FLASH SALE! - "FINANCIAL MODELING COURSE BUNDLE AT 60% OFF" Enroll Now

Industrialization

Updated on April 24, 2024
Article bySusmita Pathak
Reviewed byDheeraj Vaidya, CFA, FRM

Industrialization Definition

Industrialization refers to the transformation of a manual labor-based economy to a machine labor-driven industrial society. It involves a systematic change of the agrarian economic system to a complex mechanized mass manufacturing process. The gradual adoption of machine-based production methods creates job opportunities, boosts productivity, accelerates economic growth, and raises living standards.

Multiple manufacturing industries emerge as part of the industrial revolution, ranging from textiles to metals and technology to energy. However, the manufacturing of goods and services results in a decline in the number of artisans. In contrast to a resource-based economy, an industrial economy comprises mass manufacturing, efficient labor division, and assembly lines. It, thus, leads to urbanization and higher individual income.

Industrialization concept

You are free to use this image on your website, templates, etc, Please provide us with an attribution linkHow to Provide Attribution?Article Link to be Hyperlinked
For eg:
Source: Industrialization (wallstreetmojo.com)

Key Takeaways

  • Industrialization is the transformation of society from being a manually driven economy to a machinery-driven industrial structure. It encourages mass production through assembly lines, resulting in economic expansion.
  • It tackles financial hurdles in an agrarian society through technological innovation, a transition from rural to the industrial workforce, and investments in mechanized production processes.
  • The first industrial revolution happened in Western Europe and North America from the mid-18th to early 19th century, while the second occurred in the 19th and 20th centuries.
  • Industrialization effects include productivity, economic development, employment growth, urbanization, wealth creation, higher living standards, etc.

Understanding Industrialization

Industrialization addresses economic growthEconomic GrowthEconomic growth refers to an increase in the aggregated production and market value of economic commodities and services in an economy over a specific period.read more issues in an agrarian society by minimizing reliance on factors outside human control. Technological advancement, shift from rural to industrial labor, and investment in mechanized manufacturing processes promote social, cultural, and economic change.

Industrialization Factors

You are free to use this image on your website, templates, etc, Please provide us with an attribution linkHow to Provide Attribution?Article Link to be Hyperlinked
For eg:
Source: Industrialization (wallstreetmojo.com)

Mass production occurs with the large-scale introduction of materials like steel and iron, energy sources like steam, coal, electricity, and machines. Improved transportation systems and communication methods also contribute to economic transformation. It can, however, sometimes result in increased pollution and labor exploitation.

Financial Modeling & Valuation Courses Bundle (25+ Hours Video Series)

–>> If you want to learn Financial Modeling & Valuation professionally , then do check this ​Financial Modeling & Valuation Course Bundle​ (25+ hours of video tutorials with step by step McDonald’s Financial Model). Unlock the art of financial modeling and valuation with a comprehensive course covering McDonald’s forecast methodologies, advanced valuation techniques, and financial statements.

History Of Industrialization

It all started in Britain in the 1730s when the nation encouraged factory systems and mechanized the mass production processes. However, its origin dates back to well before the factory system was fully operational.

Agriculture and livestock were the primary sources of income in ancient times. In the 18th century, Scottish inventor James Watt invented the steam engine that revolutionized the manual societal structure. The steam engine converted the steam energy into power and aided the smooth operation of machinery, hence promoting manufacturing operations. The steam engine also contributed to the smooth running of trains and steamboats, which facilitated regional and international tradeInternational TradeInternational Trade refers to the trading or exchange of goods and or services across international borders. read more.

As a result, artisans who designed and developed utensils and equipment lost their jobs as automatic machines took their place. The artisan workshops disappeared gradually, giving way to various factories and industries. As factories sprang up across the world, artisans had no choice but to relocate to big cities in search of work. But due to the job requirements, factory owners began exploiting workers by forcing them to work longer hours for a lower wage. It was one of the adverse industrialization effects.

Factory owners had complete control over their businesses as there was no government intervention in the market economyMarket EconomyA market economy (ME) refers to a form of economic system where businesses and consumers drive the economy with minimal government intervention. In other words, the laws of demand and supply determine the price and quantity of goods produced in an economy.read more. It ushered in free marketFree MarketA free market refers to an economic system free from government interventions and controlled by privately owned businesses.read more capitalism, in which business owners could do as they pleased without having to answer any higher authority.

Industrial Revolution

The industrial revolution began in the mid-18th to early 19th century in Western Europe and North America. The transition of a farm-based economy to an industrial system became apparent in Britain in 1760, which lasted until 1840. It was when English economist Arnold Toynbee first coined the term. The industrialization revolution gradually spread to other countries, including the United States, until it ended in the 1880s.

