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The major way in which Marx and Engels thought that industrialization was a positive development was in the fact that it was a development that had to happen in order for history to move on towards communism.
Marx and Engels saw history as a constant class struggle that was moving towards the inevitable creation of communism. But in order for communism to come about, there first had to be class conflict between a mass proletariat and the bourgeoisie. These classes could only come about through industrialization. As they argue in The Communist Manifesto,
...with the development of industry, the proletariat not only increases in number; it becomes concentrated in greater masses, its strength grows, and it feels that strength more.
As this happens, the proletariat will start to rebel more and more against the bourgeoisie. Eventually, this class will triumph in the conflict and a truly just society will emerge. But this cannot happen without industrialization which means that industrialization, bad as it is in the short term, is necessary for true progress.
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