Transcript WW Rostow & his Stages of Growth Theory

Development
and Development Models
W.W. Rostow & his Stages of Growth Theory
Walt Whitman Rostow
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Born 1916
American economist and political theorist
Johnson’s Special Assistant for National
Security Affairs
A staunch anti-Communist
A champion of capitalism and free enterprise
Author of
The Stages of Economic Growth: A nonCommunist Manifesto (1960)
W.W. Rostow & his Stages of Growth Theory
The Stages of Economic Growth
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Modernization occurs in five basic stages
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Traditional society
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Pre-conditions for take-off
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Take-off
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Drive to maturity
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Age of high mass consumption
All countries go through these stages fairly linearly
Traditional societies
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Fatalistic
Norms of economic growth are completely absent
in a traditional society
W.W. Rostow & his Stages of Growth Theory
The Stages of Economic Growth
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Traditional societies
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Believing that humans have limited capacity to
change the world
Weak national government
Preconditions to take-off
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A strong national government
Popularization of secular education
Capital mobilization for productive purposes
Rise of entrepreneurial class
Start of manufacturing
W.W. Rostow & his Stages of Growth Theory
The Stages of Economic Growth
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Take-off
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Start of sector-led growth
Society driven by economy rather than traditions
Society in transition to a modern economy
Drive to Maturity
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Diversification of production
New sectors taking shape
Reduced poverty & rising living standards
W.W. Rostow & his Stages of Growth Theory
The Stages of Economic Growth
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Age of High Mass Consumption
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A society of general affluence
 Durable goods as opposed to subsistence
concerns
 Arts and music as opposed to money and
prestige
W.W. Rostow & his Stages of Growth Theory
Criticism of Rostow’s Model
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A model based on Western development experience
Development cannot be linear
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Countries can take-off and slip back to a transitional
economy, e.g., Russia
A model based on experience of big countries
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Not applicable to small and resource poor countries
Import Substitution Model
Key Points
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State intervention is necessary
State should encourage domestic manufacturing by
reducing imports
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Protection of domestic industries is necessary
State should implement an “import substitution
industrialization” strategy
Weaknesses of ISI
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Manufacturing development at the expense of
agriculture
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Food crisis
Increased LDCs dependence on DCs
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Capital
Technology
Import Substitution Model
Weaknesses of ISI
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Manufacturing development at the expense of
agriculture
Increased LDCs dependence on DCs
Inability to promote industrial competitiveness
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Labor-intensive production
Value-added production
High-tech production
Neo-liberal Development Model
Key Arguments
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Fiscal rectitude
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Competitive exchange rates
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Removal of trade barriers, subsidies and regulations against
flow of goods and services
Privatization
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Market-determined exchange rates
Free trade
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Cut government spending, maintain fiscal health and
budget surplus
Transfer of state-owned businesses to under private control
Lifting price controls
Limited state intervention
No state capital control
Neo-liberal Development Model
Key Arguments
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Deregulation
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Remove government restrictions on business
activities
Export-led development
Soviet Development Model
Key Elements
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Abolition of private ownership
Abolition of market
Implementation of state-led development
Implementation of centralized planning
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Investment
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Production
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Five-year plan
Consumption
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Input into heavy, consumer industries & agriculture
Distribution of goods, price
Accumulation
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Resources for future investment
Soviet Development Model
Failures of Socialist Model
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Loss of productivity
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Distortion of supply and demand
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Not produce for the market
Loss of industrial competitiveness
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Price does not reflect labor and cost
Produce for the state
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Widespread free-rider syndrome
Suppression of innovation
Poor quality and poor service
Economic stagnation
Widespread poverty
Export-led Growth Model
Features of Export-oriented Economy
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State-led development focusing on manufacturing for
export
Government policy incentives for export-oriented
production
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Tax incentives
Export credits
Export targets
Duty-free imports of inputs required by exporters
Abolition of minimum wage legislation
Minimal taxes on employment of labor
Maintaining moderate trade protection of domestic
market
Developmental State Thesis
Features of a Developmental State
According to Chalmers Johnson
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A strong development-oriented state
State intervention in:
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Providing guidance to the market
Controlling investment flows
Promoting technological development
Protecting selected infant industries
development as the top priority
Heavy investment in education
Availability of a highly skilled, technocratic bureaucracy
Political Culture Thesis
Main Assumptions
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A widely shared social values impact a state’s political economy
Nature of society rather than state or state policies determines
a nation’s development
East Asian culture/Confucianism more congenial to
development due to:
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Respect for authority
Strong but benevolent state in promoting the public good
Emphasis on education
Value of strong kinship ties in creating incentives for
entrepreneurship
Emphasis on collective interest
Emphasis on hard work