Deindustrialization

What happens when a company decides it is more profitable to move its operations out of a long-established community to another part of the country, or out of the country altogether? People lose jobs; stores lose customers; the local government's tax base declines and it cuts services. This devastating process has

occurred again and again in the last decade or so.

The term deindustrialization refers to the systematic, widespread withdrawal of investment in basic aspects of productivity, such as factories and plants. Giant corporations that deindustrialize are not necessarily refusing to invest in new economic opportunities. Rather, the targets and locations of investment change, and the need for labor decreases as technology continues to automate production. First, they may move their plants from the nation's central cities to the suburbs. The next step may be relocation from suburban areas of the North-

east and Midwest to southern states, where labor laws place more restrictions on unions. Finally, a corporation may simply relocate outside the United States to a country with a lower rate of prevailing wages. General Motors, for example, decided to build a multibillion-dollar plant in China rather than in Kansas City or even in Mexico.

Although deindustrialization often involves relocation, in some instances it takes the form of corporate restructuring, as companies seek to reduce costs in the face of growing worldwide competition. When such restructuring occurs, the impact on the bureaucratic hierarchy of formal organizations can be significant. A large corporation may choose to sell off or entirely abandon less productive divisions and to eliminate layers of management viewed as unnecessary. Wages and salaries may be frozen and fringe benefits cut - all in the name of restructuring. Increasing reliance on automation also spells the end of work as we have known it.

The term downsizing was introduced in 1987 to refer to reductions taken in a company's workforce as part of deindustrialization. Viewed from a conflict perspective, the unprecedented attention given to downsizing in the mid-1990s reflected the continuing importance of social class in the United States. Conflict theorists note that job loss has long been a feature of deindustrialization among blue-collar workers. But when large numbers of middle-class managers and other white-collar employees with substantial incomes began to be laid off, suddenly the media began expressing great concern over downsizing.

The social costs of deindustrialization and downsizing cannot be overemphasized. Plant closings lead to substantial unemployment in a community, which can have a devastating impact on both the micro and macro levels. On the micro level, the unemployed person and his or her family must adjust to a loss of spending power. Painting or re-siding the house, buying health

insurance or saving for retirement, even thinking about having another child must be put aside. Both marital happiness and family cohesion may suffer as a result. Although many dismissed workers eventually reenter the paid labor force, they must often accept less desirable positions with lower salaries and fewer benefits. Unemployment and underemployment are tied to many of the social problems discussed throughout this textbook, among them the need for child care and the controversy over welfare.

References:

1. Granovetter M., Richard Swedberg R. The Sociology of Economic Life. Westview Press, 2001.

2. Swedberg R. The Social Science View of Entrepreneurship: Introduction and Practical Application

3. White H. Markets from Networks

4. Parsons, Talcott and Neil Smelser, Economy and Society (1956).

5. Polanyi, Karl. The Great Transformation (1944).

6. Polanyi, Karl, Conrad Arensberg and Harry Pearson (eds.). Trade and Market in the Early Empires (1957).

7. Schumpeter, Joseph. Capitalism, Socialism and Democracy (1942).

8. Schumpeter, Joseph. The Economics and Sociology of Capitalism (1991).

9. Simmel, Georg. The Philosophy of Money (1900).

10. Weber, Max. Essays in Economic Sociology (1999).

11. Biggart, Nicole W., ed. 2002. Readings in Economic Sociology. Cambridge: Blackwell.

12. Dobbin Frank. 2004. The New Economic Sociology: A Reader. New Jersey: Princeton University Press

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