Rostow model

● In 1960, the American Economic Historian, WW Rostow suggested that countries passed through five stages of economic development

● Stage 1 Traditional Society
- Subsistence - living from what you produce
- Barter
- Agriculture
- Africa - not developed

● Stage 2 Transitional Stage
- Specialization - focusing on 1 thing
- Surpluses - too much produced so selling extra = money
- Infrastructure
- developing

● Stage 3 Take off
- Industrialization
- Growing investment
- Regional growth
- Political change
- Example - China and India are developing
- Developing

● Stage 4 Drive to maturity
- Diversification
- Innovation
- Less reliance on imports
- Developed

● Stage 5 High Mass Consumption
- Consumer oriented
- Durable goods flourish
- Service sector becomes dominant
- Developed


According to Rostow development requires substantial investment in capital.  For the economies of LDCs to grow the right conditions for such investment would have to be created. If aid is given or foreign direct investment occurs at stage 3 the economy needs to have reached stage 2. If the stage 2 has been reached then injections of investment may lead to rapid growth.
Agriculture -->  Manufacturing -->  Services

There are exceptions:
- Kerala and Kuwait