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As they were water powered, the first mills were constructed in rural locations by streams or rivers. Workers villages were created around them, such as New Lanark Mills in Scotland. These spinning mills resulted in the decline of the domestic system, in which spinning with old slow equipment was undertaken in rural cottages.

The steam engine was invented and became a power supply that soon surpassed waterfalls and horsepower. The first practicable steam engine was invented by Thomas Newcomen, and was used for pumping water out of mines. A much more powerful steam engine was invented by James Watt; it had a reciprocating engine capable of powering machinery. The first steam-driven textile mills began to appear in the last quarter of the 18th century, and this transformed the industrial revolution into an urban phenomenon, greatly contributing to the appearance and rapid growth of industrial towns.

The progress of the textile trade soon outstripped the original supplies of raw materials. By the turn of the 19th century, imported American cotton had replaced wool in the North West of England, though wool remained the chief textile in Yorkshire. Textiles have been identified as the catalyst in technological change in this period. The application of steam power stimulated the demand for coal; the demand for machinery and rails stimulated the iron industry; and the demand for transportation to move raw material in and finished products out stimulated the growth of the canal system, and (after 1830) the railway system.

Such an unprecedented degree of economic growth was not sustained by domestic demand alone. The application of technology and the factory system created such levels of mass production and cost efficiency that enabled British manufacturers to export inexpensive cloth and other items worldwide.

Walt Rostow has posited the 1790s as the “take-off” period for the industrial revolution. This means that a process previously responding to domestic and other external stimuli began to feed upon itself, and became an unstoppable and irreversible process of sustained industrial and technological expansion.

In the late 18th century and early 19th century a series of technological advances led to the Industrial Revolution. Britain’s position as the world’s pre-eminent trader helped fund research and experimentation. The nation also had some of the world’s greatest reserves of coal, the main fuel of the new revolution.

It was also fuelled by a rejection of mercantilism in favour of the predominance of Adam Smith‘s capitalism. The fight against Mercantilism was led by a number of liberal thinkers, such as Richard CobdenJoseph HumeFrancis Place and John Roebuck.