Stages of Economic Development

Stages of Economic Development▪In the 1960's,

American economist W.W. Rostow developed a model of economic growth

▪He suggested that a country goes through five stages as it economically develops

Stages of Economic DevelopmentStage One - Traditional Society

▪Land is the basis of wealth▪Economy is dominated by subsistance agriculture▪Severly limited potential for both economic and population

growth▪Social and economic progress are limited by natural

controls like droughts and outbreaks of disease▪Governments are usually absolute monarchies or

dictatorships▪Inflexible society, used to operating in conditions that

change very little over centuries▪Examples include Britain until about 1750, Canada before

the 1880's and today’s 5th world countries

Stages of Economic DevelopmentStage One - Traditional Society

Stages of Economic DevelopmentStage Two - Establishing the Pre-conditions for Takeoff

▪Transitional period to a more complex, advanced economy▪Happened first in Britain at the beginning of the Industrial

Revolution in 1750▪In Britain, conditions that prepared the country for economic

takeoff had to be developed within the country▪For other countries it is triggered by an externally originating

shock▪Rostow believed that the takeoff stage could only be reached

if a society was able to achieve a surplus of wealth that could be invested in economic sectors like transportation, communications and natural resource exploitation

▪E.g. Increased agricultural production meant labour and capital was available for other uses

Stages of Economic DevelopmentStage Two - Establishing the Pre-conditions for Takeoff

▪Development of more effective, responsive central governments

▪For western European nations this was in the late 1700's and early 1800's

▪For Canada, it occured in the mid 1800's▪Some fifth world and many fourth world

countries are now in this stage

Stages of Economic DevelopmentStage Two - Establishing the Pre-conditions for Takeoff

Stages of Economic DevelopmentStage Three - Economic Takeoff

▪This is a period of intense growth in the economy due to the introduction of important technological innovations

▪Agriculture changes from primarily subsistance to primarily commercial

▪Manufacturing becomes an important part of the economy▪The tertiary or service sector of the economy begins to

expand▪Britain - very late 1700's, France and the U.S. - by 1860,

Canada - by 1900▪Many fourth and third world nations are in this stage now

Stages of Economic DevelopmentStage Three - Economic Takeoff

Stages of Economic DevelopmentStage Four - The Drive to Maturity

▪After a country’s economic takeoff, there is an extended period of sustained growth

▪Economic growth outpaces population growth so per capita wealth increases

▪Economy becomes more diversified▪Continued expansion of manufacturing

(secondary) and tertiary industries▪Modern, efficient production methods come into

use

Stages of Economic DevelopmentStage Four - The Drive to Maturity

▪Increasing % of a nation’s wealth is invested in developing the economy

▪Historically, a country’s economy would reach maturity 50- 60 years after takeoff

▪Britain reached maturity in the 1850's▪France and the U.S., around 1910▪Canada reached economic maturity by the 1950's▪More recently, economies like those of hong Kong,

Singapore and South Korea were able to reach maturity more quickly

Stages of Economic DevelopmentStage Four - The Drive to Maturity

Stages of Economic DevelopmentStage Five - High Mass Consumption

▪Many people have incomes that are greater than necessary for buying essentials like shelter, food and clothing

▪Growing demand for additional consumer goods and services

▪Society can invest in social programs like improved health care and educational opportunities

▪U.S. - about the 1920's, Canada, about the 1960's

Stages of Economic DevelopmentStage Five - High Mass Consumption

Stages of Economic Development

▪Rostow’s model presents only one explanation for variations in economic development and quality of life in different countries

▪His model describes development as he saw it in Europe and North America

▪Elsewhere, economic development may not have occured this way

Stages of Economic DevelopmentHistorical Colonialism - Past and Present

▪Colonialism dominated the world’s economic system for more than four centuries, until the second half of the 20th century

▪The impact was so profound that even today it affects the economic, social and political systems of much of the world

▪To understand the economic progress and problems of most of the developing world today, we have to go back and look at the beginnings of the colonial period

▪This period is tied to the early need to establish and secure reliable trade routes between Europe and east Asia

