Walt Rostow took a historical approach in suggesting that developed countries have tended to

pass through 5 stages to reach their current degree of economic development.

These are:

1. Traditional society. This is an agricultural economy of mainly subsistence farming,

little of which is traded. The size of the capital stock is limited and of low quality
resulting in very low labour productivity and little surplus output left to sell in
domestic and overseas markets
2. Pre-conditions for take-off. Agriculture becomes more mechanised and more
output is traded. Savings and investment grow although they are still a small
percentage of national income (GDP). Some external funding is required - for
example in the form of overseas aid or perhaps remittance incomes from migrant
workers living overseas
3. Take-off. Manufacturing industry assumes greater importance, although the
number of industries remains small. Political and social institutions start to
develop - external finance may still be required. Savings and investment grow,
perhaps to 15% of GDP. Agriculture assumes lesser importance in relative terms
although the majority of people may remain employed in the farming sector.
There is often a dual economy apparent with rising productivity and wealth in
manufacturing and other industries contrasted with stubbornly low productivity
and real incomes in rural agriculture.
4. Drive to maturity. Industry becomes more diverse. Growth should spread to
different parts of the country as the state of technology improves - the economy
moves from being dependent on factor inputs for growth towards making better
use of innovation to bring about increases in real per capita incomes
5. Age of mass consumption. Output levels grow, enabling increased consumer
expenditure. There is a shift towards tertiary sector activity and the growth is
sustained by the expansion of a middle class of consumers.

These countries are ranked lowest in terms of the 2015 Human Development Index - many of
these low-income countries remain heavily dependent on primary commodities.

Evaluation of Rostow's Five Stages of Economic Growth Model

 There is overlap with the Harrod-Domar model i.e. stages 2 and 3 require
increased saving and investment; Stage 4 requires improvements in technology,
which reduces the capital-output ratio.
 Stages 2 and 3 call for increased savings and investment but many households
may not have the funds to save; the banking channel between savers and firms
may be inadequate; the productivity of individual investment projects may
depend upon complementary investment in infrastructure.
  Some Sub Saharan African countries have received significant external
finance but have been slow to generate growth - many have remained stuck in
Stages 1 or 2.
 When the external finance has come in the shape of loans from developed
countries, interest charges have been incurred which have acted as a drag on
economic growth.
 Simon Kuznets threw doubts upon Rostow's theory. He argued that many
countries which have now reached developed status did so without seeing a
significant increase in their savings rate.
 The theory does not account for exceptions, e.g. falling output in the USSR under
a communist regime; the corrupt and failing government in Zimbabwe has
reversed development advances; increased globalisation means that a country's
growth rate does not lie solely in its own hands and international competition and
protectionism may prevent an economy from moving through the latter stages.

The traditional society[edit]

An economy in this stage has a limited production function which barely attains the minimum level of
potential output. This does not entirely mean that the economy's production level is static. The output
level can still be increased, as there was often a surplus of uncultivated land which can be used for
increasing agricultural production. Modern science and technology has yet to be introduced. As
a result, these pre-Newtonian societies, unaware of the possibilities to manipulate the external world,
rely heavily on manual labor and self-sufficiency to survive. [7] States and individuals utilize
irrigation systems in many instances, but most farming is still purely for subsistence. There
have been technological innovations, but only on ad hoc basis. All of that this can result in
increases in output, but never beyond an upper limit which cannot be crossed. Trade is
predominantly regional and local, largely done through barter, and the monetary system is
not well developed. Investment's share never exceeds 5% of total economic production.
Countries in this stage could include Ghana and Togo.
Wars, famines and epidemics like plague cause initially expanding populations to halt or shrink,
limiting the single greatest factor of production: human manual labor. Volume fluctuations in trade
due to political instability are frequent; historically, trading was subject to great risk and transport of
goods and raw materials was expensive, difficult, slow and unreliable. The manufacturing sector
and other industries have a tendency to grow but are limited by inadequate scientific
knowledge and a "backward" or highly traditionalist frame of mind which contributes to low
labour productivity. In this stage, some regions are entirely self-sufficient.
In settled agricultural societies before the Industrial Revolution, a hierarchical social
structure relied on near-absolute reverence for tradition, and an insistence on obedience and
submission. This resulted in concentration of political power in the hands of landowners in
most cases; everywhere, family and lineage, and marriage ties, constituted the primary social
organization, along with religious customs, and the state only rarely interacted with local
populations and in limited spheres of life. This social structure was generally feudalistic in
nature. Under modern conditions, these characteristics have been modified by outside
influences, but the least developed regions and societies fit this description quite accurately.

