ABSTRACT
Before the industrial changes of the eighteenth century an extension of production in the consumer goods industries did not involve much investment demand on the capital goods industries. Equipment was simple, of the size of handicraft looms and spinning wheels in the main. The numbers of workers had to be increased with the number of their tools. But not many specialized buildings or massive plant were needed. Expansion of output therefore involved little investment problem in industry in the modern sense and no increases in productivity occurred with the expansion of capacity in traditional, or very slowly changing technology. When expansion in textiles meant also cumulative innovations in the techniques of production — culminating in the rise of the factory system — it did create large demands directly and indirectly on these capital goods industries. The capital goods industries have special problems. The rhythms of their expansion and depression are more violent. The problems of capital investment for them, even the problems of locating and marketing, are all very much influenced by this distinction. Evolving structural differences of this new sort lay behind the enormous increases in total production and in productivity per man which the new technology made possible.
