Key Features of Labor and Economic Changes During Industrialization

The main features of the labor force during the early stages of industrialization were: work intensified and was subjected to greater scrutiny. The majority came from rural industry; the traditional craftsman and the peasantry were largely composed of women and children (more docile labor and cheap).

The differences that existed between subsistence and commercial agriculture in relation to forms of management included: division of large estates to smallholder farmers transferred through leasing contracts, emergence of large tenants who acted like true entrepreneurs, cropping systems with large areas fallow, and the introduction of intensive systems that reduce the fallow.

The main features of corporate financing in England during the Industrial Revolution (1760-1860) were: A) long-term plans for new investments in fixed capital, dominance of self-financing, loans from family, friends, and acquaintances, and the search for new partners was rarely used (fear of losing control of the company). Ultimately, bank loans were focused more on short-term loans. B) In the short term, to meet capital requirements (payment for raw materials, wages, or granting loans to customers), there was dependence on obtaining credit from the direct knowledge and confidence inspired by the shareholders of the company (it was more difficult to get credit in the first years of business). This led to the development of a complex web of claims (S. Pollard speaks of “a web of credit”) based on bills of exchange and regional banks participating with merchants and industrial agents.

The features that characterized the economic and institutional environment in which businesses were developed before the Industrial Revolution included: tightness in the supply of productive factors (land/natural resources, labor, and capital), technological stagnation, fragmented markets, and difficult access, as well as the importance of relations with the state.

The factors behind the demise of unions throughout the nineteenth century included: the action of the state that abolished unions for introducing the principle of free enterprise, conflicts arising within their own guilds caused by increasing socio-economic differentiation within the same (differences of interests between some teachers and others), the discomfort of the officers who saw limited promotion in the office (the emergence of corporate officers), and increased competition from non-unionized industries whose products were more competitive.

The factors behind the emergence of market agriculture in England and the Netherlands included: changes in the ownership of land (enclosures) and the use of capital investment (polders), breaking the closed circle involving subsistence agriculture through new production methods and organization of farms, specialization of agricultural production into raw materials for industrial production, the development of relations between agriculture and manufacturing production, and the adoption of management systems based on profit criteria.

The role played by the state differed with respect to the development of economic activities in pre-industrial economies compared to the time of the Industrial Revolution: in pre-industrial economies (until the last decades of the eighteenth century and the first half of the nineteenth century for the whole of Western Europe), the state played an active role primarily through the mechanism of granting privileges (some trade union regulations, establishment of monopolies, etc.). During the Industrial Revolution (late eighteenth century and the first half of the century) and under the influence of economic liberalism (Adam Smith), state action was limited mainly to the provision of public goods (justice, police, and defense) and the promulgation of new legal codes (civil, commercial, criminal, etc.) that guaranteed the security of private property, public order, and the functioning of markets through contracts between operators with legal personality (individuals or firms).

The factors leading to the fragmentation of markets and difficult access during the period before the Industrial Revolution included: poor transport and communication, which made markets large and more expensive for long-distance trade. The difficulty of access to markets was related to high transaction costs and limited information available (information about product prices, customers, and suppliers).

The main sources of business financing during the early stages of the Industrial Revolution (1760-1860) included: before the Industrial Revolution, companies were funded by cash flow (profit reinvestment), family investment, and commercial credit (bills of exchange). Some of these sources remained important, but others developed, such as long-term investment in fixed assets (facilities, infrastructure, machinery). Self-financing alternatives included searching for partners, loans from relatives or acquaintances, and ultimately only bank loans. Short-term capital (payment of suppliers, raw materials, wages, etc.) still relied heavily on commercial credit (bills of exchange, discounts, sale of raw materials on credit). This picture describes the overall situation of France and Britain, while in Belgium there was greater involvement of banks in industrial financing, and in the U.S., domestic loans to directors of the banks themselves (insider lending) were common.

The relations established in some European regions between industrial and agricultural activity led to the emergence of a mostly rural and sparsely populated area producing for larger markets than those of the unions, outside the locality or region of origin.

The institutional changes that accompanied the Industrial Revolution and contributed to the implementation of economic liberalism included: abolition of feudal institutions, elimination of internal tariffs, liberalization of inputs (land/natural resources, labor, and capital), implementation of full private ownership, and freedom for entrepreneurship and capital partnership.

The mechanisms used by retailers to ensure compliance with contracts in the absence of legislation and an efficient judicial system included the development of codes of conduct and honest behavior rewarded through generation networks of trust based on family ties, religious, or ethnic connections.

The social origins of entrepreneurs during the Industrial Revolution in Britain are difficult to generalize even nationally, as both businesses and entrepreneurs were very different according to sectors and regions, even within the same country. According to some authors (H. Kaelble), there are common characteristics among employers in England, France, Germany, and the United States: many came from families of entrepreneurs, most were children of economically independent (not employees) businesses, landowners, or merchants, and very few came from lower social sectors (workers, artisans, and rural poor). In the case of Great Britain, during the Industrial Revolution, this trait called endogeny (F. Crouzet) was repeated: employers came from families of employers (especially in trade and manufacturing). In the business class, there was some mobility, but little downward ascent (from noble entrepreneurs) or upward movement from the outside (from workers or peasants to entrepreneurs).

The form unions acted on manufacturing output was that they controlled the quantity and quality of production, set prices, regulated entry into the trade, and trained apprentices.

The measures taken by various European states in the nineteenth century to liberalize natural resources (land, mineral resources, and fish stocks) included the elimination of related property (ecclesiastical, aristocratic, and communal), implementation of enclosures (enclosures) in England from the seventeenth century, confiscations in Spain (Mendizabal 1836, Madoz 1855), conquest and colonization of new land to be allocated among small and medium owners in the U.S., and transfer of subsoil use for private farming through perpetual licenses in exchange for a royalty or lease (in Spain with the Mines Act 1868). Within its territorial waters, control over access to local guilds was retreated, allowing free access to fisheries resources.

The main differences between Western Europe, the Ottoman Empire, India, and China regarding the role played by the state in the development of economic activities during the pre-industrial era included: in Europe, the arbitrariness of the state (forfeiture of goods and properties) was progressively limited by the development of taxation law and full private ownership, compared to non-interventionism and lack of state support for the development of economic activities characteristic of the Ottoman Empire and India, and excessive state intervention in China that stifled initiative. The state played an intermediary role in European security and created conditions more suited to the development of private initiative.

The main differences in the legal framework for the partnership of capital and business financing during the Industrial Revolution in France included: three types of companies (trade code 1803) – collective unlimited liability, limited liability (with government approval), and companies limited by shares with managing partners with unlimited liability and limited capital partners with responsibility. The latter prevailed until 1856, and from the decade of 1861, corporations emerged. In Britain, there were severe constraints for the formation of limited liability companies, and unlimited liability partnerships dominated (even after the reforms of 1856).

The changes that occurred in connection with long-distance trade from the thirteenth century included: sedentary trade (separation between trade and transport) driven by the development of marine insurance, the appearance of the bill of exchange, improvements in accounting, information, and transport, as well as the emergence and spread of corporations (commenda, companies).

The forms adopted by workers in resistance to the introduction of the factory system during the onset of the Industrial Revolution were varied and almost all complementary, including individual responses (absenteeism, alcohol consumption, etc.), and collective responses (Luddism (destruction of machines), strikes, and worker associations (mutual aid, trade unions)).

Production systems in the American plantations after the abolition of slavery evolved: after the abolition of slavery following the Civil War in the U.S., large plantation farming systems in partnership were introduced, where former slaves cultivated plots of land, delivering farm income to the owners as part of the harvest.