Rostow’s Model

Introduction

In an attempt to identify a framework by which the economic development of nations can be

Rostow based his model on studies of many countries and their economic and social history.

The model suggests that the low technology and agricultural 'traditional society' (stage 1)
would, through external influences, gradually increase investments in its infrastructure (such
as roads, water supply, etc.) and develop its agriculture and extractive industries in a new
social and political framework in stage 2, as pre-conditions for economic 'take-off' to occur
(stage 3).

From this point on investment and economic growth become self-sustaining with
manufacturing industries developing. The impetus of this leading to 'economic maturity
(stage 4). Finally, with the consumer durable industries supplying the needs of a wealthy
population who have a high level of consumption, the economy is seen as being fully
developed (stage 5).

The Model

Stage 1: The Traditional Society

Rostow uses this term to define a country that has not yet started a process of development. A
traditional society contains a very high percentage of people engaged in agricultural
activities and other primitive activities. The society is based on primitive technology and
primitive attitude towards the physical World. 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.
There is limit to attainable output per head. This limit arises due to the absence of access to
modern science and technology.

The value system of these societies was generally geared to what might be called a long-run
fatalism; that is, the assumption that the range of possibilities open to one's grandchildren
would be just about what it had been for one's grandparents. But this long-run fatalism by no
means excluded the short-run option that, within a considerable range, it was possible and
legitimate for the individual to strive to improve his lot, within his lifetime.

Characteristics:

i. Less developed society in terms of science and technology;

ii. Limited production function

iii. Industry activity shows a tendency to grow, but the progress is constrained by the
inadequacy in scientific knowledge.

iv. Labour productivity is low

v. Predominance of agriculture leads to hierarchical social structure

vi. Concentration of political power

vii. Conventional techniques.

Stage 2: The pre-conditions for take off

According the Rostow, the process of development begins when an elite group initiates
innovative economic activities. Under the influence of these well-educated leaders, the
country starts to invest in new technology and infrastructure, such as water supplies and
transportation systems. These projects will ultimately stimulate on increase in productivity.
The development of a centralised tax system and financial institutions also takes place. There
is a change in the attitude of the people who start viewing the world where there are
possibilities of future growth.

Characteristics:

i. Societies are in a process of transition, building up conditions which, in course of time,

ii. Rise in rate of savings and investment;

iii. Broadened outlook of people;

iv. More emphasis on trade

v. Development of transport and communication.

Rostow noted history provides two different patterns of transition from the traditional society
• Changes in fundamental nature in the socio-political structure and in the production
techniques. This pattern was observed in Europe, Some parts of Asia, Middle east and Africa;

• Change in economic and technical dimensions. This pattern observed in America, Australia
and New Zealand.

According to Rostow :

• Agrarian society should attempt to transform itself into industrial society;

• Trade and commerce should not remain localized

• Society should attempt to enlarge the area of its commercial activities;

• Surplus of income to be used to create more industries and developed infrastructure.

Stage 3: The Take – off stage

Rapid growth is generated in a limited number of economic activities, such as textiles or food
products. These few take-off industries achieve technical advances and become productive,
while other sectors of the economy remain dominated by traditional practices.

“The take-off” is defined as “the interval during which the rate of investment increases in
such a way that real output per capita 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 capita output.”

The term “take-off ” implies three things :

1. First, the proportion of investment to national income must rise from 5% to 10% and
more so as to outstrip the likely population growth
2. Secondly, the period must be relatively short so that it should show the characteristics
of an economic revolution
3. Thirdly, it must culminate in self-sustaining and self-generating economic growth.

Characteristics:

i. In this period, growth becomes a normal condition of the society;

ii. Begins with some sharp stimulus from political revolution, innovation

iii. Investment rises 5-10% of the national income

v. More complex economy

Rostow groups the sectors of economy in following three categories:

1. Primary growth sectors, where possibilities of high growth rate exists and activity in
them sets in motion expansionary forces elsewhere;
2. Supplementary growth sectors, where rapid growth takes place in direct response to
progress in primary sectors.
3. Derived growth sectors, where growth materializes in some steady response to
increases in real income, population, etc.

Stage 4: The Drive to Maturity

This stage of economic growth occurs when the economy becomes mature and is capable of
generating self-sustained growth. Modern technology, previously confined to a few take-off
industries, diffuses to a wide variety of industries, which then experience rapid growth
comparable to the take-off industries. Workers become more skilled and specialized. Overall
capital per head increases as the economy matures. The structure of the economy changes
increasingly. Average rate of growth is maintained by a succession of new rapidly-growing
sectors

Characteristics:

i. Changes in the character of labour force (more organized, increased wages)

ii. Changes in the character of entrepreneurship

iii. Increase in investment from 10-20% of National income

iv. Old methods are replaced by new technology

v. Increase in exports

vi. Less dependent on other countries

vii. Increase in standard of living

viii. Increase in per capita income

Society approaches maturity. The economy shifts from production of heavy industry, such as
steel and energy, to consumer goods, like motor vehicles arid refrigerators. Further, with
progressive industrialisation and urbanisation of the economy values of people change in
favour 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.

