W.W. Rostow, The Stages of Economic Growth: A Non-Communist
Manifesto (Cambridge: Cambridge University Press, 1960), Chapter 2,
"The Five Stages of Growth--A Summary," pp. 4-16
CHAPTER 2
THE FIVE STAGES-OF-GROWTH--A SUMMARY
It is possible to identify all societies, in their economic
dimensions, as lying within one of five categories: the traditional
society, the preconditions for take-off, the take-off, the drive to
maturity, and the age of high mass-consumption.
THE TRADITIONAL SOCIETY
First, the traditional society. A traditional society is one whose
structure is developed within limited production functions, based on
pre-Newtonian science and technology, and on pre-Newtonian attitudes
towards the physical world. Newton is here used as a symbol for that
watershed in history when men came widely to believe that the external
world was subject to a few knowable laws, and was systematically capable
of productive manipulation.
The conception of the traditional society is, however, in no sense
static; and it would not exclude increases in output. Acreage could be
expanded; some ad hoc technical innovations, often highly
productive innovations, could be introduced in trade, industry and
agriculture; productivity could rise with, for example, the improvement
of irrigation works or the discovery and diffusion of a new crop. But
the central fact about the traditional society was that a ceiling
existed on the level of attainable output per head. This ceiling
resulted from the fact that the potentialities which flow from modern
science and technology were either not available or not regularly and
systematically applied.
Both in the longer past and in recent times the story of traditional
societies was thus a story of endless change. The area and volume of
trade within them and between them fluctuated, for example, with the
degree of political and social turbulence, the efficiency of central
rule, the upkeep of the roads. Population--and, within limits, the level
of life--rose and fell not only with the sequence of the harvests, but
with the incidence of war and of plague. Varying degrees of manufacture
developed; but, as in agriculture, the level of productivity was limited
by the inaccessibility of modern science, its applications, and its
frame of mind.
Generally speaking, these societies, because of the limitation on
productivity, had to devote a very high proportion of their resources to
agriculture; and flowing from the agricultural system there was an
hierarchical social structure, with relatively narrow scope--but some
scope--for vertical mobility. Family and clan connexions played a large
role in social organization. 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. In Chinese villages, for example, there was an endless
struggle to acquire or to avoid losing land, yielding a situation where
land rarely remained within the same family for a century.
Although central political rule--in one form or another--often
existed in traditional societies, transcending the relatively
self-sufficient regions, the centre of gravity of political power
generally lay in the regions, in the hands of those who owned or
controlled the land. The landowner maintained fluctuating but usually
profound influence over such central political power as existed, backed
by its entourage of civil servants and soldiers, imbued with attitudes
and controlled by interests transcending the regions.
In terms of history then, with the phrase 'traditional society' we
are grouping the whole pre-Newtonian world : the dynasties in China; the
civilization of the Middle East and the Mediterranean; the world of
medieval Europe. And to them we add the post-Newtonian societies which,
for a time, remained untouched or unmoved by man's new capability for
regularly manipulating his environment to his economic advantage.
To place these infinitely various, changing societies in a single
category, on the ground that they all shared a ceiling on the
productivity of their economic techniques, is to say very little indeed.
But we are, after all, merely clearing the way in order to get at the
subject of this book; that is, the post-traditional societies, in which
each of the major characteristics of the traditional society was altered
in such ways as to permit regular growth: its politics, social
structure, and (to a degree) its values, as well as its economy.
THE PRECONDITIONS FOR TAKE-OFF
The second stage of growth embraces societies in the process of
transition; that is, the period when the preconditions for take-off are
developed; for it takes time to transform a traditional society in the
ways necessary for it to exploit the fruits of modern science, to fend
off diminishing returns, and thus to enjoy the blessings and choices
opened up by the march of compound interest.
The preconditions for take-off were initially developed, in a clearly
marked way, in Western Europe of the late seventeenth and early
eighteenth centuries as the insights of modern science began to be
translated into new production functions in both agriculture and
industry, in a setting given dynamism by the lateral expansion of world
markets and the international competition for them. But all that lies
behind the break-up of the Middle Ages is relevant to the creation of
the preconditions for take-off in Western Europe. Among the Western
European states, Britain, favoured by geography, natural resources,
trading possibilities, social and political structure, was the first to
develop fully the preconditions for take-off.