Historical Colonialism - Past and Present

Historical Colonialism - Past and Present• Colonialism really begins during the late 1400’s• Spain and Portugal are allowed to divide the world in half

according to the Pope• Other European countries challenge this ruling but it

underlines the point that “the colonies only existed to meet the needs of the colonizers.” (Clark, Wallace 173)

• European colonization reaches its peak with the empires of France and Britain

• The world wars were caused partly by countries trying to develop colonial empires by taking colonies from others

Historical Colonialism - Past and Present

1530

1600

1650

1700

Spain, Portugal and early Ottoman Empire

Spain, Ottoman Empire, Indian Empire

Spain, Ottoman Empire, Indian Empire

Russia, France, Britian, China

Historical Colonialism - Past and Present

18121770Britain, Spain, China, India

Britain, Spain, China, India, U.S.A.

1800

Britain, Spain, China, India, U.S.A., Russia

1850Britain, U.S.A., Spain, Portugal

Historical Colonialism - Past and Present

1861

1901

1914

1925

Britain, U.S.A., Russia, France

Britain, U.S.A., Russia, France, Others

Britain, Russia, France, Others

Britain, Russia, China, Japan, Others

Historical Colonialism - Past and Present• Colonies were

developed for the economic benefit of the mother country

• This was called the “Mercantile System”

• Colonies were a source of raw materials and were consumers of finished products

Historical Colonialism - Past and Present

• The companies not only expanded trade but also acted as agents for the colonial government in remote places

• Most of the companies faded into obscurity over the years but two stand out• The first is the East India Company. This British company was given a

monopoly on the tea trade. To promote and protect it they built their own armed navy, traded in opium to get cheap tea and promoted the interests of the British Empire

• One way to expand colonies and develop commercial activity was through “Concession Companies”

• Concession companies were monopoly traders set up by the mother country to exploit a resource or area of the colony

• The second is the Hudson Bay Company. Originally formed to hold a monopoly on the fur trade, the Hudson Bay Company grew, expanded and still thrives to this day

Historical Colonialism – Impacts of Colonialism• 1. Destruction of Traditional land tenure practices• In many parts of the world the land was shared equally

amongst all collectively rather than being privately owned• Private ownership brought inequality and hunger as land

could no longer be used by all• 2. The Plantation System saw large tracts of good land

given to individuals or concession companies• Local tenants werepushed off the land and forbidden to

farm in a traditional way• Plantations specialized in single crops, usually for export• These plantations still exist in many areas

Historical Colonialism – Impacts of Colonialism• 3. The rise of colonial cash crops altered the agricultural

balance• Farmers grew crops for export to the mother country,

rather than growing core food crops• In many places this so damaged the colony’s ability to

feed itself that they began importing food • 4. Local manufacturing was delayed or refocused• The distortion of manufacturing priorities to

accommodate the mother country left many colonies at a severe disadvantage once they became free

Historical Colonialism – Impacts of Colonialism

• 5. There was little or no colonial protection for the environment

• Mining, forestry, agricultural and manufacturing all went unregulated and damage was ignored

• Many former colonies are still struggling with the environmental damage that was left behind

• 6. Colonizers introduced their own government forms to the colonies, regardless of what had previously existed

• Little recognition or respect was given to traditional systems

Historical Colonialism – Impacts of Colonialism

• 7. Colonial powers were not able to fully staff their colonies so they had to train locals

• These locals became an elite, educated and priviledged• This group was often not representative of the general

population• In many cases these people became the rulers after

independence was achieved• 8. Countries were created from land that did not match

tribal, cultural or religious boundaries• The colonial powers created boundaries for their

convenience, not for the subject colony

Historical Colonialism – Impacts of Colonialism

• 9. Colonial powers imposed their culture and language on the colonies

• This meant that the native culture as often submersed and seen as inferior, even by those whose culture it was

• While a common language did help unite certain colonies, it was divisive in far more

• 10. Colonial infrastructure was built to serve the needs of the colonizers

• This meant that many roads, railways and portswere built to service the export trade but few hospitals or universities were created

• Infrastructure often did not service the areas with the densest population