Manufactories: from workshop to many hands
In the Middle Ages most goods were made by craftsmen in small workshops. Their trade groups, called guilds, set rules about quality, prices and how many helpers a master could have. Guilds protected members but also stopped growth.
Putting-out system
From the 1500s, rich merchants began to give wool, cotton or leather to families in villages, who worked at home for a fee. The merchant then sold the finished goods in distant markets. He owned the materials and the market, so he held the power.
The manufactory
A manufactory (from Latin manu factum, "made by hand") brought many workers into one building under one owner. Everyone used hand tools. The key idea was division of labour: each worker did one small task again and again, got faster and made fewer mistakes.
Simple count: one craftsman makes 2 shirts a day. In a manufactory, 6 workers with 6 tasks make 36 shirts a day, that is 6 per worker. Output rises three times per worker.
- Examples: cloth, glass, paper, soap, gunpowder and ship-building yards in many countries. In the 1700s there were also manufactories in Ukrainian lands (for example cloth and glass) and in India's textile towns.
- Limits: no engines or machines yet. Power came from hands, animals, wind and water.
The early capitalist economy: capital, profit, markets
Capitalism is an economic system in which most goods are made by private owners who use capital to produce for a market and hope for profit.
Key words
- Capital: money, tools and materials used to make more money.
- Wage labour: people who own no workshop sell their working time for a wage.
- Profit: sales money minus all costs.
- Competition: owners try to sell better or cheaper than others.
Simple example
Spend 12 coins on materials and wages, sell the goods for 15 coins: profit = 15 โ 12 = 3 coins. If the owner invests the profit again, the business grows.
What helped it grow
- New trade routes and colonies (see Age of Exploration) brought spices, cotton, sugar and silver.
- Silver from the Americas increased the money in Europe, and prices rose (the price revolution).
- Banks and exchanges: money could be borrowed and moved, for example in Amsterdam.
- Joint-stock companies such as the Dutch East India Company (1602): many investors each put in a share and shared profit.
- Mercantilism: many states wanted more exports than imports, and helped trade and manufactories.
This was an early form. It was mostly merchant and manufactory capitalism. Factory capitalism with machines came with the industrial revolution.
Changes in European society
New ways of making money changed who was rich and who was poor.
- The bourgeoisie: merchants, bankers and manufactory owners in towns grew rich. They wanted a say in government and fair laws for trade.
- Wage workers: many peasants lost land or could not pay rent. In England, lords fenced off fields for sheep (enclosure). People moved to towns and sold their labour for wages.
- Nobles and church: still owned much land but slowly lost power, as money became more important than land.
- Towns grew, and so did the gap between rich merchants and poor workers.
- Ideas: people began to value education, money-making skills and private property. The Renaissance and the Reformation helped these ideas spread.
Life was not the same everywhere. In Western Europe change was faster. In parts of Eastern Europe the nobles tightened serfdom instead. In Ukrainian lands, towns and Cossack officers also took part in trade and small production.
Try it: run a toy manufactory
Try it. Make paper boats with a friend. (1) Each makes whole boats alone for 2 minutes and counts. (2) Then work as a team: one folds in half, one folds corners, one folds the brim, one decorates. Count again in 2 minutes.
- Write both counts. Which is bigger?
- Add a price: 5 coins per boat, materials 2 coins each. Profit per boat = 5 โ 2 = 3 coins.
- What happens if the team person gets bored doing only one task?
In the 3D, predict the profit for 4 workers, then slide and check. (Answer: 4 x 6 = 24 coins.)
Key formulas and definitions
- Capital = money, tools and materials used to make more money
- Profit = sales โ costs
- Manufactory = many workers, one roof, hand tools, division of labour
- Output per worker rose (here: 2 shirts alone to 6 shirts in a team)
- Putting-out: merchant owns materials; home workers are paid by the piece
- Bourgeoisie = merchants, bankers and owners; wage worker = sells labour for pay
Worked examples
1. One craftsman makes 2 shirts a day. In a manufactory, 5 workers make 6 shirts each per day. How many shirts per day, and how many more than 5 lone craftsmen?
Team: 5 x 6 = 30 shirts. Five lone craftsmen: 5 x 2 = 10 shirts. Difference = 30 โ 10 = 20 more shirts a day.
2. An owner spends 40 coins on cloth and wages and sells all goods for 55 coins. What is the profit?
Profit = sales โ costs = 55 โ 40 = 15 coins.
3. Explain how silver from the Americas could make prices rise in Europe.
More silver coins came into Europe, but the amount of goods grew slowly. More money chasing about the same goods makes sellers ask for higher prices.
Common mistakes
- Thinking a manufactory had machines. It used hand tools; machines belong to the factory age.
- Mixing up profit with sales. Profit is what is left after costs.
- Saying capitalism began suddenly in one year. It grew slowly over centuries.
- Believing everyone got richer. Many peasants lost land and had to work for low wages.