{"id":1831,"date":"2019-08-10T18:51:41","date_gmt":"2019-08-10T18:51:41","guid":{"rendered":"https:\/\/crunchlearning.com\/website_ec2cbfb0\/?p=1831"},"modified":"2026-03-02T08:08:13","modified_gmt":"2026-03-02T08:08:13","slug":"economics-in-the-industrial-revolution","status":"publish","type":"post","link":"https:\/\/crunchlearning.com\/website_ec2cbfb0\/economics-in-the-industrial-revolution\/","title":{"rendered":"Economics in the Industrial Revolution: A Detailed Summary"},"content":{"rendered":"\n

The\u00a0Industrial Revolution<\/a>\u00a0is one of the most significant events in all of world history and had a profound impact on the modern world.\u00a0 It\u00a0began first in Britain<\/a>\u00a0in the 1700s but soon expanded to the rest of Europe and North America.\u200b\u00a0 When discussing the\u00a0economics\u00a0of the Industrial Revolution it’s first important to recognize that the early years of the Industrial Revolution were based on the principles of\u00a0capitalism<\/a>\u00a0while the later years introduced more\u00a0socialist beliefs.<\/p>\n\n\n\n

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NEW INNOVATIONS IN THE INDUSTRIAL REVOLUTION<\/h2>\n\n\n\n

The Industrial Revolution<\/a> is a significant event in world history because it transformed European and North American societies from being based on agriculture production to industrial production.\u00a0 This caused a mass migration of people from the rural countryside to the city-centers as people moved in search of work in the newly developed factories of the time.<\/p>\n\n\n\n

Before the start of the\u00a0Industrial Revolution, the production of goods was done on a very small scale.\u00a0 Historians refer to this method of production as the \u2018cottage industry<\/a>\u2019.\u00a0 Simply put, the cottage industry refers to a period of time in which goods for sale were produced on a small scale, usually in a home.\u00a0 In this system, people produced goods, such as wool, in their homes or on their own farms and then sold it to local communities since long distance transportation was uncommon.\u00a0 This method of production was slow and inefficient and struggled to keep pace with the growing demand caused by the increased population.\u00a0 As a result, entrepreneurs and inventors sought ways to increase production, which ultimately led to the creation of the factory system.<\/p>\n\n\n\n

The factory system<\/a> is a term that historians use to refer to the development of centralized factories or mills that produced goods on a mass scale.\u00a0 Throughout the 1700s,\u00a0inventors\u00a0such as\u00a0Richard Arkwright<\/a>,\u00a0Eli Whitney<\/a>,\u00a0James Hargreaves<\/a>, and\u00a0Edmund Cartwright<\/a>, developed machines and techniques that helped improve production, especially in terms of the\u00a0textile industry.\u00a0 The\u00a0textile industry<\/a>\u00a0was based on the development of cloth and clothing, and was the main industry that benefitted from the early developments of the Industrial Revolution.\u00a0 For example, some of the main textile related inventions of the Industrial Revolution included:\u00a0power loom<\/a>,\u00a0spinning jenny<\/a>,\u00a0flying shuttle<\/a>,\u00a0water frame<\/a>\u00a0and\u00a0cotton gin<\/a>.\u00a0 Another important invention of the Industrial Revolution was the\u00a0steam engine<\/a>.\u00a0 The first steam engine was invented by\u00a0Thomas Newcomen<\/a>\u00a0in 1712, to help in removing water from mines.\u00a0 However,\u00a0James Watt<\/a>\u00a0later improved the design of the steam engine and made it a significant new addition to industrial production.<\/p>\n\n\n\n

\"James
James Hargreaves invented the spinning jenny, which was an important invention in the time of the Industrial Revolution.<\/figcaption><\/figure>\n\n\n\n
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ECONOMICS IN THE INDUSTRIAL REVOLUTION – CAPITALISM<\/h2>\n\n\n\n

None of these technological and societal changes would have been possible without the emergence and development of capitalism<\/a>.\u00a0 The European empires of the 16th through the 18th centuries were empires that existed primarily to increase trade and the wealth of the European nations.\u00a0 During this time, powerful European nations such as Spain, Portugal, England and France participated in intense economic and exploration based rivalries.\u00a0 The\u00a0Age of Exploration<\/a>\u00a0shows this rivalry in the massive colonies that each European nation amassed, as they competed with each other for territories in the New World.\u00a0 At their height, these countries controlled large sections of the world as part of their vast empires.<\/p>\n\n\n\n

