Lesson Three: The Effects of Classical Liberalism

Classical Liberalism Produces Wealth

Before the Industrial Revolution began in 1750, most people lived in rural communities (the countryside). Manufacturing of products occurred mostly in people's homes. This was called the domestic system. For example, people spun thread on spinning wheels or wove cloth on small looms using their own hands or feet to power these simple textile machines.  Entrepreneurs went from home to home to collect the thread and cloth. Spinners and weavers were paid small amounts for their work.

Textile manufacturing had been done this way for hundreds of years. However, the domestic system was very slow and ineffective because neither the quality of the cloth nor the hours these people worked were controlled.

 Weaver

Spinner

With the coming of the Industrial Revolution, the production of goods became industrialized. That is, manufacturing began to use first water-powered then steam-powered machines in large factories. This was called the factory system. Textile factories produced large volumes of quality cloth goods in much less time than under the old domestic system.

Manufacturing moved from the rural areas into urban centres (cities). With the use of machines in factories, manufacturing became more efficient and profitable. Those entrepreneurs who had the knowledge and money to build factories and were able to compete successfully in the market earned large amounts of wealth.

Adam Smith's economic values of classical liberalism seemed to be working quite well. Entrepreneurs were making large amounts of wealth for themselves. As long as the government stayed out of the economy, things could not have been better. Indeed, governments tended to stay out of the economy, and few laws interfered with individual rights just as people such as John Stuart Mill had argued.

Textile Factory