This economic upheaval resulted in a favorable shift in the market, with robots taking over human abilities. It made manufacturing processes more efficient and faster. Industries began mass production of personal and commercial goods with the introduction of textiles and metals. As manufacturing expanded, new sectors emerged, such as transportation and communications.

Industrialization _Effects

You are free to use this image on your website, templates, etc, Please provide us with an attribution linkHow to Provide Attribution?Article Link to be Hyperlinked
For eg:
Source: Industrialization (wallstreetmojo.com)

Events like post-Civil War, Great Depression, and World War II were primarily responsible for industrialization in the United States. The country had enough natural resources, which were transformed into energy to boost its economic output. For example, the nation harnessed its flowing rivers to generate electricity, immense timber resources to construct houses, furniture and factories, and iron and steel supplies to develop advanced machinery.

This transformation leading to proper utilization of available resources for mass production indicated the industrialization revolution in America. It subsequently resulted in economic development, labor specialization, urbanization, financial well-being, and wealth creation.

Characteristics-Industrialization

You are free to use this image on your website, templates, etc, Please provide us with an attribution linkHow to Provide Attribution?Article Link to be Hyperlinked
For eg:
Source: Industrialization (wallstreetmojo.com)

The improved manufacturing of metal, chemicals, electricity, and automobiles sparked a second industrial revolution in the 19th and 20th centuries. This phase focused on assembly lines and economies of scaleEconomies Of ScaleEconomies of scale are the cost advantage a business achieves due to large-scale production and higher efficiency. read more and utilized steam and water power to accelerate mass production. Industrialization is still taking place in emerging economies, particularly in Asia and Africa.

Industrialization Examples

Let us consider the following industrialization examples to understand the concept better:

Example #1

Carl had a garden on his residential property, which covered a large area. Opposite his property, there was a shopping complex, where visitors had trouble finding parking for their vehicles. Realizing the situation, he discovered a profitable way to use that portion of his property.

Carl demolished the garden to construct a parking lot, which solved the parking problem and allowed him to earn money. It is how the concept of industrialization works. While ensuring the economic progress of a nation, it ignores factors like environmental destruction aside.

Example #2

While the first industrial revolution witnessed the invention and use of the steam engine, subsequent revolutions saw the advent of science and technology in mass production. A fourth industrialization revolution is already in motion to transform human society using new forms of technology, such as Artificial Intelligence (AI) and the Internet of Things (IoT). Unlike human-machine interaction, these technologies will make the communication between connected devices to accomplish any task smarter and faster.

Industrialization Of Agriculture

The industrialization of agriculture laid the groundwork for the industrial revolution, which continues to impact society in various ways. In the early 1900s, agriculture provided a living for more than half of the population in the United States. Farmers were part of rural civilization. They had farms that produced different crops and a diverse range of animal species around. As a result, they were able to make a living from whatever resources were available.

Agriculture Industrialization

You are free to use this image on your website, templates, etc, Please provide us with an attribution linkHow to Provide Attribution?Article Link to be Hyperlinked
For eg:
Source: Industrialization (wallstreetmojo.com)

Humans and animals contributed to agricultural activities. Despite the low productivity, people had lower expectations. This cycle continued until technological breakthroughs happened. As a result, skilled farmers acquired specialized skills, making agriculture the most efficient occupation globally.

Farmers began to take on specialized tasks based on their knowledge and abilities, which aided food production. For example, selective breeding allowed the segmentation of animals based on activities and outcomes. Using machinery, this specialized group of farmers improved the efficiency of the agricultural process, from sowing seeds to feeding animals.

The introduction of chemical fertilizers and pesticides in the early 1900s was a turning point in the industrialization of agriculture, especially crop production.

Frequently Asked Questions (FAQs)

What is Industrialization?

Industrialization is the transition from a manually driven economy to a machine-driven economy. It entails a gradual shift from agricultural to a mass production system, thus promoting social, cultural, and economic change.

When did Industrialization start?

The first industrial revolution extended from the mid-18th to early 19th century in Western Europe and North America. In Britain, the transition from a farm-based economy to an industrial economy began in 1760 and continued until 1840. The revolution spread gradually to other countries, including the United States, until it ended in the 1880s.

What are the effects of Industrialization?

Industrialization results in efficient production, urbanization, economic prosperity, higher living standards, reduced socioeconomic gap, etc. However, it can sometimes lead to adverse environmental change and create a society where businesses dominate the working class.

This has been a guide to What is Industrialization its Definition. Here we discuss the history of industrialization and agriculture, along with revolutions and examples. You may also have a look at the following articles to learn more –

Reader Interactions

Leave a Reply

Your email address will not be published. Required fields are marked *