Watermills are pretty limited technology, though. It is advantageous to build them on rivers in hilly terrain, which is usually far from the seaports that are used for trade. Hilly terrain is also often agriculturally subpar, therefore you need to import food for the workers from the lowland, making the operation more expensive.

Finally, medieval watermills cannot produce heat, which is absolutely necessary for production of iron and steel. Which means that you cannot increase production of iron and steel beyond pre-modern levels, a major obstacle in development of technical civilization.

Agreed, and that is aligned with the point I'm making: bottleneck was the production, not consumption. Saying that increased consumption of freed slaves would somehow pull you out of pre-industrial age (the comment I was replying to) is just bonkers.

The increased production was indeed a result of centuries of incremental improvements. You're right to point out that some of them were not about energy, but I would argue that all of the big ones were.

Slaters mill put hydropower to work and even though watermills were medieval, the machines that poured that energy into cotton weren't. Same with the windmills during the Dutch Golden Age which I mentioned above. Increased trade happened through massive wind-powered ships, not slave galleys. (Though the Smith pin factory unlike the Slaters mill is not a real factory but a criticized thought experiment, I wouldn't consider it too influential)

But yes, indeed the steam appeared at the right time, only when there was enough technology to put it to use down the line.