The Disaster Of De-industrialization

Tyler Durden's picture

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Once a nation no longer produce essential goods and services, it becomes vulnerable to collapse.

By now, we all know what's happening in Venezuela: hyperinflation, empty stores, a regime in denial. The Trajectory of Venezuelan Hyperinflation Looks Frighteningly Familiar... (Zero Hedge)

My contacts in Venezuela tell me that merely posting the black market exchange rate of bolivars to USD can get you arrested. So yes, Venezuela's regime has gone full Orwell-1984: whatever is true is outlawed.

Venezuela is imploding not because of hyper-inflation, but as a result of policies that led to hyper-inflation: policies that generate perverse incentives, disincentives to produce goods and services and incentives to depend on government subsidies.

But one of my correspondents nailed a key cause that is rarely discussed: Venezuela has been effectively de-industrialized. Capital that should have been invested in the electrical grid and the oil industry has been diverted to other pet projects (and the pockets of regime insiders).

There's no food in the markets because government-set prices don't make it worthwhile to grow anything. Farmers take their produce to neighboring countries if they can, where they can actually get paid for producing food.

But de-industrialization is the result of more than perverse policies. De-industrialization results when a citizenry is denied access to the tools and capital needed to produce goods, and when government subsidies sap the will to take the risks that are part and parcel of making real stuff.

De-industrialization is also the result of currency exchange and trade policy. When it becomes cheaper to import goods and services from other nations, the domestic populace loses the will and the skills needed to produce goods and services.

But a funny thing happens when a nation loses its capacity to produce real goods in the real world: when the currency and trade policies that made importing everything financially sensible blow up, there's nobody left to actually make essential goods, grow food or maintain critical infrastructure.

De-industrialization is a gradual process. The loss of key industries is gradual; the loss of supply chains is gradual; the loss of local suppliers and jobbers is gradual; the loss of skilled workers is gradual; the decline of local capital is gradual; the loss of the willingness to get out there and take risks to make real goods in the real world is gradual.

This is a chart of industrial production in the United Kingdom. many nations share the same basic trajectory: given a strong currency and restrictive policies, it no longer makes sense to produce goods, food, transport, etc. Financialization and free-spending governments borrowing billions create the illusion that a nation that was once a nation of makers can become a nation of takers with no downside.

Once a nation no longer produces essential goods and services, and depends on financial games or commodities to pay for industrial goods and food produced elsewhere, it becomes vulnerable to a collapse in the financial games and the commodity markets that made it all too easy to succumb to de-industrialization.


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iAmerican's picture

The Hitler-financing, Auschwitz-constructing, JFK-assassinating, 9/11-committing Rockefeller sub-clan Bushes have been getting a piece of every dime Americans spend on Made in China.

Time for the sovereign People to exact Justice under God alone.

nibiru's picture

Let's waito for Chinese to privatise Venezuela or Brazil. Or both of them.


NoDebt's picture

"when the currency and trade policies that made importing everything financially sensible blow up, there's nobody left to actually make essential goods, grow food or maintain critical infrastructure."

Hence, why we have preppers.  They only appear nuts BEFORE the shit hits the fan.  Afterwards they seem a lot smarter.

r3phl0x's picture

Being smart and being nuts are not mutually exclusive!

HelloSpencer's picture

'Once a nation no longer produce essential goods and services, it becomes vulnerable to collapse.'


I would say, once a nation becomes one of useless talkers and has no doers, it will collapse.

Berspankme's picture

But we have Warren Buttfuck and Jeff Bozos

CPL's picture

Who works your fields and why don't your children know where their food comes from?  

Protip: Ain't no kid ever died from working dirt and fresh air.  They'll start a summer like mush, by harvest carved of stone.  And doer's don't just happen, they are trained young with foundations of a civlizations.  In the case of farming, it's certainly not for the money.  Security happens with bounty and strong, smart kids.  They need to be as strong or stronger than you to keep it up and moving.  If you want doers, you build them the same way every civilzation has to teach them the value of the social value of farming and food.  Plus they'll have friends around, or they will be by the end of the summer.  Again, ain't no kid ever died from working dirt and fresh air.  Fundementals count for any long range planning on how to build a civilzation that lasts.