At the foundation of these rivalries existed the economic system of\u00a0mercantilism<\/a>, which was the idea that colonies and trade should be strictly controlled to benefit the economy of the home (European) nation.\u00a0 Mercantilism was an economic system that was heavily regulated and controlled by the government and allowed very little freedom for individual people.\u00a0 This all changed with the introduction of capitalistic beliefs and values in the late 1700s.<\/p>\n\n\n\n

As the 18th century went along, some people began to reject the principles of mercantilism.\u00a0 For example, in 1776 Scottish economist,\u00a0Adam Smith<\/a>,\u00a0published his famous written work \u201cAn Inquiry into the Nature and Causes of the Wealth of Nations\u201d which is just often shortened to \u201cWealth of Nations\u201d.\u00a0 The book challenged the idea that the government should control the economy and instead proposed the idea of free trade and competition with a lesser role of the government.\u00a0 The ideas of this book would eventually lay the foundation for the principles of capitalism, which is an economic system that supports the idea of free trade and choice as a way of achieving prosperity.\u00a0 The emergence of capitalism was vitally important to the start of industrialization and the Industrial Revolution.<\/p>\n\n\n\n

\"Adam
Portrait of Adam Smith called ‘The Muir Portrait’ from around 1800. Created by an unknown artist.<\/figcaption><\/figure>\n\n\n\n
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Capitalism caused the Industrial Revolution because industrialization required significant work and investment from individuals and not necessarily the government.\u00a0 For example, in Britain, where the Industrial Revolution began<\/a>, wealthy entrepreneurs were important because they used their wealth to create factories and mines.\u00a0 This investment from individuals, whose actions were guided by the profit motive, would not have been possible without the emergence of capitalism.\u00a0 Furthermore, as the Industrial Revolution began the individualistic principles of capitalism helped create a climate wherein industrialization exploded, and eventually spread worldwide.<\/p>\n\n\n\n

Capitalism was a central component of\u00a0classical liberalism<\/a>\u00a0in the societies of the Industrial Revolution<\/a>.\u00a0 Classical liberalism was an ideology that was based on economic individualism<\/a> and the principles of: economic freedom, private ownership, competition, self-interest and self-reliance.\u00a0 In general, all of these principles focused on little or no government intervention in the economy and as much economic liberty for individuals as possible.\u00a0 This contrasted with the previously mentioned mercantilism, which favored heavy government regulation and intervention.\u00a0 The economic ideals of classical liberalism first emerged in the 18th and 19th centuries and quickly shifted European society from left-sided mercantilism to right-sided capitalism.<\/p>\n\n\n\n

Classical liberal societies were also based on the economic principles of\u00a0laissez-fair capitalism<\/a>. Often, laissez-faire capitalism is also referred to as free market capitalism or market capitalism.\u00a0 Simply put, laissez-faire translates to \u2018leave us alone\u2019 meaning that the government should remain out of the economy and instead allow individuals to freely carry out their own economic affairs. Historically, laissez-faire capitalism was most common during the 18th and 19th centuries in the timeframe of the\u00a0Industrial Revolution.\u00a0 As such, England during the Industrial Revolution is considered to be an example of a classical liberal society.\u00a0 At the time, it was a revolutionary idea, because in the previous centuries, mercantilism\u00a0had been the dominant economic system which was discussed previously.\u00a0 However, prominent thinkers, including\u00a0Adam Smith, began to argue against mercantilism in favor of an economic system with more freedom for individuals.\u00a0 The development of capitalism as an economic system, sought to reject the idea of government control of the economy and instead put the focus on individuals.<\/p>\n\n\n\n

\"Industrial
The Industrial Revolution is a significant event in world history because it transformed European and North American societies from being based on agriculture production to industrial production.<\/figcaption><\/figure>\n\n\n\n
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ECONOMICS IN THE INDUSTRIAL REVOLUTION – SOCIALISM<\/h2>\n\n\n\n

However, by the mid-1800s the economics of the Industrial Revolution began to shift with the emergence and development of socialism<\/a>.\u00a0\u00a0During the early 19th century many people began to question whether or not\u00a0laissez-faire capitalism\u00a0was meeting the needs of all people in society.\u00a0 Laissez-faire capitalism was the dominant economic system in Europe at the time and, in general, was based upon little or no government intervention in the economy. In fact, some argued that laissez-faire capitalism was causing a wide income gap in society between business owners and the working class.\u00a0 Socialism developed as a response to how some felt about laissez-faire capitalism and its apparent failings.\u00a0 For example, early socialists argued that laissez-faire capitalism led to several issues of the\u00a0Industrial Revolution, including: child labor<\/a>, dangerous and dirty working conditions<\/a> and a lack of basic workers\u2019 rights.\u00a0 Therefore, socialism is a left-wing economic system that favors government intervention in the economy in order to try to decrease the imbalances created by laissez-faire capitalism.\u00a0 In general, socialism was favored by working class people, as it sought to create a more equitable distribution of income. With that said, historians acknowledge several different types of socialism that each formed over different periods of time.\u00a0 For instance, early socialist movements that developed in the timeframe of the Industrial Revolution included\u00a0Utopian Socialism\u00a0and\u00a0Marxism<\/a>,\u00a0and\u00a0Democratic Socialism. The central difference between these types of socialism is the degree to which they support government intervention and what types of political systems they are combined with.<\/p>\n\n\n\n

