Development Economics in the Twenty-First Century

Claudia Sunna, Davide Gualerzi

• Publisher: Routledge
• Year: 2015
• Print ISBN:
  9780367668570
  9781848935389
• eBook ISBN:
  9781317219965
• Edition: 1
• Topic: Economía
• Subtopic: Economía del desarrollo

Development Economics has been identified as a homogeneous body of theory since the 1950s, concerned both with the study of development issues and with the shaping of more effective policies for less advanced economies.

Development Economics in the Twenty-First Century brings together an international contributor team in order to explore the origins and evolution of development economics. This book highlights the different elements of 'high development theory' through a precise reconstruction of the different theoretical approaches that developed between the 1950s and the 1970s. These include the theory of balanced and unbalanced growth theory, the debate on international trade, the concept of dualism, dependency theory, structuralism and the analysis of poverty and institutions. The chapters highlight the relevance and usefulness of these analyses for the contemporary theoretical debate on development issues.

Comparative perspectives are explored and analysed, including those of Keynes, Hirschman, Krugman and Stiglitz. The chapters situate development economics within current debates among economists and historians of economic thought, providing a platform for future research. This book is suitable for researchers and students with an interest in Development Economics, the History of Economic development and the Economics of Developing Countries.

1 Historical growth modelling

Rostow’s ‘take-off’ and Rosenstein-Rodan’s ‘big push’

Matthew Smith

1.1 Introduction

Of the development economists of the 1950s and 1960s Walter Rostow (1916–2003) stands out as one who built an historical-based model in order to identify the stages of development of economic systems and, in particular, to identify the main factors which can explain the transformation of an undeveloped country to a developed country. In Rostow’s ‘stages of economic growth’ model there are five evolutionary stages of possible economic development, as based on his study of the historical patterns of development of the advanced nations up to 1960. The critical stage, and indeed, the most contentious, in Rostow’s model, is the ‘take-off’ stage, which characterizes the period when an economy experiences a transformation decisive in putting it on the path to sustained growth and development and becoming an economically advanced nation. This ‘take-off’ notion has subsequently been employed by some economic historians and development economists. In connection to this model Rostow endeavoured to develop a theoretical apparatus – ‘a system’ – for interpreting economic history and identifying the main forces in society which explained the take-off of economies. This attempt by Rostow to bring together theory and history to explain economic growth is itself of great interest.

Another to develop a model in post-war development economics was Paul Rosenstein-Rodan (1902–1985) with his ‘big push’ model. Different from the historical-based model of Rostow, this model was instead developed by Rosenstein-Rodan from theoretical principles to rationalize a policy of large-scale co-ordinated investment that would provide the momentum – a ‘big push’ – to the development of undeveloped regions.

There is an affinity between these two models in the sense that Rosenstein-Rodan’s big push can be seen as an economic strategy to achieve Rostow’s take-off. Indeed, consistent with Rosenstein-Rodan’s model, Rostow argued that the crucial take-off stage of economic development involved a marked acceleration in the growth of investment which embodied rapid technical progress.¹

This chapter will critically examine the models of these two development economists and appraise their contemporary significance to explaining growth and proposing policies which promote economic development. In section 1.2 we examine Rostow’s historically-based ‘stages of economic growth’ model. Then, in section 1.3, we examine the theoretical apparatus developed by Rostow, principally to explain the take-off growth stage. In section 1.4 we consider Rosenstein-Rodan’s ‘big push’ model and his grand policy to promote economic development. Our conclusion in section 1.5 critically appraises these two models, showing that their insights can be better appreciated by reference to a coherent theoretical framework provided by the demand-led approach to explaining growth.

1.2 Rostow’s ‘stages of economic growth’ model

The ‘stages of economic growth’ model began with the notion of the ‘take-off’ first articulated by Rostow in The Process of Economic Growth, published in 1952: ‘The process of take-off may be defined as an increase in the volume and productivity of investment in a society, such that a sustained increase in per capita real income results’.²