PitBullsRule's picture

Yeah because Venezuela used to be such an industrial power house!  I still have my Venezualen car from the 90's, its a "Moto-rumba".  Incredible machine that Moto-rumba, it can carry 4 hookers and still tow a tamale wagon behind it, holding steady at 12 miles an hour.  Those were the days, back when you could still get a Venezualen computer, a Venezualen nuclear power plant, and we still had Venezualen astronauts walking on the moon.  

Berspankme's picture

I was at a ford plant in valencia vz in the early 90's. So incredibly fucked up. I have been in a lot of plants around the world but that sticks out in my mind as a clusterfuck

silverer's picture

Just a profitable agro-business would have helped a lot. Look at what happened to Zimbabwe. They got rid of the high tech skilled white farmers, gave the farms to the cronies and thought they could sit back and the money would roll in. Zimbabwe used to be the bread basket of S Africa as a net exporter. Now the population barely has enough food to eat.

Berspankme's picture

Lets face it the elites have fucked us 7 ways from sunday. Time for a real revolution. Time for guillotines and lynchings worldwide. The elites are constructing a world for you to live in that they never will. Do you think Paul amnesty Ryan is living with muzzies, neegrows, queers and trannys. Of course not, but you should. Where does cuntasaurus live? Oblowme? Harry Reid? Pelosi?

Time to burn the whole corrupt thing down and start over

BooBooMan's picture

Right-on. I'll bring the kerosene. And maybe some old tires.
Some of these bastards could use one of Winnie Mandela's "neckties".

cat writer's picture

I agree.   But do this after you start dealing with your own evil first.

One of these is not like the others..'s picture

Four downvotes for telling it as it is.

It's easy to decry other peoples evil when their situations and the temptations they face are wildly different to your own.

I've seen what happens when "ordinary people" get promoted, or become rich..

Insightful post, catwriter.

stock market loser's picture
stock market loser (not verified) Berspankme Jun 16, 2016 12:31 PM

Arm chair revolution. 

Elco the Constitutionalist's picture
Elco the Constitutionalist (not verified) Jun 16, 2016 9:58 AM

High enough tariffs will return our means of production in a hurry.

silverer's picture

If you are talking about the US: Total collapse from losing reserve currency status will do it.

Apocalicious's picture

Yep, and ppl need to realize that's when, not if. The only global reserve currency out of dozens across history that hasn't collasped is just the one that hasn't yet.

Five Star's picture

The UK's GDP growth rate has been declining since they joined the EU in the 70s

Kaeako's picture

And to think there was a time when Europe(France) fought tooth and nail to keep the UK OUT.

ISawThatToo's picture
ISawThatToo (not verified) Jun 16, 2016 10:54 AM

Banbait #204

"Once a nation no longer produces essential goods and services, and depends on financial games or commodities to pay for industrial goods and food produced elsewhere, it becomes vulnerable to a collapse in the financial games and the commodity markets that made it all too easy to succumb to de-industrialization." That's the plan:

Protocols 4:4 "...But again, in order that freedom may once for all disintegrate and ruin the communities of the GOYIM, we must put industry on a speculative basis: the result of this will be that what is withdrawn from the land by industry will slip through the hands and pass into speculation, that is, to our classes."

Protocols 6:6 "At the same time we must intensively patronize trade and industry, but, first and foremost, speculation, the part played by which is to provide a counterpoise to industry: the absence of speculative industry will multiply capital in private hands and will serve to restore agriculture by freeing the land from indebtedness to the land banks. What we want is that industry should drain off from the land both labor and capital and by means of speculation transfer into our hands all the money of the world, and thereby throw all the GOYIM into the ranks of the proletariat [poverty]. Then the GOYIM will bow down before us, if for no other reason but to get the right to exist [live]."

