Stages of Economic Growth

Stages of Economic GrowthWhat is economic growth?An increase in the capacity of an economy to produce goods and services, compared from one period of time to another.

Is a sustained quantitative improvement in the country in terms of investment, production, income and consumption.

The 5 stages of economic growth according to Walt Whitman Rostow are :Traditional societyPreconditions for take-offTake-offDrive to maturityAge of High mass consumption

Traditional Societythis initial stage of traditional society signifies a primitive society having no access to modern science and technology.

characterized by subsistence agriculture orhunting or gathering ; almost wholly a "primary" sector economy

Pre-condition or the Preparatory StageThe people start using modern science and technology for increasing productivity in both agriculture and industry

development of more productive, commercial agriculture and crops

Adaptability of labor force

Political sovereignty

5Development of a tax system and financial institutions; and

The construction of certain economic and social infrastructure like railways, ports, irrigations and educational institutionsThe Take-off Stagethe stage of a country's economic development when rapid and sustained economic growth is first achieved.

Urbanization increases, Industrialization proceeds and technological break through occurs.

the desire to achieve economic growth to raise the living standards dominates the society.

workers and institutions become concentrated around a new industry.

textiles and apparel are usually the first "take-off" industry, as happened in Great Britain's classic "Industrial Revolution"

The Industrial Revolution, which took place from the 18th to 19th centuries, was a period during which predominantly agrarian, rural societies in Europe and America became industrial and urban. Prior to the Industrial Revolution, which began in Britain in the late 1700s, manufacturing was often done in peoples homes, using hand tools or basic machines. Industrialization marked a shift to powered, special-purpose machinery, factories and mass production. The iron and textile industries, along with the development of the steam engine, played central roles in the Industrial Revolution, which also saw improved systems of transportation, communication and banking. While industrialization brought about an increased volume and variety of manufactured goods and an improved standard of living for some, it also resulted in often grim employment and living conditions for the poor and working classes.Drive to Maturity: Period of Self-sustained Growthoccurs when the economy becomes mature and is capable of generating self-sustained growth.

The proportion of the population engaged in agriculture and other rural pursuits declines.

rapid development of transportation infrastructure

large-scale investment in social infrastructure (schools, universities, hospitals, etc.)

Stage of Mass ConsumptionIn this stage of development, per capita income of country rises to such a high level that consumption basket of the people increases beyond food, clothing and shelters to articles of comforts and luxuries on a mass scale.

the industrial base dominates the economy

widespread and normative consumption of high-value consumer goods (e.g. automobiles)