The preconditions for take-off[edit]

In the second stage of economic growth the economy undergoes a process of change for building up
of conditions for growth and take off. Rostow said that these changes in society and the economy
had to be of fundamental nature in the socio-political structure and production techniques. [4] This
pattern was followed in Europe, parts of Asia, the Middle East and Africa. There is also a second or
third pattern in which he said that there was no need for change in socio-political structure because
these economies were not deeply caught up in older, traditional social and political structures. The
only changes required were in economic and technical dimensions. The nations which followed this
pattern were in North America and Oceania (New Zealand and Australia).
There are three important dimensions to this transition: firstly, the shift from an agrarian to
an industrial or manufacturing society begins, albeit slowly. Secondly, trade and other
commercial activities of the nation broaden the market's reach not only to neighboring areas
but also to far-flung regions, creating international markets. Lastly, the surplus attained
should not be wasted on the conspicuous consumption of the land owners or the state, but
should be spent on the development of industries, infrastructure and thereby prepare for
self-sustained growth of the economy later on. Furthermore, agriculture becomes
commercialized and mechanized via technological advancement; shifts increasingly towards
cash or export-oriented crops; and there is a growth of agricultural entrepreneurship.[8]
The strategic factor is that investment level should be above 5% of the national income. This
rise in investment rate depends on many sectors of the economy. According
to Rostow capital formation depends on the productivity of agriculture and the creation of
social overhead capital. Agriculture plays a very important role in this transition process as
the surplus quantity of the produce is to be utilized to support an increasing urban
population of workers and also becomes a major exporting sector, earning foreign exchange
for continued development and capital formation. Increases in agricultural productivity also
lead to expansion of the domestic markets for manufactured goods and processed
commodities, which adds to the growth of investment in the industrial sector.
Social overhead capital creation can only be undertaken by government, in Rostow's view.
Government plays the driving role in development of social overhead capital as it is rarely
profitable, it has a long gestation period, and the pay-offs accrue to all economic sectors, not
primarily to the investing entity; thus the private sector is not interested in playing a major
role in its development.
All these changes effectively prepare the way for "take-off" only if there is basic change in
attitude of society towards risk taking, changes in working environment, and openness to
change in social and political organisations and structures. According to Rostow, the
preconditions to take-off begins from an external intervention by more developed and
advanced societies, which "set in motion ideas and sentiments which initiated the process by
which a modern alternative to the traditional society was constructed out of the old
culture."[9] The pre-conditions of take-off closely track the historic stages of the (initially)
British Industrial Revolution.[10]
Referring to the graph of savings and investment, notably, there is a steep increase in the rate of
savings and investment from the stage of "Pre Take-off" till "Drive to Maturity:" then, following that
stage, the growing rate of savings and investment moderates. This initial and accelerating steep
increase in savings and investment is a pre-condition for the economy to reach the "Take-
off" stage and far beyond.

The take-off[edit]
This stage is characterized by dynamic economic growth. As Rostow suggests, all is
premised on a sharp stimulus (or multiple stimuli) that is/are any or all of economic, political
and technological change. The main feature of this stage is rapid, self-sustained growth. [4]
[10]
Take-off occurs when sector led growth becomes common and society is driven more by
economic processes than traditions. At this point, the norms of economic growth are well
established and growth becomes a nation's "second nature" and a shared goal. [1] In
discussing the take-off, Rostow is noted to have adopted the term "transition", which
describes the process of a traditional economy becoming a modern one. After take-off, a
country will generally take as long as fifty to one hundred years to reach the mature stage
according to the model, as occurred in countries that participated in the Industrial Revolution
and were established as such when Rostow developed his ideas in the 1950s.
Per Rostow there are three main requirements for take-off:
1. The rate of productive investment should rise from approximately 5% to over 10% of
national income or net national product

