As the middle ages ended the feudalism came to an end in Europe due to Renaissance and other developments. Rise in towns and cities created a demand for goods which in turn stimulated the production of manufactured goods. But for a long time the techniques and organization for production of goods did not undergo any significant improvement. It was during the later half of the 18th century that the methods of production were revolutionized.

These developments resulted in the rise of a new type of economy called an industrial economy.

Industrial Revolution is used to describe these developments because the changes came rapidly and they had far reaching effects on World history.


This new system of economy emerged in Europe around the 15th century and emerged as an important form of economy that has continued to be economic system of most present day countries.

Features of Capitalism

  1. Instruments and means of production i.e. industries are owned by private entrepreneurs and the purpose of production is profit.
  2. The profit or wealth earned by the entrepreneur was used mostly as an investment for further increasing the means of production.
  3. Workers were wage earners who did not own anything.
  4. Profit was the only motive for production and selling in the market.
  5. This system became a replacement of the feudal system where goods were produced for local consumption but wealth produced was for personal use or consumption by the owner.
  6. Economic life in capitalism was fast moving as owners had incentive to increase means of production so that profits could be increased. Unlike capitalism in feudalism the there is no incentive to produce more and economic life is static.

Industrial Revolution

The desire to produce more goods at a cheaper price and thus increase profits gave rise to industrial revolution. It led to the beginning of Industrial Revolution in England in 1750. The Machine Age had started and soon people started losing out jobs to machines. The industrial revolution changed the way of thinking rapidly. More inventions came up that changed people’s lives.

Industrial Revolution also led to creation of Factory System that used machines and steam power in place of humans and animals for production.

Factory system meant that the Capitalists, who were people who brought investment and owned the means of production, setup factories that made finished products. The finished products were also under ownership of capitalists who decided where to sell. They earned profits and invested it to further increase means of production.

Factory system turned early capitalism into Industrial Capitalism.

Birth of Industrial Revolution – England

England became the birthplace of the industrial revolution because of the following reasons:

  1. It had accumulated vast capital, that could be invested to create factories, from its overseas trade and colonial possessions. It had emerged as the unrivaled leader in Europe during the trade wars. The continuous supply of raw materials can be ensured from the colonies.
  2. The end of feudalism and serfdom created a class of people who were not tied to land but could take any occupation. The big landowner in England consolidated their land holdings and ousted the small landowners. This created no shortage of labor in factories.
  3. A stable system of government was created in colonies and this was under the influence of the capitalist class. Thus there was no problem of government interference in economy.
  4. England had plenty of sources of Iron and coal which were needed for the industries.
  5. System of shipping was developed by England which made it a powerful force in Europe. These could be used for transporting finished products in colonies which would also become consumers.
Other European economies saw unfavorable conditions as natural resources were not available or capital or lack of political unity. However soon these to started developing and competed with England for markets overseas.

Textile and Transport Revolution in England 

Indian calico cloth made in Calicut , Dacca muslin in Dhaka and Kashmir shawl from Kashmir were very popular in the English market. The English traders then imported raw materials and made the textile products in England for higher profits. The series of inventions further boosted the growth of textile industries in England.

  1. Powerloom – Speed up spinning
  2. Cotton gin – Speed up cleaning of cotton
  3. Steam engine – easy transportation of goods
  4. Blast furnace – cheaper and easier way of producing steel.

Transport revolution in England when Railways were started to transport coal from mines to ports and then also from ports to factories. Roads called mcadamised roads were built to facilitate smoother transport by land and since water transport was easier than land transport canals were built.

Agriculture Revolution

The revolution in agriculture started before the industrial revolution as the demand for more food production was created. Mechanization of agriculture was done as the machines were used to reap and thresh. Steel plough and harrow were used for cultivating cash crops and raw materials for industries.

Pre industrial revolution land was allowed to lie fallow every third year to regain its nutrients. However this wasn’t possible after industrial revolution as demand from agriculture increased. Crop rotation became a popular technique to achieve balance.

Land Consolidation movement was the “Enclosure Movement”. In this the big landowners consolidated their land holdings and evicted the small peasants. They also usurped the common pastures and grazing grounds and the small grazers and peasants had to move to cities and towns. They did whatever work was available at the wage offered. The industrialists benefited from this as there was cheap and easily available labor.

Peak of Industrial Revolution in England

Industrial revolution peaked the factory output of England. It went from a net importer to exporter. Its imports to India and other nations improved. The industries of other nations of Europe couldn’t compete with industrial goods of England. This create a chain of events that led to a race for colonies.

Tariff barriers

As industrialization spread to other countries production of goods started increasing. But as England was far ahead of others in the industrial revolution, its goods were far better and cheaper than their own goods.

The governments were forced to impose high import duty on goods which made them noncompetitive over domestic goods. As every country started imposing tariff barriers to protect local industry, The need to explore and find new markets was felt and this fueled the race for colonies.

Race for raw materials

As countries started industrialization they wanted more and more raw materials to fuel their growth. They captured colonies and exploited them for their own benefit. The economy of colony was subordinated and this phenomenon was called “Imperialism”.

Imperialism created friction between countries as they fought over colonies and dominance over a region. They created exclusive rights to trade with them and ruthlessly exploited the local population. Countries that industrialized late wanted to snatch colonies from developed nations. The countries that had colonies wanted more.

Consequences of the Industrial Revolution

Earlier people lived in villages and village life was self sufficient. But with industrialization newer towns and cities emerged. They became the centers of political and administrative activity. They were more important as centers of industry.

People lost their traditional occupations and migrated to cities. The social bonds and constraints of village life were broken. The conditions of towns and cities deteriorated which created consequences for people.

However the change industrial revolution brought was creating an international consciousness amongst the people as trade was carried out between countries and things that happened in one part affected the other.

Laissez faire – Leave us Alone doctrine

The capitalists had laissez faire as a religion, it meant leave us alone. The governments should not interfere in industry and capitalists alone should be responsible for managing the affairs of industry.

Industrial revolution created miserable conditions for workers which led to reforms in industry and increased state interventions. These created the current system of labor reforms prevalent even today.

  1. Slums were created around industries as workers had to live nearby and large number of workers created congestion and disease. After the epidemic outbreaks government reformed housing policy for workers.
  2. Women and children provided cheap labor and so were employed for long hours. Soon factory reforms were passed to regulate work hours and ban child labor.
  3. Unions couldn’t be formed and right to strike didn’t exist. However today in most countries its a legal right.
  4. Employers could fire workers anytime and workers had no security or other benfits. Till a long time they weren’t given the vote. However in middle of 18th century “Chartist movement”  began and soon by 1929 all adults got the right to vote.
Due to ill effects of Capitalism a new social order emerged called Socialism. This was completely opposed to capitalism and had a different social order where workers were owners of the means of production.