The two impoverishing mechanisms of deindustrialisation

A first form of impoverishment generated by deindustrialisation stems from the destruction of skilled, high-wage jobs (as has been the case for example in the United States, France, Italy, Spain and the United Kingdom). A second form of impoverishment generated by deindustrialisation is indirect but just as drastic as the first: deindustrialisation gives rise to an external deficit that must eventually be corrected, ultimately forcing a contraction in domestic demand (as has been the case in Italy and Spain). A deindustrialised country cannot accumulate external debt forever; its living standards therefore end up declining significantly.