The Industrial Revolution and Britain's Economic Transformation

The Foundations of Industrialization

Industrialization is defined by structural change, improvements in productivity, and the transition from human labour to machinery. This period saw a significant change in demand, marked by shifts in spending behaviors and a rise in demand for market-supplied goods. During the 17th and 18th centuries, the range of market activity expanded, creating greater opportunities for individuals to sell their labour for wages. This led to increased specialization and market activity, as the extent of the market often depends on specialization.

The key to achieving total productivity growth was not found in demography or technology alone, but in the organization of the household as an economic entity. This contrasts with Asia, where productivity was maintained by increased labour with limited market contact. According to historian Jan de Vries, there were four main routes that increased market activity and moved society away from self-sufficiency towards the cash economy:

Routes to a Market Economy

• Agricultural specialization
• Proto-industrial production (e.g., textiles)
• Wage labour
• Commercial services

This trend saw nuclear family members increasingly engage in the market. The more market activity there was, the more hours people worked.

The British Industrial Revolution

The Industrial Revolution brought unprecedented total productivity growth, driven by technical changes, national expansion, and mechanization. In Britain, the revolution was powered by several main industries.

Britain's Key Industries

• Cotton
• Steam power
• Iron production
• Engineering

Several historical factors set the stage. The Black Death of 1348-49 raised wages and increased labour mobility. In the 17th century, colonial expansion in Asia and America created new markets and sources of wealth. Institutional changes also began to support enterprise and wealth accumulation. By the 18th century, Britain was uniquely positioned with a strong proto-industry, significant urbanization centered in London, and a high-wage economy that created incentives for innovation. The low cost of energy, particularly coal, spurred the development of machinery.

Shift to a Mineral-Based Economy

A crucial aspect of this era was the switch from an organic to an inorganic, or mineral-based, economy. This technological revolution introduced new materials, new machines, new production methods, and a greater specialization and division of labour.

Organic vs. Inorganic Economies

An organic economy relies on energy that is a flow, derived from sources like forests and pastures. In contrast, an inorganic-based economy relies on energy that is a stock, such as coal, which can be stored and used on a massive scale.

The invention of the steam engine, which used water vapor for mechanization, was a pivotal development. It harnessed a new energy source, coal, and was built with a new material, iron.

Key Drivers of Industrial Change

The Industrial Revolution was driven by a combination of interconnected factors:

• Expansion of trade
• Increased urbanization
• Growing labour demand
• Higher wages, which provided an incentive for technological improvements
• Technological advances
• Favorable natural factors and resources
• Increased agricultural productivity
• The accumulation of capital

Factors of Production

The primary factors of production were transformed:

Capital: Investment was concentrated in new industrial sites, leading to the rise of factories.

Labour: The demand for workers was immense, leading to the widespread use of labour, including child labour.