2. The development of one or more substantial manufacturing sectors, with a high rate of
growth;

3. The existence or quick emergence of a political, social and institutional framework which
exploits the impulses to expansion in the modern sector and the potential external economy
effects of the take-off.[3]

The third requirement implies that the needed capital must be mobilized from domestic
resources and steered into the economy, rather than into domestic or state consumption.
Industrialization becomes a crucial phenomenon as it helps to prepare the basic structure for
structural changes on a massive scale. Rostow says that this transition does not follow a set
trend as there are a variety of different motivations or stimulus which began this growth
process.
Take off requires a large and sufficient amount of loanable funds for expansion of the
industrial sector which generally come from two sources which are:

1. Shifts in income flows by way of taxation, implementation of land reforms and various
other fiscal measures.
2. Re-investment of profits earned from foreign trade as has been observed in many East
Asian countries. While there are other examples of "Take-off" based on rapidly
increasing demand for domestically produced goods for sale in domestic markets,
more countries have followed the export-based model, overall and in the recent past.
The US, Canada, Russia and Sweden are examples of domestically based "take-off";
all of them, however, were characterized by massive capital imports and rapid
adoption of their trading partners' technological advances. [4][11] This entire process of
expansion of the industrial sector yields an increase in rate of return to some
individuals who save at high rates and invest their savings in the industrial sector
activities. The economy exploit their underutilized natural resources to increase their
production.[1]

Tentative take-off dates[3]

The take-off also needs a group of entrepreneurs in the society who pursue innovation and
accelerate the rate of growth in the economy. For such an entrepreneurial class to develop, firstly,
an ethos of "delayed gratification", a preference for capital accumulation over expenditure, and high
tolerance of risk must be present. Secondly, entrepreneurial groups typically develop because they
can not secure prestige and power in their society via marriage, via participating in well-established
industries, or through government or military service (among other routes to prominence) because of
some disqualifying social or legal attribute; and lastly, their rapidly changing society must tolerate
unorthodox paths to economic and political power.
The ability of a country to make it through this stage depends on the following major factors:

 Existence of enlarged, sustained effective demand for the product of key sectors.
 Introduction of new productive technologies and techniques in these sectors.
 The society's increasing capacity to generate or earn enough capital to complete the take-off
transition.
 Activities in the key sector should induce a chain of growth in other sectors of the economy, that
also develop rapidly.
An example of a country in the Take-off stage of development is Equatorial Guinea. It has the largest
increases in GDP growth since 1980 and the rate of productive investment has risen from 5% to
over 10% of income or product.
In the table note that Take-off periods of different countries are the same as the industrial revolution
in those countries.

The drive to maturity[edit]

After take-off, there follows a long interval of sustained growth known as the stage of drive to
maturity. Rostow defines it "as the period when a society has effectively applied the range of
modern technology to the bulk of its resources." [3][4] Now regularly growing economy drives to
extend modern technology over the whole front of its economic activity. Some 10-20% of the
national income is steadily invested, permitting output regularly to outstrip the increase in
population. The makeup of the economy changes unceasingly as technique improves, new
industries accelerate, older industries level off. The economy finds its place in the
international economy: goods formerly imported are produced at home; new import
requirements develop, and new export commodities to match them. The leading sectors in an
economy will be determined by the nature of resource endowments and not only by
technology.

Tentative drive to maturity dates[3]

On comparing the dates of take-off and drive to maturity, these countries reached the stage of
maturity in approximately 60 years.
The structural changes in the society during this stage are in three ways:

 Work force composition in agriculture shifts from 75% of the working population to 20%.
The workers acquire greater skill and their wages increase in real terms.
 The character of leadership changes significantly in the industries and a high degree of
professionalism is introduced
 Environmental and health cost of industrialization is recognized and policy changes are
thus made.
During this stage a country has to decide whether the industrial power and technology it has
generated is to be used for the welfare of its people or to gain supremacy over others, or the
world in toto.
A prime example of a country in the Drive to Maturity stage is South Africa. It is developing a
world-class infrastructure- including a modern transport network, widely available energy,
and sophisticated telecommunications facilities. Additionally, the commercial farm sector shed
140,000 jobs, a decline of roughly 20%, in the eleven-year period from 1988 to 1998.
This diversity leads to reduction in poverty rate and increasing standards of living, as the society no
longer needs to sacrifice its comfort in order to build up certain sectors. [12]

