Rostow's Stages Theory of Economic Growth

Economic Development
Students Name
Institution

Economic development 1
1. Describe Rostow’s stages theory of economic growth.
Noteworthy, Rostow‘s theory encompassed five stages of economic growth. Namely,
the traditional society stage, take off preparation stage, take off period, Maturity drive and
high mass stage of consumption (Anushree, N .d). According to Rostow, traditional society is
characterized by low per capita output, large employment opportunities in the agricultural
sector and land-based political power. Secondly, under the preparation stage, people try to
break through the confines of the traditional societal norms towards knowledge quests.
Primarily, the preparation stage is characterized by acceptance of economic progress, the
evolution of new forms of enterprises establishing industries, firms for prolonged output and
development of credit facilities. Alongside credit facilities, transportation, communication
infrastructure began to take shape over the once primitive society.
With the rise of newer enterprises, there is an employment shift from agriculture to
manufacturing and nationalized political power as opposed to localized power in the
traditional society. Thirdly, there is the take-off stage which is marked by dynamic changes
due to revolutionary political event or structure, technology or production method. Such
revolutionary events could be the Industrial revolution in Britain among others. Basically, the
take-off stage is earmarked by the acquisition of land for industrialization, development, and
growth of steel and iron sectors of the economy, maturity drive and the flourishment of
social, institutional and political channels which supported the expansion of modern
economies. Lastly, the mass acquisition stage, there is an increased allocation of social
security and welfare as a way of addressing consumption challenges.

Economic development 2
2. What is meant by the term neoclassical counterrevolution? What are its principal
arguments?
Worth noting is the fact that the neo-classical revolution is sometimes referred to as
neoliberal counter-revolution (Jones & Jackson, 2016). Primarily, the neoclassical
revolutionists hold the view that underdevelopment occurs due to the fact that internal
structures/institutions and not any external factors (Jones & Jackson, 2016). Basically, the
poor allocation of resources and intrusive government intervention is responsible for under
development in developing countries. Among the arguments forwarded by neoclassicals
revolutionists is privatization of public state bodies, macroeconomic policies (supply side)
and rational expectation theories. According to this development theory, there are three
approaches to curb under development. Namely, the free market, public choice, and market-
friendly approach. Basically, the theory proposed that there be a free market, lack of
government intervention and instead there be a free market of demand and supply deciding
on the economic outcomes.
The free market doesn’t encourage government intervention due to the fact that market
forces of demand and supply, access to information are efficient thus capable of propelling
development in developing countries(Economic Concepts, N.d). Notably, the public choice
approach is sometimes called the modern political economy. Basically, it proposes that there
be minimal government involvement in resource allocation. This is because, political players,
bureaucrats do use political power to accumulate wealth and maintain their positions at the
expense of public good. Whereas government intervention is not always necessary, a market-
friendly intervention approach will boost development by addressing market deficiencies.