How did the rise of the English novel in the 18th century come about?

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The rise of the English novel in the 18th century came about with the decline in poetry (or, at least, the decline in the long narrative poem), the rise of the individual (decline of class-ism), improvements in the publication process, and a demand for romance by the public.

The early pre-Romantic poets of this time shifted their language and style to appeal to the common man, incorporating prose style vernacular, paving the way for prose to surpass poetry as the dominant art form by the end of the century.  Also, the novel was able to absord and synthesize all other forms of writing: poetry, letters, journals/diaries, and essays, making it a superior platform.  According to Holman and Harmon's Handbook to Literature:

The English novel is essentially an eighteenth-century product...The narrative interest developed in the stories of Charlegmagne and Arthur, the various romantic cycles, the fabliaux; the descriptive values and appreciation of nature found in the pastorals; the historical interest of diaries and journals; the use of suspense in tales and Medieval romances--all of these had to be familiar and understood before writers could evolve the novel...

The introduction of movable type (printing press) allowed for the novel to be published and read in greater numbers.  With the rise of periodicals (newspapers, pamphlets), the novel also could be serialized.  Do not discount the importance of technology in the novel's popularity in Europe.

The popularity of early novels such as Pilgrim's Progress (1678),  Robinson Crusoe (1719) and Gulliver's Travels (1726), led to the rise of Samuel Richardson's first "fully realized novel" Clarissa (1747).  Later, the period's two greatest novels Tom Jones (1751) by Henry Fielding and Tristam Shandy by Laurence Stern (1760) took the novel to the next level.  Gone were the public and nationalistic values of the oral culture of poetry.  The novel supplanted these with a private author whose fixed point-of-view and focus on characterization championed the individual freedoms that would later gain traction in the French and American Revolutions, issuing in the height of democracy and the Romantic Period.