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It was much more efficient to bring workers to the machines and organize their labor collectively in factories located next to rivers and streams, the sources of power for many of these early machines. The concentration of labor in the new factories also brought the laborers and their families to live in the new towns that rapidly grew up around the factories.

The factory system was pushed to even greater heights of productivity by the invention of the steam engine, which played a major role in the Industrial Revolution . The steam engine revolutionized the production of cotton goods and caused the factory system to spread to other areas of production, thereby creating whole new industries. The steam engine secured the triumph of the Industrial Revolution. The factory system was spread to the U.S. by Samuel Slater because he came from Britain with the factory system memorized, and implemented it into industry.