In an attempt to identify a framework by which the economic
development of nations can be analysed, W. Rostow proposed a five-stage
model which tried to show how, over a period of many decades, nations
develop from a traditional society to one of high mass consumption.
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).
STAGE-I : 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 and a high percentage of
notional wealth allocated to what Rostow calls "nonproductive" activities,
such as the military and religion.
Characteristics:
i. Predominance of agriculture.
iii. Industry inadequate due to lack of scientific knowledge.
iv. Labour productivity is low
vii. Conventional techniques.
STAGE-II: THE PRECONDITIONS 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,
Characteristics:
i. Societies are in a process of transition, building up conditions
which, in course of time, enable them to take-off;
ii. Rise in rate of savings and investment;
iii. Brodened 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-III : 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.
Characteristics:
i. In this period, growth becomes a normal condition of the
society;
ii. Begins with some sharp stimulus like political revolution,
innovation
iii. Investment rises 5-10% of the national income
iv. Substantial manufacturing sectors became developed,
v. More complex economy
requirements of take-off:
• • Rise in rate of investment and savings (>10%);
• • Development of one or more substantial manufacturing
sectors, with a high rate of growth.
STAGE-IV : THE DRIVE TO MATURITY
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.
Characteristics:
i. 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
STAGE-V : THE AGE OF MASS CONSUMPTION
A society approaches maturity. The economy shifts from
production of heavy industry, such as steel and energy, to
consumer goods, like motor vehicles arid refrigerators.
Characteristics:
i i. Attention shifts from problems of production to problems
of consumption;
ii ii. Consumption of comforts and luxuries increase.
iii iii. Rate of investment rises above 20% of National Income
iv iv. Society assumes the role of a welfare state*
v v. Migration of population from village to cities
vi vi. Increase in financial security
vii vii. More employment opportunity
i viii. Increase in per capita income
ii ix. Development of new sectors, because of linkage efforts,
which can be forward* or backword**
Note : A forward linkage* is created when investment in a particular
project encourages investment in subsequent stages of production. A
backward linkage** is created when a project encourages investment in
facilities that enable the project to succeed. –Hirschman
STAGE-V : THE AGE OF MASS CONSUMPTION
A society approaches maturity. The economy shifts from
production of heavy industry, such as steel and energy, to
consumer goods, like motor vehicles arid refrigerators.
Characteristics:
i i. Attention shifts from problems of production to problems
of consumption;
ii ii. Consumption of comforts and luxuries increase.
iii iii. Rate of investment rises above 20% of National Income
iv iv. Society assumes the role of a welfare state*
v v. Migration of population from village to cities
vi vi. Increase in financial security
vii vii. More employment opportunity
i viii. Extensive use of durable consumer goods like
automobiles and household instruments
ii 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.
