Industrialization results in a wider gap between the rich and poor due to a division of labor and capital. Those who own capital tend to accumulate excessive profits derived from their economic activities, resulting in a higher disparity of income and wealth.
Rockefeller, Cornelius Vanderbilt, Henry Ford, and Andrew Carnegie would by today's standards be measured in the hundreds of billions of dollars — far more than tech giants like Elon Musk, Bill Gates, Mark Zuckerberg, and even Jeff Bezos, the wealthiest individual in the world as of 2019.
The Industrial Revolution shifted societies from an agrarian economy to a manufacturing economy where products were no longer made solely by hand but by machines. This led to increased production and efficiency, lower prices, more goods, improved wages, and migration from rural areas to urban areas.
Innovation during the Industrial Revolution meant food, clothes, and other goods could be produced faster and better, increasing productivity and enriching the world. But some were left behind. The historic economic boom in the 1700s and 1800s also meant a bigger gap between rich and poor.
Societies with pronounced economic inequality suffer from lower long-term GDP growth rates, higher crime rates, poorer public health, increased political inequality, and lower average education levels.
A major cause of economic inequality within modern economies is the determination of wages by the capitalist market. In the capitalist market, the wages for jobs are set by supply and demand. If there are many workers willing to do a job for a great amount of time, there is a high supply of labor for that job.
The bourgeoisie were the owners of the factories and businesses that drove industrialization, and they were the wealthiest and most powerful members of the middle class.
The middle and upper classes benefited immediately from the Industrial Revolution. For workers, it took much longer. However during the 1800s, workers formed labor unions and gained higher wages and better working conditions. As a result, they began to see the benefits of the Industrial Revolution as well.
Britain gained dominance in the trade with India, and largely dominated the highly lucrative slave, sugar, and commercial trades originating in West Africa and the West Indies. Exports soared from £6.5 million in 1700, to £14.7 million in 1760 and £43.2 million in 1800.
The Industrial Revolution brought about many changes to how people worked, which impacted how those same people lived. More and more people moved away from rural areas to the cities in search of work, and the lack of legal protections meant many people lived in poverty and filth.
While the standard of living was improved for the middle and upper classes, it may have worsened for the lower and impoverished classes. Many people in the upper classes benefited during this time, however, the majority of people that were being affected by industrialization were the people in poverty and immigrants.
Reasons for the wealth gap
To discover why this gap emerged, the researchers broke wealth down into three key drivers: differences in saving rates; wages; and capital gains rates. During the decades surveyed, the research showed that house prices had gone up dramatically in both regions, as had financial asset prices.
During the 1920s, there was a pronounced shift in wealth and income toward the very rich. Between 1919 and 1929, the share of income received by the wealthiest one percent of Americans rose from 12 percent to 19 percent, while the share received by the richest five percent jumped from 24 percent to 34 percent.
During industrialization the classes of people were affected differently. With the rise of industrialization, the majority of upper and middle class workers were well off and able to have jobs in management, where they had more structure to their work week, hours they worked, and got paid more.
The old aristocratic upper classes continued to exist as they had before industrialization, but they weren't as secure in their position. The newly rich business families of the bourgeoisie gained wealth and power from industrial growth in areas like manufacturing, banking, and trade.
The Industrial Revolution brought great riches to most of the entrepreneurs who helped set it in motion. For the millions of workers who crowded into the new factories, however, the industrial age brought poverty and harsh living conditions.
A group that benefited the most in short term from the Industrial Revolution were the Factory Owners of the growing middle class. They were part of the group of people who were making most of the new money brought in by the industrial revolution.
Great Britain, and England in particular, became one of the most prosperous economic regions in the world between the late 1600s and early 1800s as a result of being the birthplace of the industrial revolution that began in the mid-eighteenth century.
By the late 1700s many people could no longer earn their living in the countryside. Increasingly, people moved from farms and villages into bigger towns and cities to find work in factories. Cities grew larger, but they were often dirty, crowded, and unhealthy. Machines greatly increased production.
The industrial revolution, as the transformation came to be known, caused a sustained rise in real income per person in England and, as its effects spread, in the rest of the Western world.
The living conditions in the cities and towns were miserable and characterized by: overcrowding, poor sanitation, spread of diseases, and pollution. As well, workers were paid low wages that barely allowed them to afford the cost of living associated with their rent and food.
Poor workers were often housed in cramped, grossly inadequate quarters. Working conditions were difficult and exposed employees to many risks and dangers, including cramped work areas with poor ventilation, trauma from machinery, toxic exposures to heavy metals, dust, and solvents.
Despite all these ills, the Industrial Revolution had positive effects, such as creating economic growth and making goods more available. It also helped lead to the rise of a prosperous middle class that grabbed some of the economic power once held by aristocrats, and led to the rise of specialized jobs in industry.
This imbalance of wealth created an unstable economy. The excessive speculation in the late 1920's kept the stock market artificially high, but eventually lead to large market crashes. These market crashes, combined with the maldistribution of wealth, caused the American economy to capsize.
The Great Depression was partly caused by the great inequality between the rich who accounted for a third of all wealth and the poor who had no savings at all. As the economy worsened many lost their fortunes, and some members of high society were forced to curb their extravagant lifestyles.