Describe Rostov’s stages of economic growth?

Rostov divided economic growth process into five stages

The traditional stage

• Dominated by the subsistence sector with limited levels of exchange.
• Primitive technology,
• Agricultural sector engaging in majority of labour force.
• Low labour of production and productivity.
• Limited degree of specialization and exchange
• Work is done in groups (communal society)
• Limited degree of industrialization
• Limited influence of foreign resource force

Transitional or pre-condition for take-off stage

• There are radical changes in agriculture, industry, infrastructure, foreign trade etc.
• Change in attitude from traditionalism to modernity, science and technology
• Diversification in economy where wide ranges of goods and services produced.
• Increased exploitation of the available natural resource potential.
• Economic transformation. There is remarkable increase in investment (up to 5% of national income)
• More foreign capital resources are increased.
• Better and efficient technologies emerge
• Changes in political systems e.g. society moves from traditionalism, chiefdoms and colonialism to political independence.

Take-off stage

• The economy experiences a substantial reduction in foreign aid dependence
• The rate of investment of national income increases from 5% to 10%.
• Both domestic and foreign market are likely to expand
• Increase in the real output per capita is likely to occur.
• The economy experiences the development of new technology in the social, institutional and political systems
• There is high growth and development of towns.
• There is increased investment in social capital
• The economy tends to move towards self-sustenance, though this can take place for at least 20 – 30 years
• Significant sectors of the economy start showing up or emerge.
• There is breakthrough in the vicious circle of poverty

Drive to maturity stage

• Modern and efficient technology is used in production process of economy.
• Use of more professional labour force e.g. accountants, consultants, etc.
• Increase level of research and innovation
• The rate of investment as proportion of national income increases from 10% to 20%.
• The rate of industrialization increases significantly.
• The vicious cycle of poverty is completely broken
• There is some equitable distribution of income among the majority of individuals in society.
• The rate of output society.
• The rate of output increases in the new leading sectors.
• High and increasing levels of exports
• The economy tends to reduce on the level of importation.

High mass consumption

• There is high level of technological maturity in all sectors
• The figure of the GDP are very high
• Favourable balance of payment positions
• High levels of consumption of goods and services especially durable luxury items
• Full utilization of the resource potential
• The economy becomes fully developed in almost all sectors.
• Good terms of trade
• Automation and computerization in most production sectors.
• High standards of living e.g. countries like Japan, USA, Britain, France, Italy, etc. have attained this stage.