The traditional economy was labor-intensive agriculture. The great majority of Europeans remained farmers in the middle of the eighteenth century. By the 1700s the agricultural household had begun to supplement its income by accepting tasks associated with the production of cloth—particularly spinning and weaving. During the course of the nineteenth century the nature of the traditional economy was irrevocably changed.

Over much of Europe the land was still cultivated in the open-field system in the eighteenth century. The communal system of agricultural production was prolonged because of insufficient incentive for change, serfdom, and the dangers of experimentation. The traditional agricultural economy responded to the population growth of the mid-eighteenth century by opening more lands, often less fertile than those under cultivation. More intensive methods were required to increase productivity. The accelerated population growth after 1750 placed excessive strains on the land and the rural producers.

Between 1700 and 1800 the European population increased by nearly 50 percent. The explosion of the population and the stress on the rural population opened the avenues for development of cottage industry. Capitalists provided raw wool or thread; rural households provided inexpensive labor. As landholdings grew smaller, the percentage of income derived from cottage industry became more significant to the rural poor and produced the putting-out system. Rural communities were organized to provide unskilled labor for the production of cloth. Capitalists supplied raw materials and sold the finished products. Little initial investment in machines was required, because most households already owned the required spinning wheels and looms. Eventually the percentage of income derived from rural industry became greater than that from agriculture for those families with little or no land. Because the wages for cottage industry were low, some rural poor who lost their association with the land became prisoners of the system. The traditional limits on new household formation through marriage that had operated in the exclusively agricultural society were removed. Indirectly, the establishment of the putting-out system fueled the increase of the population.

Increase in agricultural productivity was achieved through intensified use of land already in production rather than through adding more acreage. Increasingly, commercial attitudes took over agricultural production. Wholesale enclosure and the end of the open-field system were the harbingers of the agricultural revolution. Though not always a peaceful process, the division of common lands into private farms permitted the development of a market-oriented agricultural economy. Instead of producing a broad range of crops, farmers tried to cultivate the one crop most likely to produce a profit. In England and Holland the agricultural revolution progressed most rapidly. Fodder crops such as clover and turnips were introduced to replace the fallow. Animal husbandry became vastly more important. In convertible husbandry, farmers switched closed fields between pasturage for animals and grain production in response to the price structure for specific commodities. The intensification of agricultural production fed the population explosion of the eighteenth and nineteenth centuries. In contrast, the destruction of communal agriculture left the rural poor without the traditional support structures of the open-field communities.

Like the agricultural revolution, the Industrial Revolution in Britain irrevocably altered society. Machines replaced human and animal labor. The Industrial Revolution began a sustained period of economic growth between 1750 and 1850. As it progressed, England ceased to be an agricultural and rural society.

Because it was first, Britain’s Industrial Revolution is often used as a model of the process. All of the circumstances necessary for industrialization were present in Britain within a small geographical region. Because it was an island, Britain early developed a navy and consequently emerged as a leader in commerce and colonialism. Britain also possessed an enormous complex of navigable waterways—canals and rivers—that facilitated the rapid exchange of goods. Britain also had abundant mineral fuels, particularly coal. Coal replaced wood for domestic use and supplanted charcoal in the production of iron. In addition to natural resources, Britain had already developed a commercial infrastructure: foreign export markets, sources of raw materials, shipping, and banking. The Bank of England was created at the end of the seventeenth century to provide greater financial liquidity and to fund a national debt. Other banking enterprises on a more localized scale emerged along with the quickening pace of economic development. They were critical as a source of capital for investment.

Without coal, there would have been no Industrial Revolution. The original investments in coal mining came from great landed families. The capital at first was utilized to solve fundamental technological problems of mining—how to extract coal from ever deeper seams. Extracting water from the pits, providing ventilation, and lifting the extracted coal were all impediments to deep mining. Newcomen’s steam pump was critical in solving the various problems and replaced the labor of thousands. The invention permitted the widespread use of coal as an industrial fuel, particularly in the production of iron. Before coal, the individual industrial processes in the production of iron had to be located near supplies of wood. The use of coal as the smelting fuel was made possible by James Watt’s invention of an improved steam engine. The new technology was applied at the foundries of John Wilkinson. The application of coal permitted other technological advances, including Cort’s puddling and rolling processes. Iron output increased exponentially.

The traditional English cloth industry was woolens, produced in the eighteenth century in the agricultural countryside by the putting-out system. As with mining, technological improvements revolutionized cloth production. The primary impediment to cloth manufacture was the lack of machinery for the production of thread. The spinning jenny, water frame, and Samuel Crompton’s mule mechanized the process. Mechanization of cloth production led to the development of the factory system in which machines and the water power to run them were brought together with increasing numbers of unskilled laborers. Factories permitted strict supervision of the workforce and the division of labor into increasingly specialized activities. Concentration of labor moved the cloth industry out of the countryside and into the cities. Cotton cloth became the most important English manufactured product. Mechanization of cotton cloth, drove the handloom weaves out of work. In an attempt to maintain their position, groups of workers known as Luddites, engaged in machine breaking riots. They were quickly suppressed.

