In many respects, the industrialisation of today’s Czech Republic, the historic Habsburg dominions of Bohemia and Moravia along with part of Silesia, followed a typical trajectory similar to that in Great Britain: the flourishing agricultural sector produced surpluses that were used to build factories, and population growth provided the necessary labour force. However, one notable difference was the strong influence of the nobility which was characteristic of the economy and society of the entire Habsburg Empire. In Bohemia and Moravia, the noble landowners not only modernised agricultural production but also established a considerable food industry, in particular the manufacture of sugar from beet and a brewing industry. They also invested in the textile, mining and iron industries, which were among the earliest industries to develop.
Mechanisation commenced in 1797, when Johann Josef Leitenberger commissioned the first water-powered, cotton spinning machine in Verneřice (formerly Wernstädt). The first mechanical loom followed in Varnsdorf in 1801, with the first steam engines appearing in Bohemia and Moravia just a few years later. Textile production flourished particularly in Brno (German: Brünn), which was considered the "Moravian Manchester". Once the machine tool industry became established there, the city developed into one of the empire’s most important industrial centres.
Mines and iron works were also established early on to exploit the rich deposits of coal and iron ore: centred in Bohemia on the cities of Liberec (Reichenberg) and Pilsen, in Moravia primarily in Vitkovice, where Archbishop Rudolf of Olomouc founded a steel works. The Viennese rail expert Franz Xaver Riepel built a British puddling furnace there in 1830 to manufacture high-strength iron for making rails and other products. The chemical industry also flourished in the first quarter of the century, particularly thanks to the initiative of Bohemian entrepreneur Johann David Starck. By contrast, machine-tool manufacturing in the Pilsen region was launched by the investment of a noble: Ernst Prince of Waldstein-Wartenburg founded a factory there which Emil Škoda later developed into one of Europe’s largest heavy-industry enterprises under his own name.
By the middle of the 19th century, industrialisation was firmly established: new railways linked the centres of Bohemia and Moravia with Vienna, traffic on the Elbe River grew and exports to Austria, Germany and the less-industrialised neighbouring countries to the east and southeast boomed. Czechia’s regions had achieved a level of industrialisation second to none in central Europe and held a leading position within the Habsburg Empire.
However, the social consequences were dramatic. The mechanisation of textile manufacture alone put hundreds of thousands of cottage workers out of work, and Inner Bohemia remained largely agrarian for a long time. As the population was growing faster than the expanding industries and rural poverty drove many people to the urban centres, factory owners could get away with paying what was barely a living wage. Thus, poverty-stricken ghettos inhabited by a proletariat comprising industrial workers, impoverished tradesmen, carters and servants. At the same time, national conflicts became more acute: the influx of Czech-speaking rural workers from Inner Bohemia transformed the former German-dominated centres such as Prague and Brno into Czech cities. And among the Czech middle classes, modernisation and economic success fuelled a national consciousness and a desire for freedom.
Industrialisation accelerated in the second half of the century as the strong agricultural sector made more and more capital available. In addition to cooperatives, new banks were founded, primarily in Prague. A securities exchange was established in 1871, a commodities exchange followed in 1887, and the city became a major economic centre. The first automobile built during the reign of the K.u.K. (imperial and royal) monarchy was in 1888 in the Moravian town of Adamov (Adamsthal). 1895 saw the founding of the motorcycle and automobile manufacturer Laurin & Klement, which merged with the Škoda group following the First World War. Toward the end of the century, industrialisation finally reached the rural parts of Bohemia as well.