturing, compares the stages in a table, works through calculations, outlines the history and corrects common mistakes.

What is industrialization and why does it happen?

Industrialization means that machines, factories and organized production become the main way of making goods. It usually brings urbanization, higher productivity, rising incomes and changes in society. Conditions that favored it include a supply of raw materials and energy (such as coal), capital to invest, labor released from farming, transport links (canals, railways, ports), markets for the products, new technology and supportive government policy and institutions. For a developing country today, industrialization can offer a path out of poverty, as it did in South Korea, Taiwan and China, often by producing goods for export and using low labor costs at the start.

Industrial growth also has costs: pollution, poor working conditions, crowded cities and heavy use of resources and energy, which governments and societies have to manage.

What types of manufacturing are there?

• Heavy industry: large-scale production of bulky goods and materials, such as steel, shipbuilding, chemicals and machinery. It needs heavy raw materials and big sites.
• Light industry: smaller, lighter goods, such as textiles, clothing, electronics assembly and food processing, with lower transport costs and often more flexible locations.
• High-technology industry: products based on research and skilled labor, such as computers, semiconductors, pharmaceuticals and aerospace.
• Assembly and process industries: assembly joins parts into a final product (cars), and process industries change materials in a continuous flow (oil refining).

What is deindustrialization?

Deindustrialization is a long-term fall in the share of employment, and often of output, accounted for by manufacturing. It is most visible in older industrial regions in rich countries. In the UK, manufacturing employed more than a third of workers in the mid-20th century but under a tenth today, and in the United States, parts of the Midwest became known as the Rust Belt.

Causes

• Automation and productivity growth: factories can produce more with fewer workers.
• Global competition and offshoring: lower wage costs in Asia and elsewhere moved many jobs abroad.
• Exhaustion of resources and ageing industries: coal and steel works closed as resources and demand declined.
• Shift of demand to services: rising incomes lead people to spend more on services.

Effects

Closures led to unemployment, falling incomes, derelict land and a loss of population and tax revenues in industrial towns, with long-lasting social problems. Many regions then tried regeneration: cleaning up brownfield sites, creating science parks, building museums and leisure facilities and attracting new businesses, as in Manchester, Pittsburgh and the Ruhr area in Germany. Success has been uneven.

Industrialization and deindustrialization compared

Worked example: jobs and output

The figures are hypothetical and illustrate typical calculations.

1. Change in manufacturing jobs: a region had 120,000 manufacturing jobs in 1980 and has 45,000 now. The loss is 120,000 − 45,000 = 75,000, which is 75,000 ÷ 120,000 = 62.5%.
2. Share of employment: if the region’s total employment grew from 400,000 to 600,000 in the same period, the manufacturing share fell from 120,000 ÷ 400,000 = 30% to 45,000 ÷ 600,000 = 7.5%.
3. Productivity: if output stayed the same at 3.6 billion while jobs fell from 120,000 to 45,000, output per worker rose from 3,600,000,000 ÷ 120,000 = 30,000 to 3,600,000,000 ÷ 45,000 = 80,000, a rise of 167%. This shows that deindustrialization is not always a fall in output.
4. Multiplier effect: if each manufacturing job supports 1.5 other jobs locally, losing 75,000 factory jobs could cost 75,000 × 1.5 = 112,500 other jobs, a total of 187,500.
5. Industrializing country: a country whose manufacturing output grows by 8% a year doubles in about 70 ÷ 8 = 9 years (rule of 70).

What is the history of industrialization?

The Industrial Revolution began in Britain in the second half of the 18th century with textile machines, steam engines and iron production, and spread to Belgium, Germany, France and the United States in the 19th century. Japan industrialized rapidly from the late 19th century, and the Soviet Union in the 1930s. After 1945, the “Asian Tigers” (South Korea, Taiwan, Hong Kong, Singapore) grew through export-led manufacturing, and from the 1980s China became the “workshop of the world,” followed by Vietnam, Bangladesh and others. From the 1970s, deindustrialization hit older regions in Britain, the United States and Western Europe, and after 2000, the pace of change increased with global supply chains and robotics.

Which mistakes are common?

Mistake 1: Treating deindustrialization as a fall in output

Jobs and share of employment can decline while output stays high or grows, because of higher productivity.

Mistake 2: Blaming only foreign competition

Automation and changes in demand explain a large share of the job losses, along with trade.

Mistake 3: Assuming that manufacturing disappears from rich countries

Many still have large manufacturing sectors in specialized, high-value products such as machinery, chemicals and aircraft.

Mistake 4: Thinking that industrialization always improves living standards at once

Early industrial growth often comes with poor working conditions and pollution, and benefits may take time and policy action to spread.