Cottage industry was often organized through the putting-out system. The two main participants in the putting-out system were the merchant capitalist and the rural worker. In this system, the merchant loaned, or “put out,” raw materials to cottage workers, who processed the raw materials in their own homes and returned the finished products to the merchant. The relative importance of earnings from the land and from industry varied greatly for handicraft workers, although industrial wages usually became more important for a given family with time.

The putting-out system grew because it had competitive advantages. Underemployed labor was abundant, and poor peasants and landless laborers would work for low wages. Because production in the countryside was unregulated, workers and merchants could change procedures and experiment as they saw fit. Because workers did not need to meet rigid guild standards, cottage industry became capable of producing many kinds of goods. Although luxury goods for the rich demanded special training, close supervision, and centralized workshops, the limited skills of rural industry proved sufficient for everyday articles.

Rural manufacturing developed most successfully in England, particularly for the spinning and weaving of woolen cloth. By 1700, English industry was generally more rural than urban and heavily reliant on the putting-out system. Most continental countries, with the exception of Flanders and the Dutch Republic, developed rural industry more slowly. The latter part of the eighteenth century witnessed a remarkable expansion of rural industry in certain densely populated regions of continental Europe (Map 17.1).