Characteristics:

i. Attention shifts from problems of production to problems of consumption;

ii. Consumption of comforts and luxuries increase.

iii. Rate of investment rises above 20% of National Income

iv. Society assumes the role of a welfare state*

v. Migration of population from village to cities

vi. Increase in financial security

vii. More employment opportunity

viii. Extensive use of durable consumer goods like automobiles and household instruments

ix. Progressive and prosperous society in which “hunger is something one reads about and
poverty a memory”

*According to Rostow, there are three important ways to allocate the resources to achieve
welfare :

• Allocation of resources for military and foreign policy requirements;

• Redistribution of income through progressive taxes;

• Expansion of consumption levels beyond the basic necessities of life ( food, shelter,
clothing) like, education, health, infrastructure etc.
Examples of the Rostow’s model in action

Brazil and Mexico

Brazil and Mexico provide examples of Rostow´s economic development theory. Brazilian
late industrialization started after the World War II, allowed the country to reach the Take-
Off stage (with urbanization, and the creation of secondary sector) and start the Drive to
Maturity phase.

Mexican industrialization, driven by the participation of Mexican firms in the Global Value
Chains (GVC) of US manufacturing firms, also provides support to Rostow´s framework.

However, neither countries totally reached the Age of Mass Consumption status, given that
the average disposable income is quite low in Brazil.

There are also many economic discrepancies within the country, a fact also shared by
Mexico.

Therefore, although the model presents five stages with boundaries between them, Brazil and
Mexico provide examples of developing countries with characteristics in more than one stage
simultaneously.

Chile and Uruguay

Chile and Uruguay present interesting cases because the countries clearly present some
elements of the fifth era, the Age of Mass consumption, without a diversified industrial base,
a characteristic of the fourth phase.

In addition, both countries have small GDP and population, which can partially explain a
leapfrog of the Drive for Maturity phase.

Singapore

Industrialization, urbanization, and trade in the vein of Rostow's model are still seen by many
as a roadmap for a country's development.

Singapore is one of the best examples of a country that grew in this way and is now a notable
player in the global economy.

When it became independent in 1965, it did not seem to have any exceptional prospects for
growth.
However, it industrialized early, developing profitable manufacturing and high-tech
industries.

Singapore is now highly urbanized, with 100% of the population considered "urban."

It is one of the most sought-after trade partners in the international market, with a higher per-
capita income than many European countries.

Criticisms to the Model

Although Rostow’s Stages of Growth model is one of the most influential development
theories of the twentieth century, the framework receives some criticism.

First, the model was developed based on western capitalist countries, which were
industrialized and urbanized. Therefore, the model fails to explain the economic development
of new-western countries, such as China.

Second, Rostow´s paradigm does not discuss why certain countries seem to be stuck in
certain phases. For instance, countries in Southeast Asia, Africa, and Latin America have
received significant external finance but have been slow to generate growth as many have
remained stuck in Stages 1 or 2.

Third, the model seems to induce a sort of linearity and does not explain why some countries
reversed their economic growth. Venezuela, Zimbabwe, and Argentina, to some extent, are
societies that impoverished in the last decades.

Fourth, because the model was developed in the 1960s, it does not take into consideration the
economic drivers that occurred in the late 1990s (information technology, communications,
internet), the 2000s (digitization and creative industries) and the 2010s (Industry 4.0,
Artificial Intelligence).

Fifth, the model seems to be excessively pre-deterministic and shows no possibility of

Sixth, Rostow assumes that all countries have an equal chance to develop, regardless of
population size, natural resources, or location.
Finally, the stages or transition periods happen at varying lengths from country to country
and even from region to region, an issue not covered by the economic model.

References used: -

https://evodiokaltenecker.com/country-level-strategy-is-there-a-route-for-the-development-
of-countries/

https://www.yourarticlelibrary.com/economics/rostows-five-stages-of-growth-explained/
38235

https://en.wikipedia.org/wiki/Rostow%27s_stages_of_growth

http://www.cbmahavidyalaya.ac.in/studyMaterial/04323CBM_GEO_SEM-IVH__Rostows-
Mode_-10-04-2020.pdf

The Class PPT for Rostow’s Model