Rostow’s stages of development

Rostow conceived economic development as a process. According to him development passes through certain stages. The stages of development as conceived by Rostow are:

1. Traditional Society or Pre-industrial Stage
2. Pre-conditioning phase
3. The ‘Take-off’ Stage
4. Stage of ‘Drive to Maturity’
5. Stage of Self-sustained Growth of Mass Consumption

Let us discuss each of these stages in detail.

1. Traditional Society or Pre-industrial Stage

According to Rostow, all the stages of development from primitive agricultural development, animal husbandry and feudalism are covered under this stage. This stage existed world over before the 19th century‘Industrial Revolution’. This was a period of stagnation, when society remained ‘traditional’. Technical conditions and economies of scale were static and birth and death rates used to be very high. Whatever changes that used to happen during this stage did not qualify to be called as the symptoms of development.

2. Pre-conditioning phase

To move forward, away from the traditional society, there was a need for ‘the urge to development’. This urge came from the elite class and an entrepreneurial class emerged which mobilized savings and invested them. They provided for the infrastructural facilities like transport, education and medical facilities. Some development took place in the communication system also. Agriculture started developing; death rates started falling but not the birth rates. Few small scale industries developed during this stage and the investment hovered around 5 percent of the GNP in this stage.

3. The ‘Take-off’ Stage

This was a stage that was discussed in detail by Rostow. In this unit it is being discussed under the following heads:
i. Meaning and Characteristics
ii. Change in the rate of investment
iii. Take-off as a function of entrepreneurial and elite class
iv. Leading sectors will lead
v. Time period

Let us discuss each of these heads in detail

i. Meaning and Characteristics

In this stage rate of investment increases from around 5% to 10% of GNP. The real output per capita increases and both rate of investment and real output per capita maintain an increasing trend. This stage is also characterized by the emergence of a group in the society which has the will and the authority to take the economy up. Entrepreneurs, corporations and the government become capable of mobilizing the financial and real resources for further development. A leading sector, also known as the ‘growth pole’ emerges and it is because of this leading sector the development takes place.

ii. Change in the rate of investment

In economies attempting to take off, the rate of investment becomes around 5 to 10 percent. Rostow opined that if the population growth is above 1.5 percent per year or the capital output ratio is more than 3:1 then upto 12.2 percent of GNP should be invested.

iii. Take-off as a function of entrepreneurial and elite class

Take off is a function of entrepreneurial and elite class. They are traditional savers and form capital which is invested. Urge to earn profit makes them invest in new industries and innovations. This class is instrumental in getting the credit structure expanded, and in bringing about a change in the exports-imports pattern. Natural resources and labour are put to use by them.

iv. Leading sectors will lead

Rostow defines leading sectors as those sectors which have new production functions of high productivity that generate a maximum of re-investible surplus which can be ploughed back into productive investment. This will turn industrialization into an automatic process
and a spiral of effective demand for other products will be started. A rapid growth of one or more new manufacturing sectors is a powerful and essential engine for economic transformation. More income is placed in the hands of those whose propensity to save is high and reinvest their profits into highly productive investments. As a result, new urban areas develop and their population and market organization help to make industrialization an ongoing process. External economies are generated to such an extent that they help to produce new leading sectors when the initial impulse of the take-off-leading sectors begins to wane. Thus while the old sectors decelerate, the acceleration in the growth of new sectors keeps the process of growth sustained.

v. Time Period

A country can be in a take-off period for two or three decades. Certain signs of take-off are:
a. Less than 40 percent of the population is left in agriculture and the rest migrates to urban and non-agricultural sectors.
b. The rate of growth in national income outstrips the rate of growth in population.
c. The rate of accumulation goes up.
d. The relative contribution of agriculture to GNP goes down and that of the manufacturing sector goes up.

Take-off is a function of certain crucial things like greater emphasis to manufacture in the leading sectors, shifts from agriculture to industrial sector, high rate of savings going up to at least 10 percent of GNP, definite policies regarding fiscal, monetary, education and income pattern.

4. Stage of ‘Drive to Maturity”

In this stage, the rate of investment increases from 10 percent of GNP to higher limits up to 20 percent. Important industries come up including many imports-replacement and exports-replacement industries. Technical knowledge spreads to other sectors. Real income per head starts rising as GNP growth rate becomes substantially higher that the growth rate of population. A country may remain in this stage between four to six decades. Specialization and division of labour become complex. Production of most things becomes possible.

5. Stage of Self-sustained Growth and of Mass Consumption

In this stage the per capita real income becomes so high that the consumption pattern rises beyond mere food, clothing and shelter to goods of comforts and luxuries on a large scale. Leading sectors change the basic structure of the society and new types of durable consumer goods industries become the new leading sectors.

Kindleberger illustrates these stages with Gompertz or ‘S’ curve. A typical growth follows Gompertz ‘S’ or leaning curve in which growth starts off slowly, picks up gradually and then proceeds very rapidly before slowing down at some later stage to become asymptotic at some limit or ceiling. In this stage the society becomes affluent society, free of hunger and extreme poverty.

Criticisms and appreciation of Rostow’s theory

Some important points against Rostow’s theory are:
1. The teleological approach to development is incorrect Myrdal is against the teleological approach to development. In this approach, policies are not chosen and adopted but they are functions of certain situations or in the nature of things. Myrdal argues that according to Rostow’s model, development is not the result of policies but policies are the result of development. This approach leads to logical confusion. Policies are chosen and should be chosen.

2. History does not repeat itself

Some economists state that every country will have the same history of economic development and shall pass through the same experiences or times. There is nothing like linear conception of history. Every country cannot have a common past and a common future,

3. Leading sectors may not lead

If we examine the development linkages of industries, we can find that the cotton textile of Manchester and the automobile industry of USA did not bring about all the development there. A leading industry is one where productivity is high and profitability is also high.

4. Stage overlap and work spill over to the next stages

Kuznet opines that the things that are supposed to happen in a particular stage may spill over to other stages also. The characteristics of the past The pre-condition things may continue in take-off and beyond take-off stage also.

5. The take-off stage is not empirically justified in the same manner in which Rostow presented it

Kuzets and Myrdal, after having examined the economic history of various nations, came to the conclusion that all that is elaborated in Rostow’s stages is not realized in the same fluid manner. Rostow’s approach is criticized for being conceptually vague, empirically superficial and theoretically non-vigorous. Rostow could not give estimates of the duration of take-off stage under different conditions.

6. An Economy need not pass through these stages before reaching self sustenance

A country with low population burden and abundant natural resources may reach the self-sustaining stage of mass consumption early by bypassing one stage. Canada and Australia entered the stage of mass consumption even before reaching maturity. In recent years this is seen happening in oil rich countries.

7. The take-off may be extremely delayed

Even when the economy starts having 10 percent to 12.5 percent investment, take off may not be realized specially when the population growth cannot be brought under control.

8. The last stage of Mass Consumption may not be reached at all Rostow presumes the stage of mass consumption to be an irreversible stage. Kuznets have raised doubts as to whether the last stage of mass consumption can continue eternally.

9. There are limits to growth

Natural resources, manpower and capital set upper limit to growth. A time comes when a country should be regarded as fully developed even if it has not reached the standards of countries like USA.