The age of high mass-consumption[edit]

The age of high mass-consumption refers to the period of contemporary comfort afforded by
many western nations, wherein consumers concentrate on durable goods, and hardly
remember the subsistence concerns of previous stages. Rostow uses the Buddenbrooks
dynamics metaphor to describe this change in attitude. In Thomas Mann's 1901
novel, Buddenbrooks, a family is chronicled for three generations. The first generation is interested
in economic development, the second in its position in society. The third, already having money and
prestige, concerns itself with the arts and music, worrying little about those previous, earthly
concerns. So too, in the age of high mass-consumption, a society is able to choose between
concentrating on military and security issues, on equality and welfare issues, or on
developing great luxuries for its upper class. Each country in this position chooses its own
balance between these three goals. There is a desire to develop an egalitarian society and
measures are taken to reach this goal. According to Rostow, a country tries to determine its
uniqueness and factors affecting it are its political, geographical and cultural structure and also
values present in its society.[12]
Historically, the United States is said to have reached this stage first, followed by other
western European nations, and then Japan in the 1950s. [4]

Beyond consumption (the search for quality)[edit]

When proposed, this step is more of a theoretical speculation by Rostow rather than an analytical
step in the process by Rostow.[13] Individuals begin having larger families and do not value income as
a pre-requisite for more vacation days. Consumer products become more durable and more diverse.
[13]
New Americans will behave in a way where the high economic security and level mass
consumption is considered normal. Rostow does make the point that it is possible with the large
baby boom it could either cause economic issues or dictate an even larger diffusion of consumer
goods.[13] With increasing urban and suburban population there will be undoubtedly an increase in
consumer goods and services as well.[13]
This stage was later discussed in Rostow's book Politics and the Stages of Growth published in
1971, in which he called the stage "the search for quality".[2]

Criticism of the model[edit]

1. Rostow is historical in the sense that the end result is known at the outset and is derived
from the historical geography of a developed, bureaucratic society.
2. Rostow is mechanical in the sense that the underlying motor of change is not disclosed and
therefore the stages become little more than a classificatory system based on data from
developed countries.
 3. His model is based on American and European history and defines the American norm of
high mass-consumption as integral to the economic development process of all
industrialized societies.
4. His model assumes the inevitable adoption of Neoliberal trade policies which allow the
manufacturing base of a given advanced polity to be relocated to lower-wage regions.
5. Rostow's model does not apply to the Asian and the African countries as events in these
countries are not justified in any stage of his model.[citation needed]
6. The stages are not identifiable properly as the conditions of the take-off and pre take-off
stage are very similar and also overlap.
7. According to Rostow growth becomes automatic by the time it reaches the maturity stage but
Kuznets asserts that no growth can be automatic, there is always a need for a push. [citation needed]
8. There appear to be two parallel theories of 'take-off' one is that 'take-off' is a sectoral and
non-linear notion, and the other is that it is highly aggregative.[14]
Rostow's thesis is biased towards a western model of modernization, but at the time of Rostow the
world's only mature economies were in the west, and no controlled economies were in the "era of
high mass-consumption." The model de-emphasizes differences between sectors in capitalistic vs.
communistic societies, but seems to innately recognize that modernization can be achieved in
different ways in different types of economies.[citation needed]
Another assumption that Rostow took is of trying to fit economic progress into a linear system. This
assumption is questioned due to empirical evidence of many countries making 'false starts' then
reaching a degree of progress and change and then slipping back. E.g.: In the case of
contemporary Russia slipping back from high mass-consumption to a country in transition.
Another criticism of Rostow's work is that it considers large countries with a large population (Japan),
with natural resources available at just the right time in its history (Coal in Northern European
countries), or with a large land mass (Argentina). He has little to say and indeed offers little hope for
small countries, such as Rwanda, which do not have such advantages. Neo-liberal economic
theory to Rostow, and many others, does offer hope to much of the world that economic maturity is
coming and the age of high mass-consumption is nigh. This does leave a potential "grim meathook
future" for the outliers, which do not have the resources, political will, or external backing to
become competitive with already developed economies.[15] (See Dependency theory)