The more general case in modern history, however, saw the stage of
preconditions arise not endogenously but from some external intrusion by
more advanced societies. These invasions-literal or figurative-shocked
the traditional society and began or hastened its undoing; but they also
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.
The idea spreads not merely that economic progress is possible, hut
that economic progress is a necessary condition for some other purpose,
judged to be good: be it national dignity, private profit, the general
welfare, or a better life for the children. Education, for some at
least, broadens and changes to suit the needs of modern economic
activity. New types of enterprising men come forward--in the private
economy, in government, or both--willing to mobilize savings and to take
risks in pursuit of profit or modernization. Banks and other
institutions for mobilizing capital appear. Investment increases,
notably in transport, communications, and in raw materials in which
other nations may have an economic interest. The scope of commerce,
internal and external, widens. And, here and there, modern manufacturing
enterprise appears, using the new methods. But all this activity
proceeds at a limited pace within an economy and a society still mainly
characterized by traditional low-productivity methods, by the old social
structure and values, and by the regionally based political institutions
that developed in conjunction with them.
In many recent cases, for example, the traditional society persisted
side by side with modern economic activities, conducted for limited
economic purposes by a colonial or quasi-colonial power.
Although the period of transition--between the traditional society
and the take-off--saw major changes in both the economy itself and in
the balance of social values, a decisive feature was often political.
Politically, the building of an effective centralized national state--on
the basis of coalitions touched with a new nationalism, in opposition to
the traditional landed regional interests, the colonial power, or both,
was a decisive aspect of the preconditions period; and it was, almost
universally, a necessary condition for take-off.
There is a great deal more that needs to be said about the
preconditions period, but we shall leave it for chapter 3, where the
anatomy of the transition from a traditional to a modern society is
examined.
THE TAKE-OFF
We come now to the great watershed in the life of modern societies:
the third stage in this sequence, the take-off. The take-off is the
interval when the old blocks and resistances to steady growth are
finally overcome. The forces making for economic progress, which yielded
limited bursts and enclaves of modern activity, expand and come to
dominate the society. Growth becomes its normal condition. Compound
interest becomes built, as it were, into its habits and institutional
structure.
In Britain and the well-endowed parts of the world populated
substantially from Britain (the United States, Canada etc.) the
proximate stimulus for take-off was mainly (but not wholly)
technological. In the more general case, the take-off awaited not only
the build-up of social overhead capital and a surge of technological
development in industry and agriculture, but also the emergence to
political power of a group prepared to regard the modernization of the
economy as serious, high-order political business.
During the take-off, the rate of effective investment and savings may
rise from, say, 5 % of the national income to 10% or more; although
where heavy social overhead capital investment was required to create
the technical preconditions for take-off the investment rate in the
preconditions period could be higher than 5%, as, for example, in Canada
before the 1890's and Argentina before 1914. In such cases capital
imports usually formed a high proportion of total investment in the
preconditions period and sometimes even during the take-off itself, as
in Russia and Canada during their pre-1914 railway booms.
During the take-off new industries expand rapidly, yielding profits a
large proportion of which are reinvested in new plant; and these new
industries, in turn, stimulate, through their rapidly expanding
requirement for factory workers, the services to support them, and for
other manufactured goods, a further expansion in urban areas and in
other modern industrial plants. The whole process of expansion in the
modern sector yields an increase of income in the hands of those who not
only save at high rates but place their savings at the disposal of those
engaged in modern sector activities. The new class of entrepreneurs
expands; and it directs the enlarging flows of investment in the private
sector. The economy exploits hitherto unused natural resources and
methods of production.
New techniques spread in agriculture as well as industry, as
agriculture is commercialized, and increasing numbers of farmers are
prepared to accept the new methods and the deep changes they bring to
ways of life. The revolutionary changes in agricultural productivity are
an essential condition for successful take-off; for modernization of a
society increases radically its bill for agricultural products. In a
decade or two both the basic structure of the economy and the social and
political structure of the society are transformed in such a way that a
steady rate of growth can be, thereafter, regularly sustained.
As indicated in chapter 4, one can approximately allocate the
take-off of Britain to the two decades after 1783; France and the United
States to the several decades preceding 1860; Germany, the third quarter
of the nineteenth century; Japan, the fourth quarter of the nineteenth
century; Russia and Canada the quarter-century or so preceding 1914;
while during the 1950's India and China have, in quite different ways,
launched their respective take-offs.
