1.2.3 Theory of Stages of Growth

This theory tries to explain the long-term processes of economic development from the point of view of economic history by describing five ideal types of stages through which all societies pass:

The 'traditional society' has more than 75 per cent of the population engaged in food production, and political power is in the hands of landowners or of a central authority supported by the army and the civil servants.

The 'transitional stage' creates the preconditions for take-off by bringing about radical changes in the non-industrial sectors. Export of raw material gains momentum; a new class of businessmen emerges; and the idea of economic progress coming from outside spreads through the elite.

The 'take-off stage' brings a sharp increase in the rate of investment in the per capita output. This stage of industrial revolution is accompanied by radical changes in the production techniques. Expansion takes place in a small group of leading sectors at first and, on the social side, is accompanied by the domination of the modern section of society over the traditional one.

The 'drive to maturity* brings a spread of growth from the leading to the other sectors and a broader application of modern technology followed by necessary changes in the society at large.

The 'stage of high mass consumption' can be reached after attaining a certain level of national income and formulating an economic policy giving priority to increased private consumption.
The critical phase for development is the 'take-off stage' during which net investment rates have to increase from 5 to 10 per cent of the national product and during which the political, social, and institutional framework has to be built in order to reach a situation of self-sustained growth. The financial resources must be accumulated internally by higher saving rates. Income distribution favouring classes and strata which are willing and able to use capital more productively than others has the same effect.

While this theory became widely known, perhaps because of its author's political post and the fact that it is a counter-position to Marxian approaches, this "time-table of development" does little to explain why some societies go ahead on this ladder and others not. As well, its value for forecasting the results of development activities is limited. The rather fixed stages hardly allow for alternative goals and processes of development and incorporate a high degree of ethnocen-trism.