Protocols 21:11 "We shall replace the money markets by grandiose government credit institutions, the object of which will be to fix the price of industrial values in accordance with government views. These institutions will be in a position to fling upon the market five hundred millions of industrial paper in one day, or to buy up for the same amount. In this way all industrial undertakings will come into dependence upon us. You may imagine for yourselves what immense power we shall thereby secure for ourselves..."

ISawThatToo's picture
ISawThatToo (not verified) ISawThatToo Jun 16, 2016 12:47 PM

Banbait #209


Interesting that the most down votes come when I produce quotes from the Protocols. Seems that some someones don't want the Goy to consider the possibility of a conspiratorial Khazarian fifth-column. Now if the conspiracy is manned by Muslims, that's just fine, even promoted. "Koran evil! Protocols fake! Khazarians Victims!"

Protocols 1:9 "...If every State has two foes and if in regard to the external foe it is allowed and not considered immoral to use every manner and art of conflict, as for example to keep the enemy in ignorance of plans of attack and defense, to attack him by night or in superior numbers, then in what way can the same means in regard to a worse foe, the destroyer of the structure of society and the commonweal, be called immoral and not permissible?"

Consuelo's picture

So Charles...


Just who is your targeted audience for this piece...?   And why is it they are not mentioned by name...?   Everyone knows the situation in Venezuela and that the UK stopped producing anything in volume (save for financialization and corruption) long ago, so why be cryptic about that 'other' nation whom you won't mention by name...?   


Is it because you have been and continue to be a $USD bull, but can't bear to face the fact of that position turning into Bull-Shit...?



scraping_by's picture

It's a longstanding notion that life in a colony is brutal and poor. The colonial powers aren't interested in any infrastructure not directly tied to their extraction industries, so the daily life of the workers simmers in neglect.

The US became the colony of the whole damn world back in the 80's when Ray-gun shrugged and grinned at the trade imbalance going to negative. Since then it's been a slow slide out of the developed world. Turning everything material into an international trade is pretty good for the traders, not so good for the rest of us.

DaveA's picture

We have a very bad case of Dutch Disease.

It begins when a large influx of unearned wealth causes a nation’s currency to rise in value. This makes imported goods cheaper than domestic manufacturing, so the nation’s industry declines. No problem, the government can simply spread the unearned wealth around. Spent on food, education, health care, housing, (and now high-speed rail and green energy), this free money creates millions of “service sector” jobs for a workforce that no longer produces tradable goods.

Then the oil fields dry up, the guano runs out, or in our case, the world loses faith in the Almighty Dollar, and there’s no more easy money to subsidize those service jobs. We easily forgot how to make goods for export; now it will be much harder to get those jobs back, short of conquering the world and forcing them to buy our products at gunpoint.

scraping_by's picture

The good years of the US economy were under a pretty hard protectionist regime. Smoot-Hawly wasn't absolute, but it recognised the difference between the domestic and world markets.

Protectionism isn't immoral, it's just out of fashion. Keeping it out of fashion is a cottage industry of abstract economists, weaponized history, and lots of lovely bribes for our elected officials.

DaveA's picture

Protectionism is (or was) out of fashion because countries awash in unearned wealth don't *need* to make anything themselves. How many trust fund kids get up at 6AM every day for a long commute to a full-time job?

It all started with Bretton Woods, which sounded like a fair deal at the time: America promised to protect its vassal states against communism, and in exchange they would accept U.S. dollars as payment and not try to redeem them for gold.

Falling Down's picture

For a long time I've felt that manufacturing output, when measured historically, should not be measured using currency as the only measure. A formula, taking into account various inputs, should be used. If manufacturing output was measured by unit volume, plus other inputs which are fairly easy to measure, we'd see just how bad things are in that segment of the economy, compared with, say, 30 years ago.

conraddobler's picture

The US is basically dead and the fighting at the reading of the will has commenced.

It may rise again in some  form but as a United States it's obvious the ties that bind are fraying faster than a bedsheet on a clothes line in a hurricane.

It's always ugly on the way down to turd world status.