The Stages of Economic Growth

There are a pair of works known by this name: an article and a book expanding on the article.

The Stages of Economic Growth (DOI: https://doi.org/10.2307/2591077) was written by Walt W. Rostow. It was published in the Economic History Review volume 12 (1959).

The Stages of Economic Growth, a Non-Communist Manifesto was written by Walt Whitman Rostow in 1960.

This article is largely about the latter.

The author's five stages theory goes as follows:

1. Traditional society
   • Low production, mostly devoted to agriculture
   • Low socioeconomic mobility with power concentrated in the landed
   • pre-Newtonian philosophy/science
     • "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." (p.4)
2. Preconditions for take-off
   • Western Europe experienced a gradual take-off, rest of the world experienced a sudden (sometimes literal) invasion
   • Capital has to become held by those who will invest into infrastructure and education, rather than ornamentation
     • Justifiable by either capitalism and nationalism
   • Communication, transportation, and trade all widen
   • Financial institutions emerge
3. Take-off
   • Early investments into manufacturing yield high returns, which are largely re-invested
     • High investment rate should be visible indicator of stage
   • Agriculture becomes more efficient
   • Trickle down economics lifts everyone's quality of life
4. Drive to maturity
   • Economy outgrows population
   • Extractive export industries replaced by 'mature' industries
   • Society reorganizes to fit around new economy
5. Age of high mass-consumption
   • Industries arrive to durable consumer goods and services
   • Substantial population living above subsistence level
   • Urbanism
   • Investment into welfare and security rather than growth
6. Beyond consumption
   • Author believed the U.S. was building into a sixth stage contemporaneously
   • Baby boom
   • Disinterest in growth

The author interprets the differential experiences of European powers through a lens of old landed elite vs. new economic elite.

More generally, the author looks for 'sharp stimuli' that rearrange society and trigger self-reinforcing growth; usually a political revolution.

The author classifies industries as:

1. Primary growth sectors, which involve necessities with inherent value.
2. Supplementary growth sectors, which involve inputs to industrialization. Effectively extractive industries which have no inherent value for a traditional society but do for a country in take-off.
3. Derived growth sectors, which grow in proportion to real incomes.

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