Although Western Europe had long had the basic trappings of capitalism (private property, wealth accumulation, contracts), the Industrial Revolution fueled the creation of a truly modern capitalist system. Widespread credit, business corporations, investments and large-scale stock markets all become common. Britain led the way in this transformation.

By the 1780s, the British Industrial Revolution, which had been developing for several decades, began to further accelerate. Manufacturing, business, and the number of wage laborers skyrocketed, starting a trend that would continue into the first half of the 19th century. Meanwhile, technology changed: hand tools were replaced by steam- or electricity-driven machines.

The economic transformation brought about the British industrial revolution was accompanied by a social transformation as well. Population boomed, and demographics shifted. Because industrial resources like coal and iron were in Central and Northern England, a shift in population from Southern England northward took place. Northern cities like Manchester grew tremendously. These changes in social and demographic realities created vast pressure for political change as well. The first act to protect workers went into affect in 1802 (though in practice it did very little). Pressure to redress the lack of representation for the new industrial cities and the newly wealthy industrial manufacturers also began to build.

Meanwhile, industrialists developed an ideology called Laissez Faire based on Adam Smith's Wealth of Nations (1776) and continued by David Ricardo and Robert Malthus. Based on this, the discipline known as "economics" developed, largely to give the manufacturers a basis for arguing for little or no regulation of industry. Instead of government interference, these economists argued that a free market, in which everyone followed their own self- interest, would maximize the nation's utility.

Britain, with its head start in manufacturing, its many world markets, and its dominant navy, would dominate industry for most of the 19th century. Towards the end of that century, the United States and Germany would begin to challenge Britain's industrial power.


Among the Western European countries, Britain was the ideal incubator for the Industrial Revolution because an "Agricultural Revolution" preceded it. After the 1688 "Glorious Revolution", the British kings lost power and the aristocratic landholders gained power. The landholders tried to rationalize their landholdings and started the Enclosure Movement to bring more and more of their own land under tighter control, a process that went on throughout the 1700s. This policy had two main effects: it increased the productivity of the land, and transformed the people who used to work land into an unemployed, labor class of poor in need of work. Thus, the first factories had a ready labor- supply in Britain that was not available in other nations. Important inventions like the "Spinning Jenny" to produce yarn began to be made in 1760s, and soon the British textile industry was booming, aided by Eli Whitney's invention of the "Cotton Gin" in America, which provided a ready source of cotton.

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