Rostow’s Stages of Economic Growth

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Introduction-

Professor W.W Rostow, propounded an alternative theory of the stages of growth in his book ‘The Stages of Economic Growth’ (1960).

Five Stages of Economic Growth-

According to Rostow, the process of economic development can be divided into following five stages:

1. The Traditional Society-

According to Rostow, the Pre Newtonian Era is called traditional society. Rostow has described to traditional society as “one whose structure is developed within limited production function based on Pre Newtonian Science and Technology and Pre Newtonian attitude towards physical world.

It means the structure of traditional society was based on primitive technology and orthodox ideas of people. The modern Science and Technology were absent. There is no social change that create economic development.

Features of traditional society-

• Dominance of Agriculture-  In this stage bulk of people were engaged in agriculture but agriculture was backward as primitive methods of production were adopted.
• Dominance of family and caste system-  In the traditional society, the society structure was  hierarchical in which family played a dominant role.
• High birth and death rate- National society high birth rate and death rate was travelling due to which the population was low
• Political power- Political power was centered in the hands of landlords. The landlords exploited the natural resources of the country for their self-interest. 
• Law of diminishing Returns- In the traditional society diminishing returns prevailed in agriculture. It was basically due to the use of old methods of production and outdated technology.
• Application of Malthusian theory- The increase and fall in the population was based in the law of Malthusian theory of population. 

The dynasties of China, the civilization of the Middle East and the Mediterranean etc. possessed the characteristics of traditional society.

2. Pre-take off-

The second stage of economic growth is the pre conditions for take off. This stage has duration of around 100 years which shapes economy for the stage off. 

Features of Pre-take off-

•  Decline of death rate-  Death rate declines and population was growing because of cleanliness and awareness, due to which life expectancy increased which results in demographic changes and economy of a country started rising. 
• Expansion of social overhead capital-  Government spends a part of their income  in spending infrastructure i.e. transport, communication and education, health system etc. 
• Importance of non-agricultural sector- Less dependency on agriculture as compared to traditional society, because of development of other factors like industry, transport, trade, etc.
• Modernisation in Ideology- Temperament of traditional society is changed now. The dogmatic views are changed by new ideas.
• Technological advancement- Technological advancement was taken place in this stage due to which capital formation increase. As a result investment level also shows an upward trend.
• Open Economy- International trade between countries has ben taken place. Export and import of goods started.

Thus pre-conditions for take-off is an era when society prepares itself for sustained growth.

3. The Take off-

The third significant stage of growth is the stage of take-off . The period of this stage is 20 years during which the economic development process is automatic and the economy becomes self-reliant. The self-reliant growth is also known as take off, an initial push up, big push, a critical minimum effort. It is also called ‘a great watershed‘ in the life of modern societies.

UK was the first country which entered into the take-off stage in 1783. India entered in 1952.

Conditions for take-off-

• Rostow had suggested that the rate of net investment should be over 10 per cent of national income.
• It can be pushed exogenously by government intervention.
• Once our country reached in take-off stage then it could not move back.

Impact of take- off-

• Industrial and manufacturing growth starts doubling which improves employment.
• International trade started which results in globalisation.
• Growth of education, technology starts rising within an economy.

4. The Drive to Maturity-

It is a period of long sustained growth extending over four decades. New production techniques taken place by replacing old ones. During this period the rate of in Savings and investment crosses 15% percent and economic development becomes automatic.

Features of the Drive to Maturity-

• As the economy drives to maturity, the overall capital per head increases. New leading sectors are created. Privatization increases.
• Education system starts changing.
• End of war and conflict. Prices became stable.
• At this stage birth rate goes at single digit or below 10. Population growth slows down and average age lies between 30 to 35 years that resulted in population dividend, i.e. more work and less leisure.
• Brain drain started towards USA.

Great Britain was the first country to enter in the cities in 1850.

5. The Age of High mass consumption or Stage of self-sustained growth –

After the stage of drive to maturity, the age of high mass consumption dawns.  In this stage the leading sectors of the economy produce durable consumer goods and services like automobiles refrigerators, etc.

Features of High mass consumption-

• The rate of investment of this stage goes up to 20% or more.
• Labour will be less important and machines will be more important. Capital intensive techniques will become dominant than labour intensive.
• Service sector starts expanding and will become more important than other sectors.
• Due to rising consumption level the living standard of people goes up.
• Birth rate and death rate are almost identical. Zero population rate.
• Amusement and leisure time starts.
• Average rate life expectancy reached at 70. Infant Mortality Rate (IMR) will fall.

At this stage development is taken place. Before this stage growth is taken place in all the stages. This is the last stage. USA, 1st country to reache in this stage.

Criticism-

Allthough the theory is attractive yet it does not predict anything accurately because of following reasons-

• Misleading concept of self-sustained growth because no groth is purely self-sustaining.
• Chronological sequence of stages is not applicable to all countries.
• It failed to explain what would happen after the 5th stage of growth is beyond the canvas of Rostow’s growth analysis.

Conclusion-

Rostow’s  stages of economic growth analysis is unique as it highlights the importance of social and institutional factors in theory of economic development. Thus,a study of his stages give fairly reliable data of evolution and transformation of an underdeveloped economy to developed one.

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