>> was seriously considered as a major plot at some point
So the very out-of-universe answer is: Because Tolkien decided against it. So the better question, and also the one we can use some source material to answer, would be why Tolkien decided against it and wrote a classic fantasy story.
Because he was a Professor of Anglo-Saxon and not a historian of the 18th/19th centuries.
There's no Industrial Revolution in Anglo-Saxon mythology. Including it would have jarred in a dyschronistic way.
More than that, fantasy is based on nostalgia for heroic simplicity and straightforwardness, with a dash of magic to instil some child-like wonder.
The Industrial Revolution operated on a completely different narrative and moral basis. It was more about colonisation at home, using mechanisation to organise forced labour.
It's hard to be a brave Romantic hero in that kind of setting.
Haven't read the notes, but shouldn't Mordor, being an autocracy without a recognizeable middle class and a very lean political system focused on war, have very cheap labor?
Very cheap, but probably also quite unsophisticated. They can make basic stuff, but they also don't need to produce finer things. The Orcs make up for it with their numbers, and Sauron cares about power, not about wealth.
Right but I mean, that's not exactly the right conditions for industrialization. Who designs and builds the machines? Who does the research? Sauron solo?
Yes - Sauron is one of the remarkably few people in Middle-Earth who have not lost knowledge over time - the others are majorly proscribed from such actions (Wizards, including Saruman before he turned), or crushed into depression by what they lived through - depopulated Lindon where small remnants mostly builds ships for further movement west, the small settlement of Rivendell which doesn't have enough resources to spend on industrialization, the elves of lothlorien are in similar condition to Lindon, Arnor is so ruined that AFAIK there are no more cities that aren't ruins, and Dwarves are too harassed to expand much, though they have major win at Lone Mountain (but haven't recovered Moria).
Generally in the Middle-Earth, the parts we see, are post-apocalyptic environment constantly wrecked by wars and depopulated so hard most people are too busy raising crops to survive.
