Prelude to the Industrial Revolution
The rise of Capitalism
Netherlands and Antwerp
Large Trading port in the north of
Europe
 Perfectly situated for trade

Netherlands and Antwerp
Large Trading port in the north of
Europe
 Perfectly situated for trade
 Frugal people who put a high value on
saving
 Which leads to…

Banking!!!
Surplus of capital leads to banks
 Banks are able to invest in businesses
and people are able to take out loans
 Businesses can take out capital to build
themselves
 This leads to accelerated development
of business

Before we move on: Just a little
bit of British History…

Scotland and England? Together at
last?
Just a little bit of British History…

Scotland and England? Together at
last?

1706 Treaty of the Union
 Unified Scotland and England politically
○ Brings to the end centuries of fighting
What’s so great about Scotland
and England coming together?
England has great food producing
capacity
 Scotland is nothing but rocks…

 Where there are rocks…
○ There are minerals: coal and iron
Therefore…

England and Scotland are a match
made in heaven to dominate the world
 And they do.
English System 18th Century

Englishmen were becoming Capitalists
 One that invests money in a business

By the 17th Century English bankers had
developed a deposit banking service:
 They had enough money to lend out and
gain interest
 Invented a system of checking
 Bank notes were accepted as money
Why was Banking Necessary?

With the rise of capital and countries
investing cross border:
 Currency needed to be converted and
changed
 Accounts needed to be paid from long
distances
 Money needed to be stored
England

Inflation hit everywhere except England
where rising incomes rose faster than
prices
Inflation
Rising prices
 Too much money chasing too few goods
 Increase in spending which exceeds
increases in real production

England
Inflation hit everywhere except England
where rising incomes rose faster than
prices
 This lead to more investment abroad

Cottage System (Putting out
System)
Central agency contracted out work to
subcontractors who completed work in
their own facilities (usually their own
home)
 No more guilds
 Could charge whatever was market
price
 Supply and demand = more capital

Conclusion

In England the putting out (Cottage
system), extra money, banking,
colonialism, larger markets all lead to
the development of capitalism as an
economic ideology.