<P> The defining characteristics of the factory system are: </P> <Ul> <Li> The factory system is considered a capitalist form of production . The operative labor generally does not own a significant share of the enterprise . The capitalist owners provide all machinery, buildings, management and administration, raw or semi-finished materials and are responsible for the sale of all production, as well as any resulting losses . </Li> <Li> Use of Unskilled labor--Before the factory some systems had many products such as shoes and muskets were made by skilled craftsmen who usually custom - made an entire article . In contrast, factories practiced division of labor, in which most workers were either low skilled laborers who tended or operated machinery, or unskilled laborers who moved materials, semi-finished and finished goods . There were a few skilled mechanics . Division of labor was also practiced by the putting out system in which, for example, pieces of leather were cut off - site and brought to a central shop to be made into shoes or other articles . </Li> <Li> Economies of scale--Factories produced products on a much larger scale than the putting out or crafts systems . Because factories could oversupply local markets, access to transportation was important so that goods could be widely distributed . Factories used far less manpower per unit of production and therefore lowered product cost . </Li> <Li> Location--Before the widespread use of steam engines and railroads, most factories were located at water power sites and near water transportation . Railroads became widespread (itself a consequence of steam power becoming more efficient and affordable), so factories could be located away from water power sites but nearer railroads . </Li> <Li> Centralization--The cost and complexity of machinery, especially that powered by water or steam, was more than cottage industry workers could afford or had the skills to maintain . The exception was the sewing machine, which allowed putting out of sewing to continue for decades after the rise of factories . Home spinning and weaving were displaced in the years following the introduction of factory production, especially as distribution became easier . </Li> </Ul> <Li> The factory system is considered a capitalist form of production . The operative labor generally does not own a significant share of the enterprise . The capitalist owners provide all machinery, buildings, management and administration, raw or semi-finished materials and are responsible for the sale of all production, as well as any resulting losses . </Li> <Li> Use of Unskilled labor--Before the factory some systems had many products such as shoes and muskets were made by skilled craftsmen who usually custom - made an entire article . In contrast, factories practiced division of labor, in which most workers were either low skilled laborers who tended or operated machinery, or unskilled laborers who moved materials, semi-finished and finished goods . There were a few skilled mechanics . Division of labor was also practiced by the putting out system in which, for example, pieces of leather were cut off - site and brought to a central shop to be made into shoes or other articles . </Li>

What continued to make the factory system profitable in america in the late 1800s