\"Child
‘Breaker Boys, Child Coal Miners for the Pennsylvania Coal Company in 1912. (Colorized by historycrunch.com)<\/figcaption><\/figure>\n\n\n\n
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A central figure of the development of these socialist ideologies, which transformed the economies of the Industrial Revolution, was\u00a0Karl Marx<\/a>.\u00a0\u00a0Marx is perhaps one of the most influential philosophers of the last two centuries.\u00a0 His writings inspired revolutions in several countries and are still used today in support of worker\u2019s rights and other socialist principles. \u00a0His ideas are often associated with the timeframe of the\u00a0Industrial Revolution\u00a0since he witnessed and expressed concern for the\u00a0horrible working conditions\u00a0of the period.\u00a0 He is best known for writing (along with Fredrich Engels)\u00a0The Communist Manifesto.<\/p>\n\n\n\n

Written at the end of 1847, The Communist Manifesto was a political pamphlet first published in 1848 under the title \u2018Manifesto of the Communist Party\u2019.  It was commissioned by the Communist League, an international communist organization that operated in Europe.  Marx and Engels were associated with the Communist League and wrote The Communist Manifesto in order to clarify and articulate the ideas of the organization.  In the pamphlet, Marx and Engels set forth the basic principles of Marxism that have gone on to influence many different thinkers and ideologies around the world.<\/p>\n\n\n\n

The basic ideas of The Communist Manifesto were centered on the nature of society and the struggles between different classes. According to Marx and Engels, the only way to overthrow capitalism was by means of a class struggle between the proletariat (industrial workers) and the bourgeoisie (wealthy owners).  They argued that this workers revolution was necessary before any significant changed could be made in society.  In general, they discussed the failings of capitalism and sought to bring about a final revolution that would end the struggle between classes.  For example, in The Communist Manifesto, Marx and Engels argued that a socialist society formed by workers should involve a move towards the following: a shift from private property to public property, factories controlled and owned by the proletariat, free public education for all children.<\/p>\n\n\n\n

\"Karl
Karl Marx in 1875. (Colorized by historycrunch.com)<\/figcaption><\/figure>\n","protected":false},"excerpt":{"rendered":"

Economics in the Industrial Revolution played an important role in the overall era, and was dominated by the developments of capitalism and socialism.<\/p>\n","protected":false},"author":1,"featured_media":5934,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"iawp_total_views":26,"footnotes":""},"categories":[11],"tags":[15,17],"class_list":["post-1831","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-industrial-revolution","tag-history","tag-industrial-revolution"],"_links":{"self":[{"href":"https:\/\/crunchlearning.com\/website_ec2cbfb0\/wp-json\/wp\/v2\/posts\/1831","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/crunchlearning.com\/website_ec2cbfb0\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/crunchlearning.com\/website_ec2cbfb0\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/crunchlearning.com\/website_ec2cbfb0\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/crunchlearning.com\/website_ec2cbfb0\/wp-json\/wp\/v2\/comments?post=1831"}],"version-history":[{"count":4,"href":"https:\/\/crunchlearning.com\/website_ec2cbfb0\/wp-json\/wp\/v2\/posts\/1831\/revisions"}],"predecessor-version":[{"id":6023,"href":"https:\/\/crunchlearning.com\/website_ec2cbfb0\/wp-json\/wp\/v2\/posts\/1831\/revisions\/6023"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/crunchlearning.com\/website_ec2cbfb0\/wp-json\/wp\/v2\/media\/5934"}],"wp:attachment":[{"href":"https:\/\/crunchlearning.com\/website_ec2cbfb0\/wp-json\/wp\/v2\/media?parent=1831"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/crunchlearning.com\/website_ec2cbfb0\/wp-json\/wp\/v2\/categories?post=1831"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/crunchlearning.com\/website_ec2cbfb0\/wp-json\/wp\/v2\/tags?post=1831"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}