Is Deindustrialization a Myth? Capital Mobility versus Absorptive Capacity in the U.S. Economy

Abstract

The current debate concerning the necessity and propriety of establishing an industrial policy for the United States turns, to a significant extent, on the question of whether the nation is undergoing deindustrialization. Using data on aggregate trends in manufacturing employment, Robert Z. Lawrence and others at the Brookings Institution claim that despite widespread plant closings during the 1970s, most employment loss was cyclical in nature and not permanent. In this article, new evidence on individual industries and regions is explored to test again the deindustrialization thesis. The conclusion of the current study is that while aggregate manufacturing employment has remained constant over the past decade, substantial permanent job losses have occurred in key basic industries and in particular regions of the nation. These employment losses pose a serious problem because the economy generally fails to provide comparable jobs in other sectors that can absorb the workers who become displaced.

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References

1. See Council of Economic Advisers , Economic Report of the President, 1981 (Washington, DC: Government Printing Office, 1981), tab. B-31, p. 269.

2. Barry Bluestone and Bennett Harrison , The Deindustrialization of America (New York: Basic Books, 1982), p. 30.

3. Candee S. Harris , “Plant Closings: The Magnitude of the Problem,” Business Microdata Project, Working Paper no. 13 (Washington, DC: Brookings Institution, June 1983).

4. Roger W. Schmenner , The Location Decision of Large, Multiplant Companies (Cambridge, MA: MIT-Harvard University Joint Center for Urban Studies, 1980), tab. 1-2, p. 30, and tab. 1-5, pp. 36-39.

5. Pravin Varaiya and Michael Wiseman , “Investment and Employment in Manufacturing in U.S. Metropolitan Areas 1960-1967,” Regional Science and Urban Economics, 11:431-469 (1981).

6. “The Reindustrialization of America,” Business Week, special issue, 30 June 1980, p. 58.

also see idem, “Is Trade Deindustrializing America? A Medium Term Perspective,” Brookings Papers on Economic Activity, ed. William C. Brainard and George L. Perry , vol. 1 (Washington, DC: Brookings Institution, 1983).

8. James Cook , “You Mean We've Been Speaking Prose All These Years,” Forbes, 11 Apr. 1983, p. 143.

Survey of Current Business (Washington, DC: Government Printing Office).

10.

10. Robert Z. Lawrence , “Deindustrialization and U.S. International Competitiveness: Domestic and International Forces in U.S. Industrial Performance, 1970-1980,” The Brookings Institution, mimeographed (Washington, DC, 1982), p. 26.

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11. Ibid., p. 39.

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12. The best argument defending this notion can be found in Lester Thurow , The Zero-Sum Society (New York: Basic Books, 1980).

13.

Louis S. Jacobson , “Earnings Loss Due to Displacement” (Working paper CRC-385, Public Research Institute of the Center for Naval Analyses, Apr. 1979).

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14. Bennett Harrison , “The Tendency toward Instability and Inequality Underlying the `Revival' of New England,” Papers of the Regional Science Association, 50:56 (1982).

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15. Calculations based on U.S., Department of Labor, Bureau of Labor Statistics , Employment and Earnings in the United States, 1947-1980 (Washington, DC: Government Printing Office, 1982).