A summary of Rostow's seminal theory, which has now evolved into the IMF's multiples steps in progressions to launch capitalist takeoff

1. Linear Stages Theory and Rostow's
Stages of Economic Growth
Summary of W. W. Rostow’s,
The Stages of Economic Growth: A
Non-Communist Manifesto
Viv Grigg/ Josh Lopez

2. W.W. Rostow
• A historical economics theorist of the 1950s
and early 1960s
• Historical experience of transforming
economies from poor agricultural subsistence
societies to modern industrial giants had
important lessons for backward countries in
Asia, Africa and Latin America.

3. Ideal Societies in Historical Anthropology
Dimension of
Integration
Band Tribal Peasant Urban/Moder
n
Postmodern
Megacity
Economic
Production
Mobile Slash and
Burn
Settled
Agriculture
Manufacturin
g +
Agriculture
High Tech +
Manufacturin
g +
Agriculture
Leadership &
Decision-
making
Familial Clans and
Chiefs
Feudal Lord
and Peasant
Councils,
elections
Big Man,
diverse
Technology Stone age Bronze, iron
utensils
Farming
utensils,
blacksmith
City systems,
auto,
manufactured
goods
Electronic,
biological,
internet
Religion Spirit worship Spirit, totemic Folk Religion
within Larger
traditions
Multiple
traditions,
disjoint,
secularising
Multi-
dimensioned
Cross overs,
secular
etc
!0,000 year progressions

4. Rostow as Reaction to Marx
• Marx’s Communist Manifesto purported to be a historic
analysis of the evolution of society from feudal monarchy
into modernism
• Unfortunately he only had the British model to build from –
neither France, nor Russia had made the transition.
• It floundered when the proleteriat did not wish to rule – a
central platform in his argument. Lenin fixed this by
making sure they ruled through his dictatorship.
• The Marxist rejection of morality and the consensus
processes of democracy
• Rostow is reflecting on an alternative historic analysis
which becomes the basis of interpretation of expanding
global capitalism and current WB/ UN development
processes

5. W.W. Rostow's Stages of Economic
Growth:
• The process where developed industrial
nations transformed themselves from
backwardness to prosperity can be described in
terms of a series of stages:
• (1) Traditional society
• (2) Pre-conditions to take-off
• (3) Take-off
• (4) Drive to maturity
• (5) High mass consumption

6. (1) Traditional Society:
• One whose production functions are based on pre-
Newton science and technology.
• Method places a ceiling on productivity.
• Higher proportion of resources is devoted to
agriculture.
• Humans valued on family basis, not on the basis of
capabilities.
• The range of possibilities for a grandchildren are the
same what they were for grandfather.
• The society is ruled by those who owned or controlled
land. (e.g. Medieval Ages in Europe)

7. Pre-Conditions to Take Off (1)
• Establishment of Financial Institutions
• Establishment of an efficient state vs
landlordism
• (in his last chapter) the necessary conditions
for people-lead governmental processes
– Based on an underlying theology of the worth of
the individual and of consensus decision-making
(my addition).

8. Pre Conditions to Take Off (2)
Crucial Role By Agriculture:
• (a) To meet the increased needs of growing population.
• (b) With agri. surplus foreign exchange can be earned
to meet the import bill of capital goods.
• (c) The overall increase in the productivity due to agri.
development will provide stimulus to other sectors of
the economy.
• Agri. sector must supply expanded food, expanded
markets and expanded funds to the modern sector.
• (ii) Growing Outlays on SOC: SOC has three distinctive
characteristics: (a) The gestation period is long, (b)
lumpy, (c) beneficial for the community.

9. (3) Take Off Stage:
• A break-through in the history. More than two
or three decades. Three conditions must be
satisfied:
– (i) rate of investment must rise from 5% to 10% of
GNP
– (ii) development of one or more substantial
manufactured sector with high growth rate
– (iii) existence of social, political and institutional
framework which could give impulses to modern
sector expansion.

10. (3) Take Off Stage:
• (i) Increase in rate of investment: attached with changes in
income distribution, (e.g. income begins flows into the
hands of capitalists who re-invest to increase rate of capital
formation.) Capital formation will further be promoted by
fiscal measures of govt., banking institutions and capital
markets.
• (ii) Emergence of leading sectors: Entrepreneurs of one or
two leading sectors re-plough their profits. Moreover, the
expansion of leading sectors helps to pay for imports and
debt charges. (e.g. Canadian grain, Swedish timber and
Japanese silk).
• Loanable funds play an important role in the emergence of
leading sectors, particularly in financing large overhead
capital. 3 sectors:(a) Primary growth sectors, (b) The
Supplementary growth sectors,(c) The Derived growth
sectors

11. (4) Drive to Maturity Stage:
• 40 years after the take-off stage long interval where
economy experiences a regular growth and modern
technology extended to a bulk of resources.
• May be shift in emphasis from coal, iron and heavy
engineering to machine tools, chemicals and electrical
equipment's.
• Germany, France, UK and US passed through this
period during the end of 19th century.
• 10% to 20% of GNP ploughed in investment, output
grows more than increase in population.
• Goods which were earlier imported now produced at
home.
• Economy becomes a part of international
economy.

