The Rise of Industrialization

The ideas of Smith and the physiocrats provided the ideological and intellectual background for the Industrial Revolution—the material side of the sweeping transformations in society and the world that characterized the 19th century. The industrialization process introduced mechanical power to replace human and animal power in the production of goods and services. Production became more specialized and concentrated in larger units, called factories. The application of mechanical power to production helped increase worker efficiency, which made goods abundant and cheap.

However, the development of industrial capitalism had serious human costs. The early days of the Industrial Revolution were marred by appalling conditions for large numbers of workers, especially in England. Abusive child labor, long working hours, and dangerous and unhealthy workplaces were common. These conditions led German political philosopher Karl Marx to produce his massive indictment of the capitalistic system, Das Kapital (3 volumes, 1867-1894). Marx's work struck at the fundamental principle of capitalism–private ownership of the means of production. Marx believed that land and capital should be owned by society as a whole and that the products of the system should be distributed according to need.

In the late 19th century, especially in the United States, the modern corporation began to emerge as the dominant form of business organization, and capitalism became the dominant economic system. The tendency toward corporate control of manufacturing led to many attempts to create combines, monopolies, or trusts that could control an entire industry. Eventually, the public outcry against such practices was great enough in the United States to lead the Congress of the United States to pass antitrust legislation. This legislation attempted to make the pursuit of monopoly by business illegal, trying to enforce at least a bare minimum of competition in industry and commerce.