The term signifies a phase of economic development that precedes and lays the groundwork for full-scale industrialization. It is characterized by a significant increase in rural manufacturing, often organized under a putting-out system. In this system, merchants provide raw materials to rural households, who then process them into finished goods. These goods are subsequently collected by the merchants for sale in wider markets. A common example involves textile production in 18th-century Europe, where families supplemented their agricultural income by spinning yarn or weaving cloth within their homes.
This stage is important because it fosters the development of skills and infrastructure that prove vital for later industrial growth. It encourages the accumulation of capital, the expansion of market networks, and the emergence of a wage-labor force, even while retaining a predominantly agricultural base. Moreover, it often leads to demographic shifts, as populations concentrate in areas where manufacturing opportunities are available. Historically, this process allowed for the gradual shift from a feudal, agrarian economy to a more commercially driven system, thereby setting the stage for the technological innovations and factory-based production characteristic of industrialization.
