The Rust Belt is a term that gained popularity in the 1980s as the informal description of an area straddling the Midwestern and Northeastern United States plus small parts of the Upper South, in which local economies traditionally specialized in large scale manufacturing of finished medium to heavy consumer and industrial products, including the transportation and processing of the raw materials required for heavy industry.
After several "boom" periods from the late-19th to the mid-20th century, cities in this area struggled to adapt to a variety of adverse economic conditions later in the 20th century, such as the movement of manufacturing facilities to the southeastern states with their lower labor costs, the rise of automation in industrial processes, a decreased need for labor in making steel products, and the liberalization of foreign trade policies. Places that struggled the most with these conditions soon encountered several difficulties in common, including population loss, depletion of local tax revenues, and chronic high unemployment.
A partial deindustrialization effect on the industrial North has been uneven in terms of geography and social class. Some regions, particularly along the Eastern Seaboard, saw an offset from an increased service sector. Problems associated with the Rust Belt persist elsewhere, particularly around the eastern Great Lakes, and many once-booming cities slowed economically on average in the latter half of the 20th century. Together with the neighboring Golden Horseshoe of Southern Ontario, Canada, cities in this area still compose one of the world's major manufacturing regions. Manufacturing recovered faster from the Great Recession in the late-2000s than other sectors of the economy, and a number of initiatives, both public and private, are encouraging the development of alternative fuel technologies.
Since the term described a set of economic and social conditions rather than denote a region of the United States per se, the Rust Belt has no precise boundaries. The extent to which a community within the northern United States may have been described as a Rust Belt city depends at least as much on how great a role industrial manufacturing has played in its local economy as it does on geography alone.
A patchwork of cities across the northern United States, because of their vibrant industrial economies, were referred to collectively as "the Foundry of the Nation". These are also referred to as the Manufacturing Belt or the Factory Belt. This includes most of the cities of the Midwest out to the Mississippi River, and many of those in the New England and Mid-Atlantic states, particularly those away from the Eastern Seaboard. After World War II, the cities in the area among the nation's 100 largest in the middle-20th century had population that had fallen most by the century's end.
At the center lies an area stretching from northern Indiana and southern Michigan in the west to Upstate New York in the east, where local tax revenues still rely more heavily on manufacturing than on any other sector (by far the largest contiguous area of the U.S. where this is the case). At or near the periphery are nine of the nation's largest metropolitan areas—Buffalo, Pittsburgh, Cleveland, St. Louis, Cincinnati, Detroit, Milwaukee, New York City, and Chicago— parts of which fall squarely within the Rust Belt while their core cities are not always considered as such.
The linking of the former Northwest Territory with the once-rapidly industrializing East Coast was effected through several large-scale infrastructural works, most notably the Erie Canal in 1825, the Baltimore and Ohio Railroad in 1830, the Allegheny Portage Railroad in 1834, and the consolidation of the New York Central after the American Civil War. A gate was thereby opened between a variety of burgeoning industries on the interior North American continent and the markets not only of the large Eastern cities, but of Western Europe as well.
Coal, iron ore and other raw materials are shipped in from surrounding regions which emerged as major ports on the Great Lakes and served as transportation hubs for the region with a proximity to railroad lines. Coming in the other direction were millions of European immigrants, who populated the cities along the Great Lakes shores with then-unprecedented speed: Chicago, famously, was a rural trading post in the 1840s but grew to be as big as Paris by the time of the 1893 Columbian Exposition.
Early signs of the difficulty in the northern states were evident early in the 20th century, before the "boom years" were even over. Lowell, Massachusetts, once the center of textile production in the United States, was described in the magazine Harper's as "a depressed industrial desert" as early as 1931, as its textile concerns were being uprooted and sent southward, primarily to the Carolinas. After the Great Depression, American entry into the Second World War effected a rapid return to economic growth, during which much of the industrial North reached its peak in population and industrial output.
The northern cities experienced changes that followed the end of the war, with the onset of the outward migration of residents to newer suburban communities, and the declining role of manufacturing in the American economy.
Outsourcing of manufacturing jobs in tradeable goods has been an important issue in the region. One source has been globalization and the expansion of worldwide free trade agreements. Anti-globalization groups argue that trade with developing countries has resulted in stiff competition from countries such as China which pegs its currency to the dollar and has much lower prevailing wages, forcing domestic wages to drift downward. Some economists are concerned that long-run effects of high trade deficits and outsourcing are a cause of economic problems in the U.S. with high external debt (amount owed to foreign lenders) and a serious deterioration in the United States net international investment position (NIIP) (-24% of GDP).
Some economists contend that the U.S. is borrowing to fund consumption of imports while accumulating unsustainable amounts of debt. On June 26, 2009, Jeff Immelt, the CEO of General Electric, called for the United States to increase its manufacturing base employment to 20% of the workforce, commenting that the U.S. has outsourced too much in some areas and can no longer rely on the financial sector and consumer spending to drive demand.
Since the 1960s, the expansion of worldwide free trade agreements have been less favorable to U.S. workers. Imported goods such as steel cost much less to produce in Third World countries with cheap foreign labor (see steel crisis). Beginning with the recession of 1970-71, a pattern emerged. Competitive devaluation combined with each successive downturn saw traditional U.S. manufacturing workers experience lay-offs. Wealth-producing primary and secondary sector jobs such as those in manufacturing and computer software were often replaced by much-lower-paying wealth-consuming jobs such as those in retail and government in the service sector when the economy recovered.
A gradual expansion of the U.S. trade deficit with China began in 1985. In the ensuing years the U.S. developed a massive trade deficit with the Asian nations of China, Japan, Taiwan, and South Korea. As a result, the traditional manufacturing workers in the region have experienced economic upheaval. This effect has devastated government budgets across the U.S and increased corporate borrowing to fund retiree benefits. Some economists believe that GDP and employment can be dragged down by large long-run trade deficits.
A March 3, 2008 Wall Street Journal editorial claimed that, while Ohio lost 10,000 jobs in the past decade, Texas created 1.6 million new jobs. The editorial stated, "Ohio's most crippling handicap may be that its politicians – and thus its employers – are still in the grip of such industrial unions as the United Auto Workers." A September 13, 2008 opinion column by Phil Gramm and Mike Solon stated, "Yes, Michigan lost 83,000 auto manufacturing jobs during the past decade and a half, but more than 91,000 new auto manufacturing jobs sprung up in Alabama, Tennessee, Kentucky, Georgia, North Carolina, South Carolina, Virginia and Texas."
Other types of advanced manufacturing have emerged in these states such as biotechnology, infotech, and nanotech. Automation has led to other types of manufacturing output which require fewer workers with varying skills. Moreover, job gains in these areas have not been nearly enough to keep pace. As a result, middle class incomes and savings in the United States have been negatively impacted.
See also 
- Early 1980s recession in the United States
- Steel crisis
- Shrinking cities in the United States
- Economy of the United States
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