Is Europe deindustrializing?

The discourse about Germany’s and Europe’s deindustrialization reappeared recently. Energy scarcity and growing energy costs are problems for many industrial companies. We experienced a wave of bankruptcies in 2022. In addition, the government of the US adopted the Inflation Reduction Act encompassing giant subsidies for companies developing green technologies and ensuring technological sovereignty of the US. The EU fears that its companies will move their production to the USA or to Asia to save energy or labor costs. Are industrial workplaces in Europe in danger?  

The fear of deindustrialization shows that Europe has acknowledged industry to be the source of its economic success and wellbeing. It was not always like that. In the 1990s and partly early 2000s, the service sector was widely considered more promising in terms of creation of new workplaces and innovation. We live in a knowledge economy and knowledge was believed to lead to the growth of innovative services, whereas industrial workplaces were associated with repetitive tasks and growing automation. In the meantime, studies found out that innovation often happens at the nexus of manufacturing and services. Furthermore, a flourishing service sector often accompanies and works for the industries, either the domestic or the foreign ones. 

During this heyday of globalization – 1990s and early 2000s – some actors feared deindustrialization of Germany or Europe, nevertheless. Europe’s traditional industrial companies were moving their production facilities either to Asia or to Eastern Europe, endangering classical industrial workplaces, relatively well remunerated and protected by unions. Yet, it turned out that deindustrialization did not happen, neither at that time, nor later. Industrial companies kept important workplaces in Europe and having their production facilities abroad enabled them to cut costs, contributing to their success. Classical German or European industrial companies, such as BASF, that recently announced outsourcing a further part of its production due to the energy crisis, became multinational, globalized companies.

Is deindustrialization happening nowadays? The current energy crisis needs to be taken seriously, as well as increased technological competition between the USA and China and its consequences. The EU does not want to be just a spectator in this process, but invests heavily in its economic recovery and maintenance of industrial production. For this purpose, it needs to reinvent itself as far as its economic constitution is concerned. Competition was supposed to be at the center of the EU’s architecture, not industrial policy that distorts the market. However, in the face of current challenges, economic efficiency seems to be less important than technological and industrial survival. We do not know what the consequences of these processes for the EU labor market, especially the industry-related one, will be. However, it is an important moment for labor rights activists to speak up and present their vision in the political process both in the EU and at the level of its member states.

Author: Dr. Ewa Dabrowska, weltgewandt e.V., Berlin

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