The Industrial Revolution saw an enormous increase in the power of machinery that could be used. This meant that the machines could work faster and more efficiently to process material to the next level of completion much faster than ever before. This made it necessary to bring all the steps of production closer together, to make it physically possible to transfer goods from one step to another at the increased rate. This was done through the factory system.
Before understanding the importance and effects of this factory system on the economy, it is vital to comprehend what a factory or factory system is.
Although the earliest factories in Europe , often dealing with textiles, were called mills, the idea of the factory is prevalent during the period of rapid industrialization. Derived from the French word 'factorie' which means a shop, depot, or warehouse, a factory (Merriam – Webster) is “a building or set of buildings with facilities for manufacturing”. Indeed, the word is derived from “manufactory” – a place where things are manufactured.
According to Paul Mantoux, "The object of all industry is the production of goods, or to be more explicit, articles of consumption which are not directly provided by nature. By 'factory system' we therefore primarily mean a particular organization, a particular system of production."
In different contexts, factories had different effects on the people and places around them, but the definition was usually immutable; Karl Marx, for example, defines a factory as "a workshop in which machinery is employed".
The history or origin of factories, in the modern sense of the word, can be traced back to Venice , where the Venice Arsenal was founded in 1104. During the reign of Louis XIV, factories were incorporated in France . This factory system, unlike that in England , was bolstered completely by the state; when support from the King waned, the small-scaled factory system quickly deteriorated. This factory system was not large and did not affect the economy as significantly as England 's factories did.
England too, prior to the Industrial Revolution, contained a few factories supported by the government and associated fundamentally in the production of items such as salt, soap, mining, wire, and glass. These factories faced the same fate as the early French ones – a death when support from the State faded. This situation existed not only in England and France ; many other European countries had hosted workshops with specialized labor that eventually were shut down due to dependence on state funds and approval. Often the factories were quelled, in fear that the artisans and smaller industries would suffer due to the increase in the factories as they had done in England . It was there, however, that the promising social and political atmosphere promoted the beginnings of industry. The first modern factory is considered to be that of Matthew Boulton in Soho and was established in 1761 in Birmingham .
A purpose of the factory system was to hasten the production of goods, hence creating more goods faster. Mass production led to increased amounts of goods on the market, which in turn led to lower prices. These lower prices provided a wide availability of goods to more people, which increased the demand for them, in turn leading to more competition. Competition drove producers to make goods cheaper and better, and so the process continued in a cyclical manner. Paul Mantoux, in relation to this chain of events, said, “Obviously the consumer is now in a much more favourable position than he was before the industrial revolution took place. Goods have greatly increased in quantity, while prices have been, on the whole, considerably reduced. Many things, formerly expensive and hard to come by, are obtainable in localities and in circles where previously they were unknown. Nevertheless the optimistic view with which such a spectacle inspired the classical economist is profoundly changed when the condition of the producers is examined."
For most factories, power and therefore production capacities depended on their location and proximity to a water source.
"This had an important consequence, for it meant that no factory could be established far from a stream powerful and swift enough to set the machines in motion. For this reason it was not in towns that the mill-owners at first established their factories, but near the hills, in narrow valleys where by using dams it was easy to create an artificial waterfall. The beginnings of the modern factory system are to be found in small hamlets, far removed from these great industrial centers round which the mass of the working population has since gathered These small places were scattered along the foot of the Pennine range, on all three sides of it; on the west towards Manchester and the Irish Sea, on the south towards the Trent valley, and on the east towards the Yorkshire plain and the North Sea."
Due to its location, Southern Lancashire burgeoned into a vital district in the textile industry; it contained more than forty spinning mills by 1788. Although the textile industry was now capable of becoming completely mechanized, the old and the new ways of production were still tightly woven together, different materials and parts being created on different systems and using varying technology. For example, although Crompton's Mule had almost completely replaced the jenny, the new method of creating thread was still adapted for use in homes and cottages.
When steam power was employed, the factory system began truly began to expand from its place of origin. The new technology made it possible to drive machine presses by force of steam, making machines increasingly more powerful and efficient.