The Institutional Secret Behind the Industrial Revolution’s Explosive Growth

Why Technology Alone Can’t Explain One of History’s Greatest Economic Transformations

When we think about the Industrial Revolution, images of steam engines, factories, and inventors often come to mind. Yet, the technological innovations were only part of the story. The political and economic institutions in England after the Glorious Revolution created an environment that nurtured innovation and investment. Secure property rights, an impartial legal system, and political checks and balances gave entrepreneurs confidence to develop new technologies and expand markets.

Importantly, innovation was inclusive. Inventors came from diverse backgrounds, not just the aristocracy. The patent system protected their ideas, allowing them to reap rewards and reinvest. This inclusiveness unlocked human potential and fueled rapid economic growth.

The synergy between political stability and economic freedom created a virtuous cycle of innovation and prosperity. This institutional foundation explains why the Industrial Revolution began in England rather than elsewhere, despite similar technological knowledge existing globally.

For developing countries today, the lesson is clear: fostering inclusive institutions is as important as investing in technology. Without political and economic inclusiveness, innovation may be stifled, and growth limited.