THE DRIVE TO MATURITY
After take-off there follows a long interval of sustained if
fluctuating progress, as the 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 make-up 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 society makes such terms as it will with the requirements of
modern efficient production, balancing off the new against the older
values and institutions, or revising the latter in such ways as to
support rather than to retard the growth process.
Some sixty years after take-off begins (say, forty years after the
end of take-off) what may be called maturity is generally attained. The
economy, focused during the take-off around a relatively narrow complex
of industry and technology, has extended its range into more refined and
technologically often more complex processes; for example, there may be
a shift in focus from the coal, iron, and heavy engineering industries
of the railway phase to machine-tools, chemicals, and electrical
equipment. This, for example, was the transition through which Germany,
Britain, France, and the United States had passed by the end of the
nineteenth century or shortly thereafter. But there are other sectoral
patterns which have been followed in the sequence from take-off to
maturity, which are considered in chapter 5.
Formally, we can define maturity as the stage in which an economy
demonstrates the capacity to move beyond the original industries which
powered its take-off and to absorb and to apply efficiently over a very
wide range of its resources--if not the whole range--the most advanced
fruits of (then) modern technology. This is the stage in which an
economy demonstrates that it has the technological and entrepreneurial
skills to produce not everything, but anything that it chooses to
produce. It may lack (like contemporary Sweden and Switzerland, for
example) the raw materials or other supply conditions required to
produce a given type of output economically; but its dependence is a
matter of economic choice or political priority rather than a
technological or institutional necessity.
Historically, it would appear that something like sixty years was
required to move a society from the beginning of take-off to maturity.
Analytically the explanation for some such interval may lie in the
powerful arithmetic of compound interest applied to the capital stock,
combined with the broader consequences for a society's ability to absorb
modern technology of three successive generations living under a regime
where growth is the normal condition. But, clearly, no dogmatism is
justified about the exact length of the interval from take-off to
maturity.
THE AGE OF HIGH MASS-CONSUMPTION
We come now to the age of high mass-consumption, where, in time, the
leading sectors shift towards durable consumers' goods and services: a
phase from which Americans are beginning to emerge; whose not
unequivocal joys Western Europe and Japan are beginning energetically to
probe; and with which Soviet society is engaged in an uneasy flirtation.
As societies achieved maturity in the twentieth century two things
happened: real income per head rose to a point where a large number of
persons gained a command over consumption which transcended basic food,
shelter, and clothing; and the structure of the working force changed in
ways which increased not only the proportion of urban to total
population, but also the proportion of the population working in offices
or in skilled factory jobs-aware of and anxious to acquire the
consumption fruits of a mature economy.
In addition to these economic changes, the society ceased to accept
the further extension of modern technology as an overriding objective.
It is in this post-maturity stage, for example, that, through the
political process, Western societies have chosen to allocate increased
resources to social welfare and security. The emergence of the welfare
state is one manifestation of a society's moving beyond technical
maturity; but it is also at this stage that resources tend increasingly
to be directed to the production of consumers' durables and to the
diffusion of services on a mass basis, if consumers' sovereignty reigns.
The sewing-machine, the bicycle, and then the various electric-powered
household gadgets were gradually diffused. Historically, however, the
decisive element has been the cheap mass automobile with its quite
revolutionary effects--social as well as economic--on the life and
expectations of society.
For the United States, the turning point was, perhaps, Henry Ford's
moving assembly line of 1913-14; but it was in the 1920's, and again in
the post-war decade, 1946-56, that this stage of growth was pressed to,
virtually, its logical conclusion. In the 1950's Western Europe and
Japan appear to have fully entered this phase, accounting substantially
for a momentum in their economies quite unexpected in the immediate
post-war years. The Soviet Union is technically ready for this stage,
and, by every sign, its citizens hunger for it; but Communist leaders
face difficult political and social problems of adjustment if this stage
is launched.
BEYOND CONSUMPTION
Beyond, it is impossible to predict, except perhaps to observe that
Americans, at least, have behaved in the past decade as if diminishing
relative marginal utility sets in, after a point, for durable consumers'
goods; and they have chosen, at the margin, larger families- behaviour
in the pattern of Buddenbrooks dynamics.*
* In Thomas Mann's novel of three generations, the first sought
money; the second, born to money, sought social and civic position;
the third, born to comfort and family prestige, looked to the life of
music. The phrase is designed to suggest, then, the changing
aspirations of generations, as they place a low value on what they
take for granted and seek new forms of satisfaction.
