Is De-Industrialization a “Natural Phenomenon” of Developed Economies?

by Jörg Guido Hülsmann

Let me first state my position and then add a few arguments to back it up. Economic growth typically entails a re-allocation of labor away from industrial production, but it does not all by itself lead to falling industrial output. The decline of industrial production in the US and France in the past thirty years is to some extent due to capital exports, but especially to government interventionism in the form of mushrooming labor, business and financial regulations, education policies, social security funding, and taxation. This decline cannot be stopped through more interventions, even if they are designed with the good intention to reindustrialize the country.

Now let me offer a few considerations in support of these contentions.

The reallocation of labor in a growing economy results most notably from capital accumulation and from changing preferences of the working-age population. Further investments and extensions of the existing structure of production make it necessary to spend more time devising new methods, preparing industrial activity, coordinating and monitoring supply chains. Low-quality blue-collar labor diminishes, whereas there is some increase in high-quality blue-collars, but especially an increase in white-collars working in and around the supply chains.

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