Reindustrialisation – A Generational Project
Shubhranshu 
Loss of manufacturing in a country is not only shutting down of factories. Its repercussions are far deeper and wider. Factories are run over by nature, machines and assembly lines jam up, corrode, rust and crumble and can never be revived. Industrial towns are abandoned; one only has to look at the fate that befell once celebrated industrial cities of USA – Detroit, St. Louis, Pittsburgh, Cleveland and many more, where populations have declined to half or a third of their peak. People move out to seek other avenues of earning. Shops and restaurants, schools and colleges, town halls and parks, hospitals and offices, car dealerships and cab companies, all shut down. The loss of jobs is several times larger than just those of shop floor workers. All this is only because some unknown city across the ocean can sell cars and steel, televisions and toys a few percent cheaper.
What is worse is that the very backbone of the affected industry is broken. Skilled workers, who could make the finest cars and implements, toys and gadgets scatter, never to come back together under one roof to recreate the magic. The entire supply-chains, which typically come from the Medium and Small Industries (MSMEs), dry up since the bulk buyer has downed its shutters. MSMEs are the major job creators in any country and economy. Shutting down of these smaller units is devastating though not as spectacular as that of a car company. The latter’s loss of business is a subject of headlines and debates but not of the feeder small industries even though the impact on jobs and livelihood of workers of these MSMEs is far bigger. Entire capital is wiped out and bankruptcies are more common among MSMEs. Their employees often have lower levels of social security and entire families are driven to penury.
What Happens When a Car Factory Shuts Down?
Let’s take the example of a large car factory with US$10 billion in sales and the cascade of job losses and misery that follows when it shuts down. Such a car plant would typically be manufacturing 5,00,000 cars per annum.
The factory sources its parts and sub-assemblies as follows (only material cost taken here):
In-house production: 10-15%
Tier 1 (large) Suppliers: 50-60%
Tier 2&3 (MSME) Suppliers: 25-30%
When the factory shuts down:
- Main Plant: 7500 direct employees of the company are laid off
- Tier 1: 30,000 workers are laid off (These suppliers typically employ 3-5 workers per every worker in the main plant). Tier 1 companies typically manufacture engines, transmissions, brake systems, and electronics.
- Tier 2: 75,000 workers lose their jobs. (Tier 2 suppliers typically employ 2-3 workers for every one worker in Tier 1). They manufacture sub-components such as wiring, seats, rubber-parts, and smaller assemblies.
- Tier 3: 1,12,500 employees are rendered jobless. (Tier 3 suppliers typically employ 1-1.5 workers for every one worker in Tier 2). They typically produce basic components, such as metals, plastics, rubber and small parts.
- Indirect Job Losses: 5,60,000 work hands lose their livelihood. As a multiplier effect for every manufacturing job lost 2-3 additional jobs are lost. They are typically in activities such as logistics, sales, dealerships, maintenance, catering, janitorial, services, security, transportation, schools, city-workers and all other local businesses that rely on factories and factory workers as customers.
Let’s summarise these job losses:
Total manufacturing jobs: 2,25,000
Indirect jobs: 5,60,000
Total Estimated Layoffs: 7,85,000
A disclaimer: Not all job-losses will be in the same country, state, or neighborhood. The ripples of a major factory shutting down will be felt across the world given the way supply-chains are established. One should look at ghost cities of China as a result of supply-chain dislocation let alone major factories closing down.
Americans (USA) bought 16 million cars, SUVs and light trucks in 2024. Out of this 8 million were imports. Even in the cars made in USA ONLY 40-50% was local content. Hence, local content in US car market is only 25%.
The US’ share in global R&D in automotive sector is a mere 18%.
Knee Jerk Reaction
Loss of factories, large and small, their equipment, skilled manpower, market-lines of their products, the service and after-sales business, all happen slowly, over years, decades or sometimes over the span of an entire generation.
Governments, policymakers, captains of industry and occasionally the affected population suddenly wake up one day and begin to talk in fuzzy terms like reshoring, onshoring, tariffs, China+1 etc. Little do they realise that in a deindustrialised country, bringing back factories must take the same long route in reverse. You can’t simply bring back blast furnaces and rolling mills to Pittsburgh, or cotton mills to Mumbai. Re-industrialisation is a generational project, not to be achieved in a few years of a government’s rule span. Remember these industrial centres were built by the blood and sweat of generations of entrepreneurs and workers.
What Needs to be Done?
Some of the unavoidable and quick action plans may include:
- Policy changes that facilitate easy creation of industrial units, large and small
- Easing of regulatory control
- Easy access to banking and capital
- Infrastructure Development – Highways, ports, power plants and power grids
- Easy availability of land and permits
- Low energy cost
- Healthcare and social security
- Education – Engineering and Research Oriented. Universities to take a relook at their programmes.
- Training – Entrepreneurship, Vocational and business practices
- Above all, nurture a culture of innovation.
Unless these and many more necessary steps are taken by the governments of those countries that have seen deindustrialization no significant job and wealth creation is possible slogans and statements of intent notwithstanding.
Even after that it will be a long haul.
