W.W.

Rostow and the Stages of Economic Growth

One of the key thinkers in twentieth-century Development Studies was W.W. Rostow, an
American economist, and government official. Prior to Rostow, approaches to development had
been based on the assumption that "modernization" was characterized by the Western world
(wealthier, more powerful countries at the time), which were able to advance from the initial stages
of underdevelopment. Accordingly, other countries should model themselves after the West,
aspiring to a "modern" state of capitalism and a liberal democracy. Using these ideas, Rostow
penned his classic "Stages of Economic Growth" in 1960, which presented five steps through
which all countries must pass to become developed: 1) traditional society, 2) preconditions to take-
off, 3) take-off, 4) drive to maturity and 5) age of high mass consumption.

The model asserted that all countries exist somewhere on this linear spectrum, and climb upward
through each stage in the development process:

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 characterized 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.

2. Pre-Conditions or the Preparatory Stage:

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

(b) The adaptability of the labor force;

(c) Political sovereignty;

(d) Development of a centralized 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 transfor-
mation 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 mobilize
savings and undertake investment in new enterprises and bear risks and uncertainty. In the sphere
of political organization, it is during this stage that an effective centralized 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.

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” is defined as “the interval during which the rate of investment
increases in such a way that real output per captia 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 captia output.”
Thus, the term “take-off ” implies three things : first the proportion of investment to national
income must rise from 5% to 10% 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 rasie the living standards
dominates the society. Revolutionary changes occur in both agriculture and industry and
productivity levels sharply increase.

There is greater urbanization and urban labor 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.

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”.

5. Stage of High Mass Consumption:

In this stage of development per capita income of 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 industrialization and urbanization
of the economy values of people change in favor of more consumption of luxuries and high styles
of living. New types of industries producing durable consumer goods come into existence which
satisfies the wants for more consumption. These new industries producing durable consumer goods
become the new leading sectors of economic growth.

The Traditional Society

The central economic fact about traditional societies is that they evolved within limited production
functions. Both in the more distant past and in recent times the story of traditional societies is a story of
endless change, reflected in the scale and patterns of trade, the level of agricultural output and productivity,
the scale of manufactures, fluctuations in population and real income. But limitations of technology decreed
a ceiling beyond which they could not penetrate. They did not lack inventiveness and innovations, some of
high productivity. But they did lack a systematic understanding of their physical environment capable of
making invention a more or less regular current flow, rather than a stock of ad hoc achievements inherited
from the past. They lacked, in short, the tools and the outlook towards the physical world of the post-
Newtonian era.

The Preconditions for Take-off

The initial preconditions for take-off were created in Western Europe out of two characteristics of the post-
medieval world which interacted and reinforced each other: the gradual evolution of modern science and
the modern scientific attitude; and the lateral innovation that came with the discovery of new lands and the
rediscovery of old, converging with the impulse to create new technology at certain strategic points. The
widening of the market-both within Europe and overseas-brought not only trade, but increased
specialization of production, increased inter-regional and international dependence, enlarged institutions of
finance, and increased market incentives to create new production functions. The whole process was
heightened by the extension to trade and colonies of the old dynastic competition for country.

Technically, the preconditions for sustained industrialization have generally required radical change in three
non-industrial sectors. First, a build-up of social overhead capital, notably in transport. This build-up was
necessary not merely to permit an economical national market to be created and to allow natural resources
to be productively exploited, but also to permit the national government effectively to rule. Second, a
technological revolution in agriculture. The processes at work during the preconditions generally yielded
both a general rise in population and a disproportionate rise in urban populations. Increased productivity-
in agriculture has been generally a necessary condition for preventing the process of modernization from
being throttled. Third, an expansion in imports financed by the more efficient production and marketing of
some natural resources plus, where possible, capital imports. Such increased access to foreign exchange
was required to permit the less advanced region or nation to increase the supply of the equipment and
industrial raw materials it could not then itself supply, as well as to preserve the level of real income while
social overhead capital of long gestation period was being created.

The Take-off

The take-off consists, in essence, of the achievement of rapid growth in a limited group of sectors, where
modern industrial techniques are applied. Historically, the leading sectors in take-off have ranged from
cotton textiles (Britain and New England); to railroads (The United States, France, Germany, Canada,
Russia); to modern timber cutting and railroads (Sweden). In addition, agricultural processing, oil, import
substitution industries, ship-building, and rapid expansions in military output have helped to provide the
initial industrial surge.

It is the requirement that the economy exhibit this resilience that justifies defining the take-off as embracing
an interval of about two decades. A result-and one key manifestation-of take-off is the ability of the society
to sustain an annual rate of net investment of the order of, at least, ten per cent. This familiar (but essentially
tautological) way of defining the take-off should not conceal the full range of transformations required
before growth becomes a built-in feature of a society's habits and institutions. In non-economic terms, the
take-off usually witnesses a definitive social, political, and cultural victory of those who would modernize
the economy over those who would either cling to the traditional society or seek other goals; but because
nationalism can be a social solvent as well as a diversionary force-the victory can assume forms of mutual
accommodation, rather than the destruction of the traditional groups by the more modern;

The Drive to Maturity

After take-off there follows, then, what might be called the drive to maturity? There are a variety of ways
a stage of economic maturity might be defined; but for these purposes it is defined as the period when a
society has effectively applied the range of (then) modern technology to the bulk of its resources. During
the drive to maturity the industrial process is differentiated, with new leading sectors gathering momentum
to supplant the older leading sectors of the take-off, where deceleration has increasingly slowed the pace of
expansion. After the railway take-offs of the third quarter of the nineteenth century with coal, iron, and
heavy engineering at the Centre of the growth process it is steel, the new ships, chemicals, electricity, and
the products of the modern machine tool that come to dominate the economy and sustain the over-all rate
of growth.

The Age of High Mass Consumption

There have been, essentially, three directions in which the mature economy could be turned once the society
ceased to accept the extension of modern technology as a primary, if not over-riding objective: to offer, by
public measures, increased security, welfare, and, perhaps, leisure to the working force; to provide enlarged
private consumption-including single family homes and durable consumers goods and services-on a mass
basis; to seek enlarged power for the mature nation on the world scene. A good deal of the history of the
first half of the twentieth century can be told in terms of the pattern and succession of choices made by
various mature societies as among these three alternatives.