The Factory System. While before the Industrial Revolution much work was done at home, the use of specialized machinery led to the concentration of workers at one site and also imposed geographical constraints, primarily the need for a nearby power source, either water or coal. Thus, factories clustered near rivers or coal deposits, and industrialization was more regional than national. This new sort of production permitted increased division of labor and more efficient and more hierarchical management, thereby lowering manufacturing costs. As a result, more and more people could afford manufactured goods, and the demand for them increased.

Iron and Coal. Improvements in iron production made the rapid mechanization of industry feasible, and as in the textile industry, Great Britain led the way. The key to British predominance in iron making stemmed from their use of...