Increased production created a demand for improved systems of transportation. The emergence of the railway system was the technological response. The lapse of Watt’s patent on the improved steam engine allowed other inventors to apply the machine to the problems of more rapid transportation. In 1830 the first commercial rail line was opened between Manchester and Liverpool, two industrial cities. The rail lines were an instant commercial success—even if the original investors failed to make a profit—and with governmental support, the railways rapidly spread throughout England. They spawned a demand for increasing amounts of iron and later steel that forced modernization of those related industries. Concepts of time and space were radically shortened as the railways brought people and goods closer together.

The Industrial Revolution reorganized the relationship between capital and labor. Industrialists simultaneously increased output and lowered costs for manufactured goods. Successful entrepreneurs not only needed capital for investment, but also were required to closely supervise the development of their businesses, most particularly the organization of labor. Increasingly the processes of production were subdivided into more specific, basic tasks. In search of malleable workers at low cost, factory managers began to employ women and children. British entrepreneurs came from every social class in England—from the very poor to the very rich. Two different examples of successful English industrialists were Josiah Wedgwood and Robert Owen. Josiah Wedgwood, was an heir to a family pottery industry that he reconstructed along the lines of the factory system. The result was higher quality and greater output. He then was able to sell replicas of his quality pottery by the thousands. Robert Owen became a mill owner in New Lanark Scotland. Disgusted by the terrible working and moral conditions in the mill, he set out to ameliorate the conditions of labor in the factories.

Robert Owen ended his life attempting to establish utopian communities for laborers. His efforts at last produced laws for improvement of working conditions for men and limited the sorts of labor imposed on women and children. By the middle of the nineteenth century, statutes addressing the health and working environment of laborers became more common. The Industrial Revolution caused basic shifts in the English population out of rural areas and into the manufacturing cities. By 1860 more than half of all Englishmen lived in towns. Early marriage and large families continued the surge in population. There is an ongoing debate concerning the benefits and losses of the Industrial Revolution. Per capita income increased demonstrably in the first half of the nineteenth century, but the increased wealth was not distributed evenly throughout society. Real wages for workers probably declined until about 1820, when conditions improved. Business cycles were more severe in an industrialized economy. The factory system destroyed the old domestic economy of the agricultural household when the individual replaced the family as the primary unit of production. Labor was more strictly controlled in the factories. Methods of payment required budgeting or starvation. The old society of estates was supplanted by the mid nineteenth century with a new social system of classes based on wealth and the relationship to the means of production.

Continental European leaders carefully studied Britain’s Industrial Revolution as a model for economic development, but the development of industrialization on the Continent followed patterns dictated by local conditions. The technology of the revolution could be exported, but the conditions that called the inventions forth could not. The industrialization of the Continent was a slower process.

The industrialization of France was typified by slow growth keyed to local luxury demand rather than export markets. Two factors—population growth and the French Revolution—determined the nature of French industrialization. Famine and conscious limitation of family size restricted the rate of population growth in France. As a result, France did not experience the same pressures on the traditional agricultural economy as either Britain or Germany. The French Revolution was a disruptive force in the French economy. The commercial fleet was decimated. The urban guilds responsible for organization of crafts were abolished. The agricultural system fell into the hands of the peasantry who destroyed the open-field system but who did not have the capital for intensive improvements. The conservative agricultural system fed the population, but did not release large numbers of people to supply industrial labor. Until the nineteenth century, the French economy remained regionalized. The state was unable to create a centralized system through subsidies to national transportation networks or through development of banking schemes. Capital formation for investment was thus limited. Only in the mid-nineteenth century did the state finally initiate the construction of a national railroad network. Construction of railroads necessarily produced industrialization of the processes involved in the production of iron. Prohibitive tariff walls protected domestic French industries, which remained uncompetitive in international markets. There were some benefits to slow growth. French industrialization preserved the security of rural society. Urbanization proceeded without the severe problems encountered in the British Industrial Revolution.

The political fragmentation of Germany retarded industrialization. Different currencies, regional tariffs, tolls and laws localized the economy. The traditional agricultural system continued in many parts of Central Europe. In the eastern states, serfdom still prevailed. In general, the peasantry became more free the farther west in Germany they were located. Even by 1800, eighty percent of the German population was engaged in agriculture. Germany also lacked a commercial foundation for industrialization. The Hanseatic cities had declined as international trade centers. The mechanization of German industries lagged far behind Britain into the middle of the nineteenth century. Prussia mounted the most successful attempt to overcome the impediments to industrialization. The government created a trade union, the Zollverein, composed of countries willing to adopt the lenient Prussian customs policies. The Zollverein was the first step in German political unification. Industrialization that followed the creation of the Zollverein was slavishly modeled after Britain. States invested heavily in the creation of railroads, particularly in Prussia. The Germans eventually developed proficient domestic centers of production for iron and engines.

The Netherlands, Austria, Russia, Spain, and the states of the Italian peninsula failed to develop industrial economies. Some lacked natural resources, others lacked transportation networks and the capital to produce them, and others were limited by geographical determinants (lack of waterways, mountains, etc.). All the countries that failed to industrialize featured traditional agricultural systems that were unable to increase their productivity to release surplus labor or to supply sufficient food to feed an industrial labor force. In some cases, serfdom was maintained with the active support of the state. Tariff systems protected inefficient local industries and isolated regional markets. In Austria-Hungary and Italy, some regions were favored for industrial development at the expense of others. Hungary, for example, was forced to retain a traditional agricultural system in order to foster the industrialization of Austria.