The question of why it didn't happen in the Netherlands is interesting. At one point I thought it was because the Netherlands lacked natural resources like coal and rivers. But it turns out they were already out of contention by the time the Industrial Revolution started. The Netherlands were prosperous in 1650 but a wreck by 1750. The main reason seems to have been high taxes, driven by the (ultimately impossible) goal of maintaining military parity with England and France, which had much larger populations.
It was unique to Britain for reasons having to do with coal and trade with the colonies, but the bottom line is only when you have cheap energy and expensive labour does it make sense to invest in machinery.
Only under those circumstances is it economical.
Even today companies in China who have tried to use more advanced machines to replace workers have found out it is less profitable. There is nothing magic about machines, they have to be more profitable then the alternative. And when labour is cheaper, you just use human labour, what ever is cheapest and works.
For those who prefer to read: http://www.voxeu.org/index.php?q=node/3570
Also, humans only compete with machines in a few types of work. For example, you could not use human power to drive most of the things we drive with engines: cars, trains, ships, planes, etc.
True, but not relevant to the initial, successful commercialisation of the technology. The mobile power plants are a whole step beyond the "lets mechanize labour".
Newcomen engine: 1712, Stephenson's Rocket 1829.
Case in point: New York was founded as New Amsterdam before the Brits took over. Wall Street is named such because it's where the original Dutch wall stood.
A bit sobering for us folks who think Haskell/Clojure/Insert-high-level-language-here is going to change the world. Not that these tools aren't valuable, as they increase productivity (which is kind of a big deal when good engineers cost $100k a year), but on the flip side, it was then as true then as it is true now that you just had to do the grunt work of experimenting with your product.