Models of development

W.W.     Rostow, in his discussion of the stages of economic growth argues that growth follows five stages:

  • Traditional society, where innovation occurs in both industry and agriculture, but there is a limit on “the level of attainable output  per head”.
  • Societies “in a process of transition” in “the period when the pre-conditions for take-off are developed”, where transition might be the result of circumstances where “the insights of modern science began to be translated into new production functions” in agriculture and industry. An “intrusion” thus created would lead to the path towards modernity.
  • The stage of take-off which is “the interval when old blocks and resistances to steady growth are finally overcome”, where “enclaves of modern activity” expand and dominate society, and where “growth becomes the normal condition”. Here investment of the Gross National Product of GNP must increase from about 5% upto 10% on average, and it must be marked by large reinvestment in industries and large scale changes in agriculture.


It is a stage to be seen in Britain in the twenty years after 1783; in France and the USA in the decades before 1860; in Germany in the 1850- 1875; period; and in Russia and Canada in the twenty-five years before 1914. The cardinal elements and periodicity of this perspective are not easily justified. Many of Rostow’s pre- conditions for take-off are themselves, for instance, features of take-off itself: in the case of the French economy, no significant period of take- off  is discernible.

  • The drive to maturity, when an economy become fully part of an international economy, the significance of established leading sectors decline and investment stands at  10-20%  of GNP.
  • The stage of high mass consumption, where greater resources are devoted to social welfare, and where the focus of the economy shifts from leading sectors to durable consumer goods.

Alexander Gerschenkron, on the other hand, in his discussion of backwardness in historical perspective, argues that stress on “preconditions” or “take-off” is unwarranted, since these hardly exist in any consistent way in industrialization. He feels that “the development of a backward country tend to differ fundamentally from that   of  an  advanced  country”.

Gerschenkron proposes that the nature of the industrialization process in a backward country shows differences when compared with advanced countries in the rate of industrial growth and, in its organization and nature of production. These consequences are the result of the application of “institutional instruments” for which no counterpart exists in established industrial nations. The intellectual climate of industrialization is substantially different. “The extent to which these attributes of backwardness occurred in individual instances appears to have varied directly with the degree of backwardness and the natural industrial potentialities of the countries  concerned”.

Novel banking networks and the intervention of the state are the “institutional instruments” that Gerschenkron isolates as crucial to industrialization in “backward” states of Europe. Hence in France, a new form of banking emerged during the reign of Napoleon III, which changed the direction of established wealth and established


a model of banking which thereafter became widely established on the continent. This model was developed in new directions in Germany. In Russia, on the other hand, the state was inspired by military interests to establish a firm path towards industrialization. Different paths followed by different countries for industrialization drives home the point that there can be no one-stop solution for the general underdevelopment in developing countries of world. Every nation has to fine tune its strategy keeping  in  mind  its  specific concerns.


Ideological Criticisms

Path towards capitalist ‘Industrial revolution’ was not accepted unanimously but an ideological and intellectual criticism of earlier growth models was vigorously pursued. Criticism pursued mercantilists who were concerned with the methods the state might use to promote prosperity, through regulation of foreign trade; criticism was also leveled against physiocrats who were                           mainly                   concerned          with       general improvements in the productivity of the land. A proper integration of the various forces which were       crucial   to            capitalism                            (population, entrepreneurship, demand, rent, profit, state policy etc.) were achieved by Adam Smith (1723- 1790), David Ricardo (1772-1823) and Thomas Robert Malthus. Smith, in his Inquiry into the Nature and Causes of the Wealth of Nations established a critique of mercantilism and physiocracy. He supported the principle of laissez faire. Smith accepted the occurrence of social disparities when individuals pursued their own ends; but he was optimistic that overall prosperity would ensure, and that a degree of “harmony” with the onset of ‘perfect’ compe- tition in prosperity would exist in social relations.

Objections were raised by others thinkers against the capitalist industrialization. Ricardo was convinced that steady increase in rent, which would follow more production and a growing population, might be the foundation of economic crises. Malthus, on the other hand, saw a rising population, which was the necessary consequence of growth, as the ultimate brake on prosperity. “Utilitarian” views, associated with Jeremy Bentham that some role for government was still to be found in the pursuit of prosperity were further strengthend in face of such criticisms. These were aimed primarily to ensure the “greatest happiness of the greatest   number”,


which might, in various circumstances, be threatened by the greed of the     minority.

Smith’s optimism regarding the ability of classes to arrive at a harmonious pursuit of prosperity, despite disparities of income, was challenged by Socialist writers. Sismonde de Sismondi (1773-1842), saw production increasing rapidly within capitalist development, but also foresaw a growth of inequalities, which  could  not be resolved, except through state intervention. Proudhon (1809-1868), considered that the injustices which were linked to inequalities must be ameliorated by “mutualism” or the activities  of voluntary associations which would perform the regulatory functions of an interventionist state. Karl Marx (1818-1883) attempted to isolate the course that inequality would run, and argued that  capitalism  itself  would  collapse eventually.


A revolution in human life

To speak of the Industrial Revolution is to identify only the most immediately obvious aspects of a total social revolution that occurred during the period called the Industrial Revolution.

The short-term effects were in many cases drastic as traditional family-centered agrarian lifestyles with all family members playing a role were torn asunder by long hours of tedious factory work required of men, women, and children if the family were to earn enough to survive. These new work patterns, over time, fostered the emergence of laws, regulations, inspectors, and labour unions to protect factory workers from exploitation by the factory owners. Aided by these protections, families became more stable and factory workers in the cities became


the source of an emergent middle class occupying such positions as managers or independent entrepreneurs  or  government employees.

Over the long term, the Industrial Revolution marked a period in which the living standard of the people in the affected countries rose tremendously as did the power of the human species to use technology for exploiting nature to human purpose and the image of the human being as the rightful dominating owner of the natural world. The resulting destructive consumption of the natural world has grown to such dimensions that in recent decades equally powerful counter currents calling for sustainable development and responsible stewardship of nature  have  arisen.

While the Industrial Revolution  contributed to a great increase in the GDP per capita of the participating countries, the spread of that greater wealth to large numbers of people in general occurred only after one or two generations during which the wealth was disproportionately concentrated in the hands of a relatively few.  Still, it enabled the ordinary to enjoy a standard  of living far better than that of their forebears. Traditional agrarian societies had generally been more stable and progressed at a much  slower rate before the advent of the Industrial Revolution and the emergence of the modern capitalist economy. In countries affected directly by it, the Industrial Revolution dramatically altered social relations, creating a modern, urban society with   a large middle class. In most cases, the GDP has increased rapidly in those capitalist countries that follow a track of industrial development, in a sense  recapitulating  the  Industrial Revolution.