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Adam Smith was the father of capitalism, the theory that individuals should own the means of production and government should not become involved. It was because of his thinking that private business enterprises were allowed to develop unhindered with their sole motive being profit.
Smith was the author of An Inquiry into the Causes of the Wealth of Nations. He opposed the old theory of Mercantilism and suggested private ownership of enterprise instead. His argument was that government should only provide those services which could not be offered by private enterprise for profit, primarily national defense and public services such as police protection and water and sewer. He illustrated the operation of the factory system by describing a pin factory:
One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head….and the important business of making a pin in this manner, divided into about eighteen distinct operations
Adam Smith was important to the Industrial Revolution because he was the most important thinker behind the idea of laissez-faire economics. In other words, he wanted the government to stop trying to tell businesses what to do. Instead, he wanted the "invisible hand" of competition and consumer choice to tell businesses what to do.
Smith was also an advocate of the idea of division of labor. In a system with division of labor, each worker does only one task or a few tasks in the process of making a larger thing. Instead of having one worker make a whole shoe, for example, you have one worker just cut out the pieces all day long. Or you have one just sew the tongues on the shoes. This means that the person only has to master one skill and things can be done more efficiently.
These two ideas were both very important for the Industrial Revolution. The first of them encouraged governments to let businesses do what they wanted instead of telling them what to do. The second helped businesses understand the best way to get more efficiency out of their workers.
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