Capitalism and the Industrial Revolution: A Transformative Era
Capitalism
An economic system based on the accumulation of capital through economic liberalism.
The Factory System
All activities taking place in a factory, aimed at mass production. This system replaced individual industrial productivity.
Economic Liberalism
The transition from a limited market economy to a liberal economy based on principles like private property, free enterprise, free contracts, free labor, and a self-regulating market.
The Industrial Revolution
Changes in Production
Characterized by the use of machines and new energy sources like hydropower and coal. These changes, along with the need for better labor control, led to the concentration of workers in factories, replacing individual production with the factory system. Mechanization began in the textile industry with innovations like the flying shuttle, spinning jenny, and power loom.
Power Sources
- Hydropower: Utilizing water as an energy source.
- The Steam Engine: Invented by James Watt.
Key Industries
The Cotton Industry
A symbolic sector of the Industrial Revolution. Cotton, a soft and readily available fabric, was highly economical to produce.
Coal and Iron
Coal became the primary fuel source of the 19th century, powering the steam engine. The iron industry also experienced significant growth.
Other Sectors
The chemical and metallurgical industries saw rapid expansion, as did the construction sector.
Transportation Advancements
Improvements in roads began in the mid-17th century. However, the railroad revolutionized transportation with the steam-powered locomotive. The first steamship appeared in 1807.
Market Expansion
Improved transportation facilitated the shift to a market economy focused on production for sale rather than consumption. Overseas markets played a crucial role in this expansion.
Industrialization Across Europe
The industrialization process spread unevenly across Europe during the late 17th and 18th centuries. Outside of Europe, similar industrial development occurred primarily in the USA and Japan.
Capitalism, Economic Liberalism, and the Rise of a Liberal Economy
The Industrial Revolution and accompanying political changes led to the shift from a limited mercantile economy to a liberal economy based on private property, free enterprise, free labor, and self-regulation. This free market, governed by profit and supply and demand, became known as liberalism, despite frequent import tariffs.
Theoretical Foundations of Economic Liberalism
Adam Smith, a Scottish economist, was the leading theorist of classical liberalism. His influential work, “The Wealth of Nations” (1776), emphasized individual self-interest as the primary motivator in economic activity. This doctrine favored private initiative over government intervention, advocating for a limited government role and a free market economy.
While Smith held an optimistic view, a more pessimistic perspective emerged, highlighting potential weaknesses in the capitalist system.
The Capitalist Economic System
The Industrial Revolution solidified the capitalist economic system. This system required substantial capital for establishing and operating businesses, leading to the development of the banking system and increased trade. Credits and bank loans facilitated the purchase of company shares, meeting the demands of commerce and industry. These economic changes brought about significant social transformations, marking a revolutionary period.
Industrial Society
Characterized by extensive service industries and urban development, a class-based society founded on wealth, and improvements in overall well-being.
The Class System
The Industrial Revolution and associated political shifts resulted in a new, open social structure with fluid mobility between classes. New groups emerged: the lower, middle, and upper classes.
The Lower Classes
Included day laborers, landless peasants, the urban poor, and the socially disadvantaged. The most significant development was the emergence of the proletariat, the working class of modern industry.
The Middle Class
Experienced substantial growth, although not as significant as the proletariat. Skilled industrial workers and a growing number of government officials and public servants contributed to this expansion.
The Upper Classes
While the nobility declined, they retained prestige and influence. The Industrial Revolution marked the triumph of the bourgeoisie, who held economic and political power. Industrialists were prominent figures within the bourgeoisie, their power and influence steadily increasing. They came from diverse social backgrounds and had to adapt to technological advancements to prevent their businesses from becoming obsolete.