Contemporary World Issues

Deindustrialization in America

"In reality, I'm not just out of a job. I'm out of a city. My kids are out of school. My wife is out of her education, and I'm out of self-respect." -laid-off San Francisco shipyard worker

What happens to communities?

Deindustrialization has been shown to contribute to poverty and crime, and has further adverse effects on worker health and the social well-being of the community. Numerous studies have shown that people who have been laid off suffer a higher incidence of health problems, such as heart disease, and stress-related illnesses. According to estimates by the U.S. Bureau of Economic Analysis in 1985, every percentage point of unemployment was equivalent in cost to the community of upwards of $68 million in lost GNP, $20 billion in federal taxes, and $3.3 billion in public aid.

Not only do plant closures cause tangible effects, the job loss they create also destroys the tax base, and therefore the political leverage, of a community (Lustig 132).

Why deindustrialization?

If we are to understand the consequences of deindustrialization, we must first understand why it happened in such a massive way in the decades following World War Two all the way up until the late eighties. As R. Jeffrey Lustig demonstrates in his 1985 essay “The Politics of Shutdown: Community, Property, Corporatism,” we must view all deindustrialization through the prism of how large companies relate in the social consciousness to the public and to the government.

Most people view corporations as being separate, private entities, distinct from the public arena of government. But Lustig argues that not only have the lines between private corporations and public government blurred, they have melded together, forming a very real partnership.

In many cases, such as with the U.S. Steel or the timber industry of northern California, companies exaggerate and even misrepresent the impact of federal regulations that cause them to close mills and layoff workers. In fact, government regulations frequently do not cause major damage to productivity, and actually, as with the timber industry, may be beneficial to the company involved. Many logging companies blamed the expansion of the federally protected Redwood National Forest for taking away their resource base. But as Lustig points out, the companies’ stock prices rose as the RNP bill was pushed through Congress. And as U.S. Steel blamed government environmental regulations and the impact of Japanese steel practices, they were expanding their own foreign assets.

The meaning we are to take from this, says Lustig, is that there has been a major shift in the overall goal of companies beginning in the 1970s. Profits were not used to increase existing productivity, but rather to diversify company holdings and to therefore create even greater profits. Plants have been closed, “not because they failed to be profitable, but because they failed to be as profitable as the artificially inflated needs of the owning conglomerates required” (Lustig 130).

What role does the government play?

The government does not want plant shutdowns any more than the workers on the factory floor. The loss of valuable tax revenue and the high economic and social cost of substantial job losses create an interest for the government to prevent plant closures. Because of this interest, the government offers direct economic subsidies to corporations, most in the form of exemptions and incentives in the tax code (Lustig 133). For instance, in 1978 U.S. Steel paid only $8 million in taxes on $250 million in profits, a tax rate of 3.2%. General Electric had $22 million of tax liabilities cancelled when it was "forced" to idle 22,000 workers.

The real effect of these governmental subsidies and bail-outs are not only comprised of tangible monetary benefit--they appear to be giving state-sanctioned authority to the corporations which are shutting down plants and laying off workers.

Hence, it is more profitable economically for a corporation to cease the investment in higher productivity of their factories, and more profitable politically for them to shut down plants and gain governmental authority.

Connections Today

The parallels between the deindustrialization shift of the late seventies and early eighties and today's government bailouts of major financial firms are undeniable. The public in general still views private business and public government as completely divorced entities, while it is very clear that they are not. This is why a bailout plan is necessary, but not popular and poorly understood by the public.


Lustig, H. Jeffrey. "The Politics of Shutdown: Community, Property, Corporatism." Journal of Economic Issues 19.1 (Mar. 1985): 123-152. Business Source Premier. EBSCO. [HHS Library], [Huntsville], [AL]. 22 Sep. 2008

Ostry, A.S. "Effects of De-Industrialization on Unemployment, Re-employment, and Work Conditions in a Manufacturing Workforce." BMC Public Health. 1: 15 (2001 December 3). 23 September 2008.

Whiteis, David G. "Poverty, policy, and pathogenesis: economic justice and public health in the US.." Critical Public Health 10.2 (June 2000): 257-271. Health Source: Nursing/Academic Edition. EBSCO. [HHS Library], [Huntsville], [AL]. 29 Sep. 2008

"The manufacturing myth." Economist 330.2 (19 Mar. 1994): 91. MAS Ultra - School Edition. EBSCO. [HHS Library], [Huntsville], [AL]. 29 Sep. 2008

Wilson, W. J. "When work disappears: The world of the new urban poor." Smart Library. (1996). New York: Knopf. [HHS Libarary], [Huntsville], [AL]. 29 Sept. 2008




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