The novel is set in the same time place that it was written – the mid-1800s in England. Because this was the time of Queen Victoria, this period is usually called the Victorian era. We tend to think of Victorian England as stuffy, prudish, and way too uptight about sex. Though the English might have been incredibly conservative in their personal lives in this time, the nation was going through radical changes in other areas.
Probably, the biggest change going on during the Victorian era was the beginning of modern industrial capitalism. Goods began to be made by semi-unskilled workers in huge factories, rather than by specially trained artisans and craftsmen in small workshops. At the same time, companies were finally legally allowed to become corporations and issue stock. This meant that instead of being owned by an individual or a small group of partners, businesses were owned by hundreds, maybe thousands of stockholders. This definitely changed business in a major way. Before, if a company went down, the person or small group that owned it really suffered. Now, though, the losses where spread among tons of people.
Yes, England was fast becoming a financial superpower. Capitalism was the toast of the town. However, a lot of people were really suffering as the result of the unchecked spread of capitalism. There were almost no government protections for workers. Factory owners took advantage of the poor and even children for their personal gain.
Since capitalism – an economic system of production and ownership – was working so well for business, there were some who wanted to use its methods of statistical analysis for making government policy as well. This was scary to others, who could see that if government started using only economics to make laws, that would mean that government would no longer rely on Judeo-Christian morality and philosophy. So, these people tended to cling even more strongly to social and moral repression, prudishness, and the whole uptightness enchilada.
The fictional city of Coketown is a stand-in for real life industrial mill towns. Coketown was inspired by places like Preston, a town Dickens visited right before writing the novel. Coketown is a hellish place where every brick building looks like every other brick building. As the narrator points out, the library could be the bank, the bank could be the school, and so on. The town has been built to be as economically logical as possible, so there's no need for creativity in its architecture.
To add to Coketown's overall grimness, its blocky uniform buildings are covered with soot. This comes from the coal that is burned to power the factories. None of this seems to bother the mill owners. The polluted air is a point of pride for them. Maybe, that's why they call the place Coketown – "coke" is coal distilled into its fuel form. To some, the black residue that coats the town may symbolize productivity and industry. To others, it may just be downright gross and depressing.
At the same time, some of the descriptions of Coketown call its factories "fairy palaces." The machinery of the mills is transformed into "elephants," making this place of hard facts and hard lives into some kind of magical wonderland. You could see this as a demonstration of the kind of escape from reality that the imagination can provide (like the novel keeps calling for). Of course, you could also see it is as covering up something dangerous and damaging with a soothing fiction
The novel sets up a general comparison of three different kinds of home life – the rich middle-class households of the Bounderbys and the Gradgrinds, the poor home of the Blackpools, and the nomadic community of Sleary's circus.
The Bounderby and Gradgrind families are completely repressed and cold. All the natural love between parents and children is either forcibly tamped down or thrown away for financial reasons. And don't even get us started on the total dysfunction between husbands and wives.
The Blackpools are another place of domestic horror. Poor Stephen is at the mercy of his alcoholic wife. Of course, there is still the possibility of romantic love here. Clearly at some point before she became a monster, Stephen loved his wife enough to marry her. Also, he is deeply committed to Rachael. In a way, though, this glimmer of warmth only makes the whole setting more depressing. When good hearted Stephen dies senselessly, we see that any hope of love was doomed to fail.
In a move that must have been kind of surprising for his nineteenth century England, Dickens makes the circus people be the ones who have the most idyllic kind of family system. Here we see the most loyal and emotionally connected bonds of kinship (everybody sing, "They are fa-mi-ly, they've got all their sisters with… them." OK, stop singing). The performers are always described as a group of mothers and children, wives and husbands, in various states of being dressed or undressed, and constantly taking care of each other's kids. Sleary's is the only place where people feel free to express normal emotions – they cry and hug Sissy, they are angry with Bounderby, they feel pity for Tom, and they are loyal to each other.