2 Deindustrialisation

Question 1

What is deindustrialisation?

Answer 1

a decline in the share of manufacturing in total employment

Question 2

What are the absolute job losses in UK’s manufacturing sector?

Answer 2

1960 - 9 million

2000s - 2.5million

Question 3

(possible) Causes of deindustrialisation

Answer 3

• Changing patterns of consumption
• Contracting out
• Differential productivity growth
• International trade
• Domestic failure

Question 4

Engel’s Law

Answer 4

as income rises, the proportion of income spent on food falls relative to the proportion spent on manufactured goods

Question 5

Bell’s Law

Answer 5

as economies ‘mature’, demand shifts away from manufactured goods and towards services

Question 6

Contracting out (hypothesis)

Answer 6

official statistics underestimate the true size of the manufacturing sector as manufacturing firms contract out work such as accounting, to services sector

in reality, this is highly unlikely that this accounts for more than a modest fraction of the huge fall in manufacturing output

Question 7

Differential productivity rates

Answer 7

Higher productivity growth rate in manufacturing than in services leads to slower employment growth in manufacturing than in services

Manufacturing sector is able to achieve higher productivity growth rate than service sector:

• Greater scope to extend the division of labour
• Greater ability to adopt mechanised forms of production in manufacturing

-Evidence confirms that productivity grows faster in manufacturing sector than in service sector-

Question 8

International Trade (hypothesis)

Answer 8

Rise in imports of manufactured goods from low wage countries in the global south (e.g. BRIC economies) has impacted on the composition and size of manufacturing sectors within high wage countries in the global north.

It is argued that this has caused a shift in manufacturing within advanced economies away from labour-intensive activities, leading to shrinkage in size of manufacturing sector (in terms of employment)

Question 9

Reality of International Trade hypothesis

Answer 9

Third World manufacturing exports are small when compared to those from advanced economies. Only 18% of OECD-manufacturing exports.

World manufacturing is still dominated by advanced economies like Germany

Competition between advanced economies seems important to explain decline of manufacturing in advanced economies like the UK.

Question 10

Domestic Failure (hypothesis)

Answer 10

The lack of growth in manufacturing may reflect domestic barriers to industrial expansion; country specific factors that might reinforce deindustrialisation

i.e.:

• low investment
• poor management
• influence of financial institutions
• lack of an effective industrial policy (govt)

Question 11

reality UK’s domestic failure

Answer 11

– Poor investment and low productivity in UK manufacturing vis-à-vis its competitors
– Historically, the high value of Sterling
– Power of the City of London and financial services
– Absence of any coordinated strategy and vision for industrial development

-In the sample as a whole, internal factors have been about twice as important as North–South trade in accounting for the relative decline of manufacturing employment since 1992-