The ground had been prepared for the Industrial Revolution in England over a long period. During the Crusades (12th through 13th century), trade routes were opened to faraway lands and a merchant class developed. In the 17th century, overseas trade increased greatly as a result of voyages of exploration and colonization of the Americas. Merchants grew prosperous, and a large middle class developed that wanted and could afford a higher standard of living.

England excelled in the making of woolen and cotton cloth. The new demand at home as well as in the colonies caused steady growth of English textile manufacturing. The method of manufacture on the eve of the Industrial Revolution was the cottage, domestic, or putting-out, system . Merchants bought raw wool or cotton and “put it out” in the cottages of workers who spun it into thread and wove it into cloth. Each process required a different set of laborers, who did the work on their own spinning wheels or hand looms.

With the decline of feudalism and the growth of the cottage system of manufacturing, small-scale farming declined in importance. Enclosure Acts made it possible for the wealthy to buy up scattered strips of land formerly farmed by villagers and to consolidate them into large holdings. Many villagers had to turn to the cities to seek work.

By the middle of the 18th century the cottage system was beginning to disappear as a result of a series of important inventions. Hand equipment could not compete with the costly new machines, which were power-operated and had to be installed in large buildings, called factories. Spinners and weavers were hired to work in factories instead of at home. The economic system of capitalism was thus developing, with the means of production owned by persons who hired workers.