Americans have behaved as if, having been born into a system that
provided economic security and high mass-consumption, they placed a
lower valuation on acquiring additional increments of real income in the
conventional form as opposed to the advantages and values of an enlarged
family. But even in this adventure in generalization it is a shade too
soon to create--on the basis of one case--a new stage-of-growth, based
on babies, in succession to the age of consumers' durables: as
economists might say, the income-elasticity of demand for babies may
well vary from society to society. But it is true that the implications
of the baby boom along with the not wholly unrelated deficit in social
overhead capital are likely to dominate the American economy over the
next decade rather than the further diffusion of consi' mers' durables.
Here then, in an impressionistic rather than an analytic way, are the
stages-of-growth which can be distinguished once a traditional society
begins its modernization: the transitional period when the preconditions
for take-off are created generally in response to the intrusion of a
foreign power, converging with certain domestic forces making for
modernization; the take-off itself; the sweep into maturity generally
taking up the life of about two further generations; and then, finally,
if the rise of income has matched the spread of technological virtuosity
(which, as we shall see, it need not immediately do) the diversion of
the fully mature economy to the provision of durable consumers' goods
and services (as well as the welfare state) for its increasingly
urban-and then suburban-population. Beyond lies the question of whether
or not secular spiritual stagnation will arise, and, if it does, how man
might fend it off: a matter considered in chapter 6.
In the four chapters that follow we shall take a harder, and more
rigorous look at the preconditions, the take-off the drive to maturity,
and the processes which have led to the age of high mass-consumption.
But even in this introductory chapter one characteristic of this system
should be made clear.
A DYNAMIC THEORY OF PRODUCTION
These stages are not merely descriptive. They are not merely a way of
generalizing certain factual observations about the sequence of
development of modern societies. They have an inner logic and
continuity. They have an analytic bone-structure, rooted in a dynamic
theory of production.
The classical theory of production is formulated under essentially
static assumptions which.freeze-or permit only once-over change- in the
variables most relevant to the process of economic growth. As modern
economists have sought to merge classical production theory with
Keynesian income analysis they have introduced the dynamic variables:
population, technology, entrepreneurship etc. But they have tended to do
so in forms so rigid and general that their models cannot grip the
essential phenomena of growth, as they appear to an economic historian.
We require a dynamic theory of production which isolates not only the
distribution of income between consumption, saving, and investment (and
the balance of production between consumers and capital goods) but which
focuses directly and in some detail on the composition of investment and
on developments within particular sectors of the economy. The argument
that follows is based on such a flexible, disaggregated theory of
production.
When the conventional limits on the theory of production are widened,
it is possible to define theoretical equilibrium positions not only for
output, investment, and consumption as a whole, but for each sector of
the economy.*
* W.W. Rostow, The Process of Economic Growth (Oxford,
1953), especially chapter iv. Also 'Trends in the Allocation of
Resources in Secular Growth", chapter 15 of Economic Progress,
ed. Leon H. Dupriez, with the assistance of Douglas C. Hague (Louvain,
1955).
Within the framework set by forces determining the total level of
output, sectoral optimum positions are determined on the side of demand,
by the levels of income and of population, and by the character of
tastes; on the side of supply, by the state of technology and the
quality of entrepreneurship, as the latter determines the proportion of
technically available and potentially profitable innovations actually
incorporated in the capital stock.*
* In a closed model, a dynamic theory of production must account
for changing stocks of basic and applied science, as sectoral aspects
of investment, which is done in The Process of Economic Growth,
especially pp. 22-5.
In addition, one must introduce an extremely significant empirical
hypothesis: namely, that deceleration is the normal optimum path of a
sector, due to a variety of factors operating on it, from the side of
both supply and demand.*
* Process of Economic Growth, pp. 96-103.
The equilibria which emerge from the application of these criteria are a
set of sectoral paths, from which flows, as first derivatives, a
sequence of optimum patterns of investment.
Historical patterns of investment did not, of course, exactly follow
these optimum patterns. They were distorted by imperfections in the
private investment process, by the policies of governments, and by the
impact of wars. Wars temporarily altered the profitable directions of
investment by setting up arbitrary demands and by changing the
conditions of supply; they destroyed capital; and, occasionally, they
accelerated the development of new technology relevant to the peacetime
economy and shifted the political and social framework in ways conducive
to peacetime growth.* The historical sequence of business-cycles and
trend-periods results from
* Process of Economic Growth, chapter VII, especially pp.
