I. The Origins of Sloanist Mass Production
Economies of Scale, Economies of Speed, and Push Distribution
Microeconomic Institutional Forms for Providing Stability
Mass Consumption to Absorb Surplus
State Action to Absorb Surplus: Imperialism
State Action to Absorb Surplus: Creation of New Industries
The centralization of production in the Industrial Revolution, and the concentration of machine production in large factories, resulted mainly from the need to economize on steam power. According to Lewis Mumford,
[Gigantism] was… abetted by the difficulties of economic power production with small steam engines: so the engineers tended to crowd as many productive units as possible on the same shaft, or within the range of steam pressure through pipes limited enough to avoid excessive condensation losses. The driving of the individual machines in the plant from a single shaft made it necessary to spot the machines along the shafting, without close adjustment to the topographical needs of the work itself…. 
Steam power meant that machinery had to be concentrated in one place, in order to get the maximum use out of a single prime mover. According to William Waddell and Norman Bodek the typical factory, through the early 20th century, had machines lined up in long rows, “a forest of leather belts one arising from each machine, looping around a long metal shaft running the length of the shop,” all dependent on the factory’s central power plant. 
Electrical power put an end to this imperative. The invention of the prerequisites for electrical power — the dynamo, the alternator, the storage cell, the electric motor — and the development of small-scale electrically powered production machinery suitable for the small shop and power tools suitable for household production were, in Mumford’s schema of technological history, what separated the neotechnic era from the preceding paleotechnic era — the era of coal, steam and Dark Satanic Mills.
If the paleotechnic had been a “coal-and-iron complex,” in Mumford’s terminology, the neotechic was an “electricity-and-alloy complex.”  The defining features of the neotechnic were the decentralized production made possible by electricity, and the light weight and ephemeralization (to borrow a term from Buckminster Fuller) made possible by the light metals.
Electricity made possible the use of virtually any form of energy, indirectly, as a prime mover for production: combustibles of all kinds, sun, wind, water, even temperature differentials.  As it became possible to run free-standing machines with small electric motors, rather than running them off a single drive shaft, the central rationale for the factory system disappeared.
The decentralizing potential of small-scale, electrically powered machinery was a common theme among many writers from the late 19th century on. That, and the merging of town and village it made possible, were the central themes of Kropotkin’s Fields, Factories and Workshops. With electricity “distributed in the houses for bringing into motion small motors of from one-quarter to twelve horse-power,” it was possible to produce in small workshops and even homes. Freeing machinery up from a single prime mover ended all limits on the location of machine production. The primary justification for economy of scale, as it existed in the nineteenth century — the need to economize on horsepower — vanished when the distribution of electrical power eliminated reliance on a single source of power. 
The introduction of electrical power put small-scale machine production on an equal footing with machine production in the large factory.
The introduction of the electric motor worked a transformation within the plant itself. For the electric motor created flexibility in the design of the factory: not merely could individual units be placed where they were wanted, and not merely could they be designed for the particular work needed: but the direct drive, which increased the efficiency of the motor, also made it possible to alter the layout of the plant itself as needed. The installation of motors removed the belts which cut off light and lowered efficiency, and opened the way for the rearrangement of machines in functional units without regard for the shafts and aisles of the old-fashioned factory: each unit could work at its own rate of speed, and start and stop to suit its own needs, without power losses through the operation of the plant as a whole.
…[T]he efficiency of small units worked by electric motors utilizing current either from local turbines or from a central power plant has given small-scale industry a new lease on life: on a purely technical basis it can, for the first time since the introduction of the steam engine, compete on even terms with the larger unit. Even domestic production has become possible again through the use of electricity: for if the domestic grain grinder is less efficient, from a purely mechanical standpoint, than the huge flour mills of Minneapolis, it permits a nicer timing of production to need, so that it is no longer necessary to consume bolted white flours because whole wheat flours deteriorate more quickly and spoil if they are ground too long before they are sold and used. To be efficient, the small plant need not remain in continuous operation nor need it produce gigantic quantities of foodstuffs and goods for a distant market: it can respond to local demand and supply; it can operate on an irregular basis, since the overhead for permanent staff and equipment is proportionately smaller; it can take advantage of smaller wastes of time and energy in transportation, and by face to face contact it can cut out the inevitable red-tape of even efficient large organizations. 
Mumford’s comments on flour milling also anticipated the significance of small-scale powered machinery in making possible what later became known as “lean production.”
Neotechnic methods, which could be reproduced anywhere, made possible a society where “the advantages of modern industry [would] be spread, not by transport — as in the nineteenth century — but by local development.” The spread of technical knowledge and standardized methods would make transportation far less important. 
Mumford also described, in quite Kropotkinian terms, the “marriage of town and country, of industry and agriculture,” resulting from the application of further refined neotechnic horticultural techniques and the decentralization of manufacturing in the neotechnic age. 
1. Lewis Mumford, Technics and Civilization (New York: Harcourt, Brace, and Company, 1934), p. 224.
2. William H. Waddell and Norman Bodek, Rebirth of American Industry: A Study of Lean Management (Vancouver, WA: PCS Press, 2005), pp. 119-121.
3. Mumford, Technics and Civilization, p. 110.
4. Ibid., pp. 214, 221.
5. Peter Kropotkin, Fields, Factories and Workshops: or Industry Combined with Agriculture and Brain Work with Manual Work (New York: Greenwood Press, Publishers, 1968 ), pp. 154., 179-180.
6. Mumford, Technics and Civilization, pp. 224-225.
7. Ibid., pp. 388-389.
8. Ibid., pp. 258-259.