This notion was considerably elaborated by Rostow in terms of the history of economic development in the article, ‘The Take-off into Sustained Growth’, published in the Economic Journal in 1956. In this article Rostow formulated a three-stages model of the growth process, consisting of ‘preconditions for take-off’, ‘the take-off’, and ‘when growth becomes normal and relatively automatic’.³ It was in the article ‘The Stages of Economic Growth’, published in The Economic History Review in 1959, that Rostow first articulated his ‘stages of economic growth’ model, consisting of five historical stages of development.⁴ The most comprehensive account of the model was then subsequently given in his book, The Stages of Economic Growth: A non-Communist Manifesto, first published in 1960.⁵ This book included a global geo-political outlook, a repudiation of Marx and Marxism and a rationalization of the emergence of communism in the twentieth century with reference to the Cold War. In this connection Rostow was quite explicit that a major motive for promoting global economic development was to staunch the spread of communism. Indeed, Rostow proposed his model – understood in conjunction with his theoretical apparatus – as a superior alternative to that which he attributed to Marx and the ‘Marxists’.⁶ But, as indicated above, Rostow’s model was fundamentally developed out of a desire to explain the growth process from an historical perspective. Hence, in the opening sentence of his book Rostow writes: ‘This book presents an economic historian’s way of generalizing the sweep of modern history. The form of this generalization is a set of stages-of-growth’.⁷

The five stages of Rostow’s model consists of (1) ‘the traditional society’, (2) ‘preconditions for take-off’, (3) ‘the take-off’, (4) ‘the drive to maturity’ and (5) ‘the age of high mass consumption’. According to Rostow each country can be categorized as being in one of these stages of economic development and in which only the most advanced countries have historically evolved through all five stages. Hence, the advanced nations, led by the United States and including Britain, France, Germany and Japan, are considered to have reached the fifth stage of growth; whereas, for example, Turkey, Argentina, China and India, were judged to be only in the take-off stage.⁸ On the basis of this model Rostow estimated timelines for when countries in his study evolved through each of the historical stages of development from the take-off stage onwards. Thus, for example, Rostow estimated that for Britain, the first nation to take-off, the take-off occurred in the period 1783–1802, the drive to maturity occurred in the period 1803–1850 and the economy entered the stage of mass consumption from the early 1930s.⁹ Each of the five evolutionary stages in Rostow’s model are defined by certain economic, social and political characteristics considered important to comprehending the general pattern of development in modern history.

1.2.1 Traditional society

The most economically backward stage, ‘the traditional society’, is defined by Rostow as ‘one in whose structure is developed within limited production functions, based on pre-Newtonian science and technology, and on pre-Newtonian attitudes towards the physical world’ where ‘Newton is here used as a symbol for that watershed in history when men came widely to believe that the external world was subject to few knowable laws, and was systematically capable of productive manipulation’.¹⁰ This stage is characterized by technological backwardness with an incapacity for systematic technological progress thereby placing a limit ‘on the level of attainable output per head’.¹¹ For Rostow the economy is overwhelmingly based on agriculture. It is a society characterized by a ‘hierarchical social structure’ in which there is limited social and economic mobility and in which ‘family and clan connexions played a large role in social organization’.¹²

Whilst Rostow does not use the term feudalism to describe this historical stage he writes that it is often characterized by ‘central political rule’ but in which the ‘centre of gravity of political power generally lay in the regions, in the hands of those who owned or controlled the land’.¹³ In the contemporary ‘post-Newtonian’ world the traditional society is one in which there is the possibility for technological progress but it remains ‘untouched or unmoved by man’s new capability for regularly manipulating his environment to his economic advantages’.¹⁴ Nevertheless, the meaning of ‘the traditional society’ in Rostow’s model is obscure, essentially capturing all those economically backward societies which have yet to evolve into the next historical stage of establishing the preconditions for take-off.

1.2.2 The pre-conditions for take-off

The second stage of growth in Rostow’s model is one in the process of transition from tradition society to the take-off stage in which the preconditions for take-off are developed. It is a period characterized by society exploiting ‘the fruits of modern science, to fend off diminishing returns’ and in which ‘the insights of modern science’ are ‘translated into new production functions in both agriculture and industry’.¹⁵ The historical reference for this ‘preconditions of take-off’ stage appear to be ‘Western Europe of the late seventeenth and early eighteenth centuries’ which he associates with modernity and th...

Table of contents

• Cover Page
• Development Economics in the Twenty–First Century
• Perspectives in Economic and Social History
• Title
• Copyright
• Contents
• List of Contributors
• Foreword
• Introduction: The Rise and Decline of Development Economics in the History of Economic Thought
• 1 Historical Growth Modelling: Rostow’s ‘Take-Off’ and Rosenstein-Rodan’s ‘Big Push’
• 2 Albert Hirschman: Unbalanced Growth Theory
• 3 The Brilliant Fifties: International Trade as a Cause of Underdevelopment
• 4 Dual Development Models in Historical Perspective
• 5 The Structuralist Research Program in Development Economics
• 6 The Resurgence of Dependency Analysis: Nostalgia or Renewed Relevance?
• 7 Development Theory and Poverty
• 8 Recovering Macroeconomic Policy for Development
• References
• Index