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 based on Auguste Comte's earlier "law of three stages." It was developed by W. W. Rostow. The model postulates that economic modernization occurs in five basic stages, of varying length.

Traditional society
Preconditions for take-off
Take-off
Drive to maturity
Age of High mass consumption

Rostow asserts that countries go through each of these stages fairly linearly, and set out a number of conditions that were likely to occur in investment, consumption and social trends at each state. Not all of the conditions were certain to occur at each stage, however, and the stages and transition periods may occur at varying lengths from country to country, and even from region to region.

Rostow's model is one of the more structuralist models of economic growth, particularly in comparison with the 'backwardness' model developed by Alexander Gerschenkron. The two models are not necessarily mutually exclusive, however, and many countries seem to follow both models rather adequately.

Beyond the structured picture of growth itself, another important part of the model is that economic take-off must initially be led by a few individual sectors. This belief echoes David Ricardo’s comparative advantage thesis and criticizes Marxist revolutionaries push for economic self-reliance in that it pushes for the 'initial' development of only one or two sectors over the development of all sectors equally. This became one of the important concepts in the theory of modernization in the social evolutionism.

Theoretical framework

Rostow's model is descendent from the liberal school of economics, emphasizing the efficacy of modern concepts of free trade and the ideas of Adam Smith. It also denies Friedrich List’s argument that countries reliant on exporting raw materials may get “locked in”, and be unable to diversify, in that Rostow's model states that countries may need to depend on a few raw material exports to finance the development of manufacturing sectors which are not yet of superior competitiveness in the early stages of take-off. In that way, Rostow's model does not deny John Maynard Keynes in that it allows for a degree of government control over domestic development not generally accepted by some ardent free trade advocates. Although empirical at times, Rostow is hardly free of normative discourse. As a basic assumption, Rostow believes that countries want to modernize as he describes modernization, and that society will assent to the materialistic norms of economic growth.

Stages

Traditional Societies

Traditional societies are marked by their pre-Newtonian understanding and use of technology. These are societies which have pre-scientific understandings of gadgets, agriculture is predominant and society has a hierarchical structure. The norms of economic growth are completely absent from these societies. The society has a low ceiling on per capita output because of the backwardness of the technology. Agriculture is the main source of income.

Preconditions to Take-off

The preconditions to take-off according to Rostow, refers to that the society begins committing itself to secular education, that it enables a degree of capital mobilization, especially through the establishment of banks and currency, that an entrepreneurial class forms, and that the secular concept of manufacturing develops, with only a few sectors developing at this point. This leads to a take-off in ten to fifty years. At this stage, there is a limited production function, and therefore a limited output.

Take-off

Take-off then occurs when sector led growth becomes common and society is driven more by economic processes than traditions. At this point, the norms of economic growth are well established. In discussing the take-off, Rostow is a noted early adopter of the term “transition”, which is to describe the passage of a traditional to a modern economy. After take-off, a country will take as long as fifty to one hundred years to reach maturity. Globally, this stage occurred during the Industrial Revolution in economic development.

Conditions for Take-off

The requirements of take-off are the following two related but necessary conditions:

A rise in the rate of productive investment from approximately 10% or less to over 20% of national income or net national product;
The development of one or more substantial manufacturing sectors with a high rate of growth; he indicates the leading sectors in the economy. Rostow regards the development of leading sectors as the 'analytical bone structure' of the stages of economic growth. There are generally three sectors of an economy:

Primary Sector - Agriculture
Secondary Sector - Manufacturing
Tertiary Sector - Services

Drive to Maturity

After take-off, there follows a long interval of sustained, if fluctuating, progress, as the now regularly growing economy drives to extend modern technology over the whole front of its economic activity. Some 10-20% of the national income is steadily invested, permitting output regularly to outstrip the increase in population. The makeup of the economy changes unceasingly as technique improves, new industries accelerate, and older industries level off. The economy finds its place in the international economy: goods formerly imported are produced at home; new import requirements develop, and new export commodities match them. Society makes such terms as it will with the requirements of modern efficient production, balancing off the new against the older values and institutions, or revising the latter in such ways as to support rather than to retard the growth process. (See Dependency theory)

References

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