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Just as an example off the top of my head, in America there was enough wood that it fueled locomotives… a quick search tells me they were in use until late 19th c. and didn't fully die until 20th c. (!)
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And there are plenty of mills other than textile mills. 19th c. America had a lot of sawmills for instance. If Britain hadn't industrialized, why wouldn't it have happened in US with wood fuel and sawmills, or some other industry?
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Somewhat surprised that sawmills outnumber gristmills in these surveys. Grinding grain into flour is always the canonical example given of the use of water or wind power, but perhaps sawing lumber was even more important?
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Arkwright's power spinning machine was called the Water Frame, reflecting its expected power source. A lot of mechanization could have been done entirely with waterpower, but limits would have been reached when appropriate sites ran out. In that alternative history, the owners
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I found the coal part of the essay compelling, but not the textiles part. It seems unlikely to me that this was the only possible technology (asides from pumping water out of mines) that early steam engines could help power.
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