global inequality

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The Five Stages of Growth

W. W. Rostow

Early research on economic underdevelopment suggested that the problem was only short-term and that in the end all countries would become rich. In this excerpt from W. W. Rostow's classic work. The Stages of Economic Growth, Rostow outlines this optimistic scenario by positing five stages of economic development all societies even¬ tually experience as they mature into industrialized developed coun¬ tries: tradition, the preconditions for takeoff, the takeoff, the drive to maturity, and the age of high mass consumption. Although this tremendously influential publication did not focus specifically on the causes of the gaps, the author suggests the reason they arise and their potential resolution. As a country moves out of the traditional stage and prepares for economic takeoff, its economy begins to grow much faster than the economies of countries that remain in the first stage. The gap between rich and poor would then be explained by the fact that not all countries enter the development process at the same time. Thus the gap between rich and poor countries would be expected to disappear as the countries progress into the later stages of growth. As a country progresses through the stages of development, those who adopt the new economic rules and suc¬ ceed accumulate the profits of their success and internal inequality arises. As more people join the monied economy and play by the new rules, the extent of the inequality should diminish.

Reprinted with permission of Cambridge University Press from The Stages of Economic Growth by W. W. Rostow, pp. 4-12. New York: Cambridge University

Press, 1990.

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10 W. W. ROSTOW

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 physi¬

cal 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 manipu¬

lation. The conception of the traditional society is, however, in no sense stat¬

ic; and it would not exclude increases in output. Acreage could be expand¬

ed; some ad hoc technical innovations, often highly productive innova¬

tions, 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 tradi¬

tional 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 regu¬

larly and systematically applied.

Both in the longer past and in recent times the story of traditional soci¬

eties 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 agri¬

culture, the level of productivity was limited by the inaccessibility of mod¬

em science, its applications, and its frame of mind.

Generally speaking, these societies, because of the limitation on pro¬

ductivity, had to devote a very high proportion of their resources to agricul¬

ture; and flowing from the agricultural system there was an hierarchical

social structure, with relatively narrow scope—but some scope—for verti¬

cal mobility. Family and clan connexions played a large role in social orga¬

nization. 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 pos¬

sible and legitimate for the individual to strive to improve his lot, within his

THE FIVE STAGES OF GROWTH 11

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 main¬ tained 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 civi¬ lization 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 regular¬ ly manipulating his environment to his economic advantage.

To place these infinitely various, changing societies in a single catego¬ ry, 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 econ¬ omy.

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 modem science, to fend off diminishing returns, and thus to enjoy the blessings and choices opened up by the march of com¬ pound 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 modem 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 geogra¬ phy, natural resources, trading possibilities, social and political structure, was the first to develop fully the preconditions for take-off.

The more general case in modem history, however, saw the stage of

12 W. W. ROSTOW

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 mod¬

em alternative to the traditional society was constructed out of the old cul¬

ture. The idea spreads not merely that economic progress is possible, but

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 modem economic activity. New types of enter¬

prising 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, modem

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 modem 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 bal¬

ance of social values, a decisive feature was often political. Politically, the

building of an effective centralized national state—on the basis of coali¬

tions touched with a new nationalism, in opposition to the traditional land¬

ed regional interests, the colonial power, or both, was a decisive aspect of

the preconditions period; and it was, almost universally, a necessary condi¬ tion for take-off. . . .

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.

THE FIVE STAGES OF GROWTH 13

In Britain and the well-endowed parts of the world populated sub¬

stantially from Britain (the United States, Canada, etc.) the proximate stim¬

ulus 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 agricul¬

ture, 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 percent of the national income to 10 percent 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 percent, as, for example, in

Canada before the 1890s and Argentina before 1914. In such cases capital

imports usually formed a high proportion of total investment in the precon¬

ditions 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 plants; and these new

industries, in turn, stimulate, through their rapidly expanding requirement

for factory workers, the services to support them, and for other manufac¬

tured goods, a further expansion in urban areas and in other modem indus¬

trial plants. The whole process of expansion in the modem 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 modem sector activi¬

ties. 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 con¬

dition for successful take-off; for modernization of a society increases radi¬

cally 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, there¬

after, regularly sustained.

. . . 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 cen¬

tury; Japan, the fourth quarter of the nineteenth century; Russia and

China the quarter-century or so preceding 1914; while during the 1950s

India and China have, in quite different ways, launched their respective

take-offs.

14 W. W. ROSTOW

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 per¬

cent 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 indus¬

tries 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 modem 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 technological¬

ly 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. . . .

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) modem technology. This is the stage in which an economy demon¬

strates that it has the technological and entrepreneurial skills to produce not

everything, but anything that it chooses to produce. It may lack (like con¬

temporary Sweden and Switzerland, for example) the raw materials or

other supply conditions required to produce a given type of output econom¬

ically; but its dependence is a matter of economic choice or political priori¬

ty 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 modem technolo¬

gy 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 FIVE STAGES OF GROWTH 15

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 unequiv¬

ocal 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 hap¬

pened: real income per head rose to a point where a large number of per¬

sons 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 modem 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 wel¬

fare 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 con¬

sumers’ durables and to the diffusion of services on a mass basis, if con¬

sumers’ 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 auto¬

mobile 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 1920s, and again in the

post-war decade, 1946-56, that this stage of growth was pressed to, virtual¬

ly, its logical conclusion. In the 1950s Western Europe and Japan appeared

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 citi¬

zens 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 rela¬

tive marginal utility sets in, after a point, for durable consumers’ goods;

and they have chosen, at the margin, larger families—behavior in the

16 W. W. ROSTOW

pattern of Buddenbrooks dynamics.1 Americans have behaved as if, having

been bom into a system that provided economic security and high mass-

consumption, they placed a lower valuation on acquiring additional incre¬

ments of real income in the conventional form as opposed to the advantages

and values of an enlarged family. But even in this adventure in generaliza¬

tion 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 implica¬

tions 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 consumers’ 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 forces making for modern¬

ization; 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 wel¬

fare state) for its increasingly urban—and then suburban—populations.

Beyond lies the question of whether or not secular spiritual stagnation will

arise, and, if it does, how man might fend it off. . . .

NOTES

1. In Thomas Mann’s novel of three generations, the first sought money; the second, bom to money, sought social and civic position; the third, bom 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.