PROJECT OF DEVELOPMENT ECONOMICS

ROSTOW’S STAGES OF GROWTH

ROSTOW’S STAGES OF GROWTH

The Rostovian take-off model (also called "Rostow's Stages of Growth") is one of
the major historical models of economic growth. It was developed by W. W. Rostow.
The model postulates that economic modernization occurs in five basic stages, of
varying length.

1) The traditional society,

2) The preconditions to take-off,
3) The take-off,
4) The drive to maturity, and
5) The age of high mass-
consumption.

1. The Traditional Society

A traditional society has a large
proportion of the population
devoted to agriculture. The level of
technology is severely restricted or is ‘pre-Newtonian’. Examples include the
Chinese dynasties, the medieval civilizations of Europe, the Middle East and
the Mediterranean.

2. The Precondition for Take-Off

Preconditions for take-off exist when there is a more stable political nation.
There is greater exploitation of science, and rising investment in transport
and communication. Modern manufacturing appears.

3. The Take-Off

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Agriculture is commercialized, new industries appear. Unused natural

resources are exploited, savings and investment rise and steady growth is
achieved.

4. The Drive to Maturity

After a long period of growth (say 40 years), 10 to 20% of national income is
invested and output continually outstrips population growth. Goods that were
previously imported are now produced at home. There is a shift away from
heavy engineering towards more complex process. The economy can choose
to produce anything it wants even if the natural resources required are not
actually present. Although 40 to 60 years is quoted, Rostow says that this
length of time may vary.

5. The Age of High Mass-Consumption

A large number of the population has moved beyond meeting their basic
needs. Leading sectors of the economy are producing durable goods. For
example, the production of the Model T Ford signaled, the start of this
process in the USA. Increased resources are allocated to social welfare and
security.

EXPLANATION

In his view, the advanced countries had all passed the stage of take-off and had
achieved self-sustaining growth. The developing economies were either in the
"preconditions" or "traditional" stage. All that these societies had to do in order to
take-off (to reach self-sustaining growth) was to follow a certain set of rules of
development. Rostow defined take-off as a period when the degree of productive
economic activity reaches a critical level and produces changes which lead to a
massive and progressive structural transformation of the economy and society.

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The take-off stage could only be reached if three criteria were satisfied. First, the
country had to increase its investment rate, with investment amounting to no less
than 10 percent of the national income. This requirement could be satisfied either
through investment of the country's own savings or through foreign aid or foreign
investment. Second, the country had to develop one or more substantial
manufacturing sectors with a high rate of growth. Third, a political, social and
institutional framework had to exist or be created to promote the expansion of the
new modern sector.

Under this theory, economic growth was measured by a rising per capita income.
Unlike the structuralists, Rostow was not concerned whether the production was
evenly divided among all economic sectors. Thus, again unlike the structuralists,
Rostow equated economic growth with economic development. To stimulate
growth, the country had to increase savings and investment. Given the low savings
rates in developing countries, the government was responsible under this theory for
creating a class of people with a propensity to save. The government also had to
ensure that people who saved more would obtain a greater share of the national
income. Otherwise, national income would be consumed rather than invested.

It is easy to see why this model was so widely accepted. It justified massive
transfers of capital and technology from the North (industrialized countries) to the
South (developing countries). At the same time, it provided a rationale for the
massive concentrations of wealth that existed in developing countries.

EXAMPLES OF THE DIFFERENT STAGES OF THE ROSTOW MODEL

Stage 1: Traditional Society

• Primary activity, mainly subsistence agriculture
• Socially captured surplus lost on religious and military
expenditures

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AFGANISTAN NEPAL

% urban 18% 10%

per capita income (?) $160

infant mortality 163 102/1000

(Examples continued)
Stage 2: Preconditions to take-off
• Young elite and role
• Infrastructure and its role

INDIA GHANA

% urban 26% 36%

per capita income $290 $430

infant mortality 74 81/1000

Stage 3: Take-off
• Target sectors
• Channeling surplus

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• Broadening and deepening

• Skills of the workforce
• Size of the surplus and investment

SOUTH KOREA TAIWAN

% urban 74% 75%

per capita income $7,670 $8k+

infant mortality 11 5.6/1000

Stage 5: The age of high mass-consumption

• Consumer based economy
• Direction of trade flows

JAPAN USA

% urban 61% 75%

per capita income $31,450 $24,750

infant mortality 4.3 8.0/1000

Some tests for the Rostow model.

Will these countries follow the same pattern?

Oil rich Middle East

1.

SAUDI ARABIA KUWAIT

% urban 79% 100%

per capita income $7,780 $23,350

infant mortality 24 12/1000

East Asia

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HONG KONG SINGAPORE

% urban 100% 100%

per capita income $17,860 $19,310

infant mortality 4.8 4,7/1000

Self-sufficiency:

CHINA (until 1980) CUBA

% urban 28% 74%

per capita income $490 $???

infant mortality 44 9.4/1000

CRITICISM OF THE MODEL

Capital. Rostow suggests capital is needed for a country to move from its
traditional society (stage 1) to the further stages of development.

Criticism. In many developing countries within Asia and Africa there have been
large injections of cash yet much of the population are still in the traditional society
stage. Countries such as Brazil and Mexico have moved on to the Preconditions for
take off (stage 2) economically, but in doing so have incurred massive national
debts.

Growth to Self-Sustaining Economic Development. Rostow puts forward that

there is a short time span between take off (stage 2) and maturity (stage 3) when a
country becomes self-sustaining.

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Criticism. In a nut shell time spans of growth is a much more complicated picture,
simply due to the fact that developing and newly developed countries learn from
economically established countries.

