Rostow’s Stages of Economic Growth | Economics

Prof. W.W. Rostow, an eminent economic historian, has described the historical process of transition from underdevelopment to development in terms of a series of five stages of growth through which all countries must pass to reach the ultimate destination of a developed country’.

These five stages of growth are:

1. The traditional society,

2. Preconditions for take-off,

3. The take-off period,

4. The drive to maturity, and

5. Stage of mass consumption.

Stage # 1. Traditional Society:

This initial stage of traditional society signifies a primitive society having no access to modern science and technology. In other words, it is a society based on primitive technology and primitive attitude towards the physical world. Thus, Rostow defines a traditional society “as one whose structure is developed within the limited production function based on pre-Newtonian science and technology and as pre-Newtonian attitudes towards the physical world”

However, Rostow does not view this traditional society as being completely static. In this stage of a society output could be increasing through the expansion of land area under cultivation or through the discovery and spread of a new crop. But the critical fact about this type of society is that there is limit to attainable output per head. This limit arises due to the absence of access to modern science and technology.

This type of a society allocates a large proportion of its resources to agriculture and is characterised by a hierarchical social structure in which there is little possibility for vertical mobility. The value system that prevails in such a society is what Rostow calls a long-run fatalism. People of these societies think that not much economic progress is possible for them and for their future generations.

Stage # 2. Preconditions or the Preparatory Stage:

This covers a long period of a century or more during which the preconditions for take-off are established. These conditions mainly comprise fundamental changes in the social, political and economic fields.

For example:

(a) A change in society’s attitudes towards science, risk-taking and profit-earning;

(b) The adaptability of the labour force;

(c) Political sovereignty;

(d) Development of a centralised tax system and financial institutions; and

(e) The construction of certain economic and social infrastructure like railways, ports, power generation and educational institutions. India did some of these things in the First Five Year plan Period (1951 -56).

It is evident from above that in this second stage of growth foundations for economic transformation are laid. The people start using modern science and technology for increasing productivity in both agriculture and industry. Further, there is a change in the attitude of the people who start viewing the world where there are possibilities of future growth. A new class of entrepreneurs emerges in the society who mobilise savings and undertake investment in new enterprises and bear risks and uncertainty. In the sphere of political organisation, it is during this stage that an effective centralised nation state starts emerging.

Thus in the stage of precondition for take-off Rostow views agriculture as performing three roles; first, agriculture must produce sufficient food grains to meet the demand of growing population and of the workers who get employment in agriculture. Secondly, increase in agricultural incomes would lead to the demand for industrial products and stimulate industrial investment. Thirdly, expanding agriculture must provide much of the savings needed for the expansion of the industrial sector.

Stage # 3. The “Take-Off’ Stage:

This is the crucial stage which covers a relatively brief period of two to three decades in which the economy transforms itself in such a way that economic growth subsequently takes place more or less automatically. “The take-off stage” is defined as “the interval during which the rate of investment increases in such a way that real output per capita rises and this initial increase carries with it radical changes in the techniques of production and the disposition of income flows which perpetuate the new scale of investment and perpetuate thereby the rising trend in per capita output.”

Thus, the term “take-off ” implies three things – first, the proportion of investment to national income must rise from 5% to 12% and more so as to outstrip the likely population growth; secondly, the period must be relatively short so that it should show the characteristics of an economic revolution; and thirdly, it must culminate in self-sustaining and self-generating economic growth.

Thus, during the take-off stage, the desire to achieve economic growth to raise the living standards dominates the society. Revolutionary changes occur in both agriculture and industry and productivity levels sharply increase. There is greater urbanisation and urban labour force increases. In a relatively short period of a decade or two, both the basic structure of the economy and social and political structure is changed so that a self-sustaining growth rate can be maintained.

It is worth noting that, in the opinion of Rostow, the rise of new elite (i.e., new entrepreneurial class) and establishment of a nation state are crucial for economic development.

Stage # 4. Drive to Maturity – Period of Self-Sustained Growth:

This stage of economic growth occurs when the economy becomes mature and is capable of generating self-sustained growth. The rates of saving and investment are of such a magnitude that economic development becomes automatic. Overall capital per head increases as the economy matures. The structure of the economy changes increasingly.

The initial key industries which sparked the take-off decelerate as diminishing returns set in. But the average rate of growth is maintained by a succession of new rapidly-growing sectors with a new set of leading sectors. The proportion of the population engaged in agriculture and other rural pursuit’s declines, and the structure of the country’s foreign trade undergoes a radical change.

It is with both the problems and the cyclical movements of national income in such mature growing economies in this fourth stage that the bulk of modern theoretical economics is concerned. The students of contemporary developing countries and also of economic history are more likely to be concerned with the economics of the previous two stages, that is, the economics of the preparatory and the “take-off’ stages. If we are to have a useful and adequate theory of economic growth, it must obviously be comprehensive enough to embrace these two stages as well, especially the economics of the “take-off into self-sustaining growth”.

Stage # 5. Mass Consumption:

In this stage of development per capita income of a country rises to such a high level that consumption basket of the people increases beyond food, clothing and shelters to articles of comforts and luxuries on a mass scale. Further, with progressive industrialisation and urbanization of the economy values of people change in favour of more consumption of luxuries and high styles of living. New types of industries producing durable consumer goods come into existences which satisfy the wants for more consumption. These new industries producing durable consumer goods become the new leading sectors of economic growth.

A Critique of Rostow’s Stages of Growth:

Rostow’s stages of growth theory have come in for severe criticism. Gunar Mydral has argued that there cannot be an inevitable sequence of events described as successive stages of growth. According to him, economic growth is the result of certain economic policies adopted and not the other way round. Likewise, Meier argues that stages in the history of economic growth cannot be generalised from the development experience of some European countries as Rostow has done.

To quote Meier, “Stage-making approaches are misleading when they consider a linear conception of history and imply that all economies tend to pass through the same series of stages. Although a particular sequence may correspond broadly to the historical experience of some economies, no single sequence fits the history of all countries. To maintain that every economy always follows the same course of development with a common past and the same future is to over-schematize the complex forces of development and to give the sequence of stages a generality that is unwarranted”.