Before the technological change of the eighteenth and the nineteenth centuries the industrial organization quite simple as the industrial operations took place on a very small scale. Most of the industrial units worked in workshops in which the master craftsmen worked along the journeymen and apprentices, as in the Middle Ages. Even the system of craft guilds was in vogue throughout Europe.
For example, in France and Germany, no artisan could practice his trade unless he was a member of the appropriate craft guild. These craftsmen were expected to observe the code of regulation laid down by the guild. Quite often these guilds tried to behave in their self-interest and obstructed the technical progress of industry.
As a result some of the progressive traders broke away from the guild system. However, even then the worker continued to work in his little workshop or home and did not sell his goods direct to the customers. He operated through a middleman who supplied him the raw material, paid him for working it up, and marketed the finished product. Though the worker was quite dependent on these middlemen he was still his own master.
The technological changes culminating in the industrial revolution demolished the workshop production system and replaced it by large scale machinery where the workers were concentrated at one place and worked under the supervision of the employer or his agents.
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It may be noted that the factory system was not entirely unknown in the earlier period and its superiority over the workshop production was also well-known, but it could not flourish due to scarcity of the capital among the industrialists of the period and the refusal of the workmen to exchange the freedom of their home for the discipline of the factory.
But with the advent of machinery on large scale, the workmen felt that they would not be able to compete with the machine-made goods and, therefore, agreed to enter the factories.
It may be observed that the growth of the factory system was not, all smooth and sudden, it has to encounter numerous difficulties and pass through various stages. Some of the hurdles in the way of the development of the factory system were as follows:
Firstly, the people who had carried on their family occupations in their homes for a long time were not willing to give up the same. It is true that the conditions of work were not ideal at home, but it certainly ensured advantages of the pooling of the family earnings because all the members of the family worked together.
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The contemporary records show that initially lot of difficulty was encountered by the factory owners in procuring necessary workers. Some of the other factors which made the workers reluctant to join the factories were the difficulty of procuring accommodation near the factory, long and irregular working hours, and lack of necessary taste in the work available.
Secondly, even the employers were reluctant to organize the factory system because this constituted a radical change from the system to which they were accustomed. Further, the factory system demanded huge capital for the purchase of machinery, coal, light, power and raw material in large quantity.
The employers were not willing to take any risk and abandon the existing methods of production. It took quite some time for the employers to realize the utility of the factory system.
Thirdly, the availability of workers in abundance due to enormous growth in population also stood in the way of introduction of labour-saving machines. This increase in population was rendered possible by reduction in mortality rate, belter medical facilities, increase in marriage rates and decline in apprenticeship.
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The willingness of women and children to take up employment also contributed to the increased availability of the labour. This naturally hampered the growth of the factory system.
Fourthly, the unsatisfactory nature of the initially available machines also acted as a deterrent to the growth of factories. It was only after these machines were perfected and the process of textiles and iron were developed that the process of growth of factories received encouragement.
The discovery of the steam engine and the improvement of the means of communication provided a further impetus to the factory system.
France was particularly reluctant to replace the workshops by the factories not due co scarcity of the coal but because she preferred to specialize in trades where the manual skill of the worker counted more than the machinery.
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The manufacturer of artistic luxury goods were encouraged with a view to promote skill and taste of the French workman. France installed large scale industrial units only in metal and textile trades where largo scale production had obvious advantages.