Economy

In 1750, the European economy was overwhelmingly an agricultural economy. The land was owned largely by wealthy and frequently aristocratic landowners; they leased the land to tenant farmers who paid for the land in real goods that they grew or produced. Most non-agricultural goods were produced by individual families that specialized in one set of skills: wagon-wheel manufacture, for instance. Most capitalist activity focused on mercantile activity rather than production; there was, however, a growing manufacturing industry growing up around the logic of mercantilism. 

   The European economy, though, had become a global economy. In our efforts to try to explain why the Industrial Revolution took place, the globalization of the European economy is a compelling explanation. European trade and manufacture stretched to every continent except Antarctica; this vast increase in the market for European goods in part drove the conversion to an industrial, manufacturing economy. Why other nations didn't initially join this revolution is in part explained by the monopolistic control that the Europeans exerted over the global economy. World trade was about making Europeans wealthy, not about enriching the colonies or non-Western countrie

Economic, political and cultural factors combine to promote industrialisation

By the later eighteenth century, the British economy was well placed to experience a major economic and structural transformation as the pioneer industrialising nation. Foreign traders secured rapidly expanding overseas markets for her manufactures. The home market was buoyant because of population growth, high levels of urbanisation, the expansion of wage earning and rising incomes of the middle classes in particular. The stimulus of demand led to a search for more efficient ways of producing goods with technological and organisational innovations. Agriculture was expanding and changing so that the growing population could be fed without commensurate increase in the agricultural workforce. The country also had a stable political regime established after the restoration of a limited monarchy in the later seventeenth century. This stability was very important in encouraging enterprise and risk taking whilst legal and financial institutions were in place which protected property and encouraged investment.                             

The slow and patchy pace of change

However, the economic changes of the industrial revolution were more patchy and less complete than was once thought and than the word 'revolution' might suggest. The growth of real output, including industrial output, remained slow (not reaching 3% per year until the 1830s) and national income grew even more slowly. The productivity of labour, capital and land (total factor productivity), at national level, remained below 1% per annum until after 1830. (Productivity refers to the value of outputs which are produced by a given level of inputs). Many regions and sectors of the economy changed very slowly and many historians argue that the transformation of the period is better described as evolutionary rather than revolutionary.

Risk, uncertainty and the role of the family firm The decades of the industrial revolution were turbulent and volatile: markets were constantly changing under the impact of war, blockade and trade depressions. Opportunities expanded but risks were high because commercial information was poor and business conditions unpredictable. The many heroic success stories of entrepreneurs, families and firms during the industrial revolution are therefore matched with as many, if not more, examples of bankruptcy and failure. Very few giant firms emerged. In the risky and uncertain business climate, family firms predominated because personal and family relationships, and social networks, provided the levels of trust and confidence necessary for business viability and success. Such familial and social networks were often centred around localised religious groups whose members met regularly at church or chapel. Commitment to roles in local government and local charities and to membership of gentleman's clubs often served further to unite groups of businessmen and their relationships were frequently cemented by the intermarriage of their daughters and sons.                                             - Juan José Nieves