12. (5) Age of High Mass Consumption
Stage:
• As societies achieved maturity in 20th century,
real incomes rose and people became
aware/anxious to have a command over
consumption of fruits of mature economy.
• Leading sectors produced consumer durables
(e.g. TV, fridges and automobiles, etc.)
• Society pays more attention on social welfare
& social security than economic growth. (US
passed through stage in 1913-14, and post
war 1946-56.)

13. Practical Importance of Rostow's
Stages:
• UDCs must learn lessons from economic history
of advanced nations. (a)follow the rules of
development to take-off and then to self-
sustaining economic growth, (b) mobilize
domestic and foreign savings in order to generate
sufficient investment to accelerate economic
growth
• E.g. Harrod Domar Model of Econ Growth
• Rostow stage theory stressed upon capital
formation for the sake of economic development
& H-D model guides UDCs

14. Criticisms
R 5 stages -against Marx stages of feudalism, bourgeoisie, capitalism,
socialism and communism. Exist certain dissimilarities in both these
approaches. (e.g. Rostow did not discuss the class conflict, while it is
very much available in Marx's stage theory).
(i)Stage Making Idea is Misleading: all the nations have passed through
these stages. Not all the nations have followed this route due to
different environment and resources etc.
(ii) Leading Sectors: leading sectors are responsible for economic
expansion, Kuznets says that Rostow did not identify the chronology of
leading sectors.

15. Criticisms
(iii) Data is Unconfirmed: Kuznets says that the statistical data presented by Rostow
regarding doubling of productivity in the period of take-off stage is not reliable and
confirmed.
(iv) No Distinction Between Pre-Conditions and Take-Off: characteristics of pre-
conditions and take-off very much similar, not possible to assess when take-off starts
after pre-conditions.
(v) Self-Sustained Growth: Kuznets greatly criticized self-sustained growth (during
takeoff stage, as increase in per capita income, savings, and investment may take place
before take-off.
(vi) Pre-Conditions is Not a Chronological Concept: Caironcross, incorrect to say that
SOC will attain minimum size before the take-off. Rostow's views on agriculture are not
true historically, some countries agri. expanded during industrialization, and SOC was
mostly required during the industrialization.
(vii) Idea of Increase in Investment is Not New: increase in investment from 5% to
10% will take the economy into take-off stage, Caironcross says that this is not a new
idea

16. Rostow's Stages and UDCs:
• Rostow stages have a greater appeal for UDCs, take-off stage
analogous to industrialization, UDCs desirous to industrialize
their economies a.s.a.p.
• Exist following problems whereby Rostow and H-D models
will be least beneficial for UDCs:
• (i) Attitudes and Arrangements in UDCs: Rostow and H-D
models were found applicable in DCs because the European
countries received aid under 'Marshall Aid Program', to
construct war affected economies of Europe possessed
necessary structural, institutional and attitudinal conditions
(e.g. had well integrated commodity and money markets,
highly developed transport facilities, well trained and
educated manpower, the motivation to succeed, and efficient
govt. bureaucracy)

17. Rostow's Stages and UDCs:
• (ii) Removal of Unemployment: conditions do not entertain
the case of countries which have abundance population, and
increasing unemployment.
• (iii) Value of COR is not Constant: In Rostow &H-D models of
growth the value of COR has been kept constant.
• (iv) Spontaneous and Automatic Growth: Rostow's take
offstage shows that here the growth is automatic and
spontaneous. But in case of UDCs, there does not exist any
possibility that a sudden growth will take place.
• (v) Integration with World Economy: Today the UDCs are well
integrated with the world economy. The external factors
which are beyond their control can nullify the best strategies
followed by UDCs. It means that development can not be
attained just through supplying the missing factors like
capital, foreign exchange and skill.

18. References
• Rostow, W.W. (1991). The Stages of Economic
Growth: A Non-Communist Manifesto (3rd
ed.). Cambridge: Cambridge University Press.
• http://economicsconcepts.com/linear_stages_
theory_and_rostow's_stages_of_economic_gr
owth.htm