What is Industrialization? - 2020 - Robinhood (2024)

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A modern example of industrialization took place in China. The country’s manufacturing output jumped from $83B in 1970 to nearly $16.5T in 2010. This increase in production occurred due to a revolution in the Chinese economy.

Between 1978 and 1988, the Chinese government encouraged village enterprises, and the number of collectively owned rural businesses increased from 1.5M to 18.9M. Chinese companies imported foreign machinery to begin mechanizing production, and by 1998, the nation became the world’s largest exporter of toys, textiles, and furniture.

Since then, China has heavily industrialized, building millions of miles of roads and high-speed trains to transport goods and raw materials. While up to 800M Chinese citizens worked in agriculture in the 1970s and 1980s, only 350M did in 2006.

Industrialization is like turning your garage into an apartment…

Imagine your house is like an agrarian economy. Converting your garage into an apartment you can rent is one way to increase your home’s productivity. To do so, you’d have to invest money and effort, and change how you do things. You’d need to find somewhere else to park your car, add amenities, and do construction work. Similarly, agrarian economies have to change the way they do things and spend money and effort to industrialize.

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Industrialization is the process of re-organizing an agrarian economy into one focused on the mass production of goods and services. Typically, this is accompanied by mechanized production, which allows businesses to produce more goods with less human labor (for example, using coal power instead of manual power to operate machines).

Industrialization usually involves significant societal changes, including a move toward free labor markets in which workers have more power to choose their employers. Fewer people work in farming, as more find jobs in manufacturing, often moving from rural areas to cities.

Industrialization tends to promote entrepreneurship, mobility, greater personal freedom, and higher standards of living. It increases productivity and fuels economic growth. Significant changes to infrastructure also tend to accompany industrialization, including the construction of roads and railroads. Historically, industrialization has sometimes led to higher levels of pollution and carbon emissions, along with exploitative labor practices.

Some countries have taken different paths to industrialization. The Soviet Union industrialized mostly using forced labor rather than entrepreneurship and free labor markets. Some nations, such as New Zealand, maintained farm-heavy economies but used industrial techniques and machinery to increase output.

One of the first examples of industrialization was the rise of textile factories in Britain during the 18th and 19th centuries. Previously, cloth and textiles were woven by hand, mainly in villages across the country. Thanks to the advent of new machines and techniques, along with improvements in transportation and communication, mass production became possible. Textile production moved to large factories based in cities.

Britain’s railroads were another example of industrialization. While people previously traveled by foot or in animal-drawn vehicles, the steam engine allowed for train travel that allowed people to go further, faster. The first steam locomotive route opened in 1830 and ran between Manchester and Liverpool. By 1948, the government passed more than 10,000 acts creating railways.

Countries that engage in export-oriented industrialization focuses on building up industries in which the industrializing nation has a competitive advantage. Countries like Taiwan and South Korea focused on an export-led strategy in the 1950s and 1960s.

Import-oriented industrialization concentrates on building up industries that can replace imported goods with domestic ones. Most countries in Latin America opted for this strategy between the 1930s and the 1980s.

The Industrial Revolution was the period that began in 1760 in Britain and expanded to other parts of Western Europe and to North America, including the United States, ending in the 1880s. Britain was ripe for this transformation thanks to plentiful coal deposits, a limited monarchy, free enterprise, cheap slave-produced cotton, the rule of law, and other factors.

New materials (like iron and steel), energy sources (like coal, the steam engine, and electricity) and machines (like the spinning jenny and cotton gin) allowed industries that had relied on manual labor to transition to mass production of goods.

Improved transportation (including steam locomotives, cars, and airplanes) and communication methods (such as the telegraph and radio) also helped transform the economy. Farmers also adopted machinery and tools that made their jobs easier and increased output. Because fewer people needed to work on farms, industrializing countries urbanized, as many residents moved to cities to work in factories. These significant shifts led to changes in the social order, such as growth of a middle class, more work for women outside the home, and an increased focus on leisure. It also led to exploitation of workers, including children, which eventually gave way to growing demands for unionization and improvements in social welfare.

During the Industrial Revolution, new technology, materials, and knowledge spread, causing industrialization to expand from Britain to other parts of the West. Even as much of the West reached the end of its industrialization process in the late 19th century, other parts of the world started industrializing.

For example, the Soviet Union didn’t begin industrializing until 1929. Josef Stalin wanted the nation — recovering from World War II, revolution, and famine — to become competitive on the world stage. He pushed through a state-run program of building factories, developing transportation networks, and forced collectivization of farms.

Asian nations like Japan, South Korea, and Singapore industrialized after World War II. Their development was fueled by foreign investment and globalization, which created an opportunity for these countries to export goods to larger economies.

A major factor in industrialization is the development of new technologies. Industrialization relies on advances in materials and equipment, allowing businesses to harness sources of power such as coal or steam and turn natural resources into materials that can handle the stress of being used in large-scale machinery, such as steel.

Some argue that one factor involved in industrialization was the stock market. Previously, individuals had provided financing for most enterprises, but that wasn’t enough to fund implementation of the steam engine or other technologies needed for mass production. The rise of stock markets and the corresponding access to capital made it easier for companies to get long-term financing and for entrepreneurs to buy expensive equipment for use in factories.

Communication and transportation technology are also important parts of industrialization. When people and information can move quickly, that helps ideas and production techniques to diffuse faster, which can lead to speedy advances in manufacturing technology. Improved transportation also increases the labor pool for new manufacturers because they can draw workers from a larger geographical area.

Industrialization rearranges a country’s economy from one based on farming to one that focuses on industry. Fewer people work on farms, as new agricultural methods reduce the need for labor and more jobs emerge in manufacturing.

Many manufacturing businesses need employees to run and maintain machinery around the clock. These businesses don’t need large amounts of land to produce goods, unlike farms. As a result, factories usually concentrate in cities, which causes people to move there for work. The US underwent this process of urbanization, as cities like New York ballooned in population during industrialization.

Changes in a country’s infrastructure also accompany industrialization. Often, this means a focus on improved transportation, such as better roads and the construction of railroads. This makes it easier for businesses to acquire raw materials from far away and to ship goods around the country or export them.

Industrialization improves productivity, which can increase a country’s gross domestic product (GDP) — the value of everything a country produces domestically. Where most of the country once focused on subsistence, industrialization allows more workers to produce an economic surplus, increasing incomes, GDP, and GDP per capita (per person). That typically translates to a higher standard of living.

Industrialization can also have negative impacts. In Britain and other countries, many workers experienced long hours and poor conditions, and lived crammed together in slums. Some children were forced to work instead of going to school. Many factories polluted the local environment and, over time, contributed to global climate change.

Industrialization is important because it formed the basis of many modern economies. All developed countries have experienced industrialization and now have industrial economies rather than agrarian ones. Even countries that rely heavily on the farming industry, like New Zealand, have industrialized agriculture to increase output.

Industrialization is also relevant because it’s an ongoing process. Some countries are newly industrialized or currently undergoing industrialization. Understanding the process and how it affects a country’s economy and society can help industrializing nations comprehend and drive the changes they are experiencing.

Many people argue that industrialization helps reduce poverty and improve living standards, making it an important part of economic development. Understanding industrialization can also help countries manage its side effects, such as environmental pollution and carbon emissions.

Knowing the history of industrialization can also help societies reckon with a shift toward what is sometimes called a post-industrial economy — one that moves away from manufacturing toward a service or information-based economy. Though the processes are different, both involve an upheaval in the economic and social order of a country. Learning from past changes can help countries understand the transitions they may experience in the future.

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