164-7.
these deviations of actual from optimal patterns; and such
fluctuations, along with the impact of wars, yield historical paths of
growth which differ from those which the optima, calculated before the
event, would have yielded.
Nevertheless, the economic history of growing societies takes a part
of its rude shape from the effort of societies to approximate the
optimum sectoral paths.
At any period of time, the rate of growth in the sectors will vary
greatly; and it is possible to isolate empirically certain leading
sectors, at early stages of their evolution, whose rapid rate of
expansion plays an essential direct and indirect role in maintaining the
overall momentum of the economy. * For some purposes it is
* For a discussion of the leading sectors, their direct and
indirect consequences; and the diverse routes of their impact, see
'Trends in the Allocation of Resources in Secular Growth', loc.
cit.
useful to characterize an economy in terms of its leading sectors;
and a part of the technical basis for the stages of growth lies in the
changing sequence of leading sectors. In essence it is the fact that
sectors tend to have a rapid growth-phase, early in their life, that
makes it possible and useful to regard economic history as a sequence of
stages rather than merely as a continuum, within which nature never
makes a jump.
The stages-of-growth also require, however, that elasticities of
demand be taken into account, and that this familiar concept be widened;
for these rapid growth phases in the sectors derive not merely from the
discontinuity of production functions but also from high price- or
income-elasticities of demand. Leading sectors are determined not merely
by the changing flow of technology and the changing willingness of
entrepreneurs to accept available innovations: they are also partially
determined by those types of demand which have exhibited high elasticity
with respect to price, income, or both.
The demand for resources has resulted, however, not merely from
demands set up by private taste and choice, but also from social
decisions and from the policies of governments--whether democratically
responsive or not. It is necessary, therefore, to look at the choices
made by societies in the disposition of their resources in terms which
transcend conventional market processes. It is necessary to look at
their welfare functions, in the widest sense, including the non-economic
processes which determined them.
The course of birth-rates, for example, represents one form of
welfare choice made by societies, as income has changed; and population
curves reflect (in addition to changing death-rates) how the calculus
about family size was made in the various stages; from the usual (but
not universal) decline in birth-rates, during or soon after the
take-off, as urbanization took hold and progress became a palpable
possibility, to the recent rise, as Americans (and others in societies
marked by high mass-consumption) have appeared to seek in larger
families values beyond those afforded by economic security and by an
ample supply of durable consumers' goods and services.
And there are other decisions as well that societies have made as the
choices open to them have been altered by the unfolding process of
economic growth; and these broad collective decisions, determined by
many factors-deep in history, culture, and the active political
process-outside the market-place, have interplayed with the dynamics of
market demand, risk-taking, technology and entrepreneurship, to
determine the specific content of the stages of growth for each society.
How, for example, should the traditional society react to the
intrusion of a more advanced power: with cohesion, promptness, and
vigour, like the Japanese; by making a virtue if fecklessness, like the
oppressed Irish of the eighteenth century; by slowly and reluctantly
altering the traditional society, like the Chinese?
When independent modern nationhood is achieved, how should the
national energies be disposed: in external aggression, to right old
wrongs or to exploit newly created or perceived possibilities for
enlarged national power; in completing and refining the political
victory of the new national government over old regional interests; or
in modernizing the economy?
Once growth is under way, with the take-off, to what extent should
the requirements of diffusing modern technology and maximizing the rate
of growth be moderated by the desire to increase consumption per capita
and to increase welfare?
When technological maturity is reached, and the nation has at its
command a modernized and differentiated industrial machine, to what ends
should it be put, and in what proportions: to increase social security,
through the welfare state; to expand mass-consumption into the range of
durable consumers' goods and services; to increase the nation's stature
and power on the world scene; or to increase leisure?
And then the question beyond, where history offers us only fragments:
what to do when the increase in real income itself loses its charm?
Babies, boredom, three-day week-ends, the moon, or the creation of new
inner, human frontiers in substitution for the imperatives of scarcity?
In surveying now the broad contours of each stage-of-growth, we are
examining, then, not merely the sectoral structure of economies, as they
transformed themselves for growth, and grew; we are also examining a
succession of strategic choices made by various societies concerning the
disposition of their resources, which include but transcend the income-
and price-elasticities of demand.
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