Drive to Maturity. Within this stage the country is self sustaining, economic
growth is spreading and with it transport, technology systems and urbanisation
develop.

Criticism. War and economic sanctions can drive the model to a halt or even
backwards in extreme circumstances. This would be applicable to the current
political situation in Iraq.

The most disabling assumption that Rostow is accused of is trying to fit economic
progress into a linear system. This charge is correct in that many countries make
false starts, reach a degree of transition and then slip back, or as is the case in
contemporary Russia, slip back from high mass consumption (or almost) to a
country in transition. On the other hand, Rostow’s analysis seems to emphasize
success because it is trying to explain success. To Rostow, if a country can be
disciplined, uncorrupt investor in it, can establish certain norms into its society and
polity, an can identify sectors where it has some sort of advantage, it can enter into
transition and eventually reach modernity. Rostow would point to a failure in one of
these conditions as a cause for non-linearity.

Another problem that Rostow’s work has is that it considers mostly large countries:
countries with a large population (Japan), with natural resources available at just
the right time in its history (Coal in Northern European countries), or with a large
land mass (Argentina). He has little to say and indeed offers little hope for small
countries, such as Rwanda, which do not have such advantages.

The designation of traditional societies as pre-Newtonian neglects the dualism of

many present-day LDCs. Much of the large manufacturing, plantation, and mining

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sectors of India, Indonesia, Nigeria and Pakistan are modern methods and
techniques and cannot be considered traditional in Rostow’s sense.

Much of Rostow’s thesis about conditions for takeoff is contradicted by empirical

data. Increases in investment rates and growth do not occur in the 20-30 year span
Rostow designates for takeoff. Growth in investment rates and net national product
in Great Britain, Germany, Sweden, and Japan indicate a slow and relatively steady
acceleration rather an abrupt takeoff.

Rostow’s premise that economic modernization implies a change from an

underdeveloped economy to one similar to those in North America and Western
Europe today poses another problem. Rostow compares LDCs at independence to
the formation of nation-stages in the West. The assumes that the development of
underdeveloped countries will parallel earlier stages of today’s advanced countries,
but he neglects the relationship of contemporary underdeveloped countries with
developed countries as well as each LDC’s highly individual history.

Finally we might conclude that rather than being one way to economic
development, there are many. But in each path to development there are common
characteristics and Rostow has successfully identified some of them.

PAKISTAN AND ROSTOW’S THEORY OF GROWTH

Pakistan was one of the few developing countries that had achieved an average
growth rate of over 5 percent over a four decade period ending 1988-89.
Consequently, the incidence of poverty had declined from 40 percent to 18 percent
by the end of the 1980s. Table I lays down the main economic and social indicators
in 1947 and compare them with 2004. The overall picture that emerges from a
dispassionate examination of these indicators is that of a country having made
significant economic achievements but a disappointing record of social
development. The salient features of Pakistan’s economic history are:

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• Pakistan is self sufficient in most food production.

• Per capita incomes have expanded more than six-fold in US Dollar terms.
• Pakistan has emerged as one of the leading and successful producers of
cotton and cotton textiles.
• Pakistan has developed a highly diversified base of manufactured products
for domestic and world markets.
• Physical infrastructure network has expanded with a vast network of gas,
power, roads and highways, ports and telecommunication facilities.

Pakistan lies at the 2nd stage of ‘Preconditions for takeoff’ taking Rostow’s growth
theory into account. Although most of the economy’s labor is much engaged in
agriculture but at the same time plantation, mining, manufacturing and
industrialization also took place during 80s rapidly. Pakistan has a liberal
investment policy which opens free gates for foreign investment and attracts
foreign investment due to its unique market value and location. Textile sector is the
backbone of the economy and also telecom sector also emerged as an important
sector last decade. These achievements in income, consumption, agriculture and
industrial production are extremely impressive and have lifted millions of people
out of poverty levels. But these do pale into insignificance when looked against the
missed opportunities. The largest setback to the country has been the neglect of
human development. Had adult literacy rate been close to 100 instead of close to
50 today due to which the country is unable to achieve the takeoff position.
Moreover, the problem of energy crisis, poverty, political instability, unemployment,
rising inflation and many others has trickled down growth rate of country.
Therefore, the country still lies at the second stage of ‘transition’ and is a
developing country.

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Rostow’s approach of development employs another major problem: how to

encourage traditional economies to reach the stages of ‘takeoff’ into sustained
economic growth. The advice for increasing growth required new investments in
industry: either import substituting, as was the mode in Pakistan and majority of
Latin American countries, or export oriented in East Asia with the purpose of
generating employment and improving labor productivity. This development model
presumes that as growth occurs, the positive effects of increased production will
‘trickle-down,’ to those sections of people who are not directly involved in the
dynamic sectors. This model leads towards a linear development path ending in
‘Western-style’ market oriented societies. The underlying belief is that the cultural
diffusion of Western economic/ technological processes and the compatibility of
social structures will force the developing countries in the long run to adopt the
characteristics of the developed ones. In this linear progress, the prediction is that
traditional societies will eventually advance through the stages that have been
achieved by developed societies. It is assumed that lack of human skills and
investment capital are the major problems, therefore, the system of banks and
development assistance agencies such as the IMF and the World Bank are designed
to provide capital for investment to developing countries who are trailing these
policies.

REFERENCES
James M.Cypher, J. L. The process of Economic Development.

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Nafziger, E. Economic Development.

Thirlwall, A. Growth and development: with special reference to developing
economies.

• http://wiki.answers.com/Q/Describe_and_critically_analyze_Rostows_theory_o
f_growth
• http://ishrathusain.iba.edu.pk/speeches/economicManagementPolicies/Econo
my_of_Pakistan_Expo_2005.pdf

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