Rostow updated

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Rostow updated

  1. 1. Climbing the Development Ladder An extension of Rostow’s Stages of Growth Model
  2. 2. The Four Stages
  3. 3. Subsistence Economy <ul><li>Low agricultural productivity </li></ul><ul><li>Poor public services as few taxes. </li></ul><ul><li>Low exports and poor range (horticulture, raw cotton and yarns) </li></ul><ul><li>Living standards: near subsistence </li></ul><ul><li>No saving = no private investment </li></ul><ul><li>Few roads, inadequate power grid, limited access to drinking water and sanitation </li></ul><ul><li>Population growth = less land per new generation </li></ul><ul><li>Average income is $300 per person </li></ul>
  4. 4. Escaping this trap <ul><li>Favourable agronomic conditions mean farmers can start to save and taxes can be used for public investments </li></ul><ul><li>Technological breakthrough like the green revolution </li></ul><ul><li>Economy has access to other resources: oil, tourism, foreign aid </li></ul><ul><li>Proximity to a richer neighbour: their demand and infrastructure can provide jobs and income </li></ul>
  5. 5. Commercial Economy <ul><li>Govt builds port, power grid, roads, basic health and education system </li></ul><ul><li>Increased productivity leads to export growth </li></ul><ul><li>Agricultural exports include cash crops ( spices, beverages, meat products, fibres) </li></ul><ul><li>Manufacturing exports include processed agricultural commodities ( cotton-based fabrics, confectionaries, ethanol) and labour-intensive operations (textiles, shoes) </li></ul><ul><li>Imported technologies : machinery, know-how, process improvements </li></ul>
  6. 6. Commercial Economy : standards of living <ul><li>Population growth declines as families adopt birth-control methods </li></ul><ul><li>Educational standards rise </li></ul><ul><li>Literacy amongst the young becomes universal </li></ul><ul><li>Average annual income levels are $1,000 per person </li></ul>
  7. 7. Emerging-market Economy <ul><li>Manufacturing exports include industrial products (automobile components, semiconductor products, consumer appliances), information-based services (business process operations, software and business consulting) </li></ul><ul><li>FDI brings not only capital but know-how, technology and linkages to global production and distribution systems </li></ul><ul><li>Average annual incomes = $4,000 per person </li></ul>
  8. 8. Emerging-market economy: the role of the state <ul><li>Complete coverage of basic infrastructure </li></ul><ul><li>Universal literacy and primary education </li></ul><ul><li>Secondary education and vocational education </li></ul><ul><li>Promotion of financial sector </li></ul><ul><li>Improvement in port services (paperless custom clearance, efficient containerisation) </li></ul><ul><li>Environmental investments </li></ul>
  9. 9. Technology-based economy <ul><li>Widespread tertiary education (30% or more) </li></ul><ul><li>Extensive public financing of scientific research (1% of GNP) </li></ul><ul><li>Extensive private-sector-led research and development (1% of GNP) </li></ul><ul><li>Sophisticated information-based society (high internet use, large daily newspaper circulation, universal mobile telephony and access to computers in school) </li></ul><ul><li>Exports and imports knowledge and technological advances </li></ul><ul><li>Annual income per capita = $15,000 </li></ul>
  10. 10. The role of government
  11. 11. The role of government : at all stages of development <ul><li>Relatively stable monetary unit </li></ul><ul><li>Banking system buffered against crises </li></ul><ul><li>Physical security for persons and property </li></ul><ul><li>Legal system to enforce contracts and property rights </li></ul><ul><li>Modest level of official corruption! </li></ul>

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