Mainstream Growth Economists and Capital Theorists by Muzhani Marin;

Author:Muzhani, Marin;
Language: eng
Format: epub
ISBN: 3332838
Publisher: McGill-Queen's University Press
Published: 2014-08-15T00:00:00+00:00

THE STAGES OF ECONOMIC GROWTH IN ROSTOW

Rostow,9 in his most ambitious work, The Stages of Economic Growth (1960), aimed to link social and economic behaviour in a theory of social and historical change. The stages of economic growth constitute merely one component of the general framework he devised. Rostow brings attention to the periodization of historical analysis of developed countries in phases or stages as opposed to the standard classical continuity. His “takeoff” theory arose as an inescapable discontinuity in the story of Britain, France, Germany, Belgium, the United States, Japan, Russia, Canada, Australia, and others. The theoretical explanation for Rostow to use discontinuities came as a result of so-called leading-sector analysis. There is always a sector that leads progress and development no matter what stage a country is in. “In essence it is the fact that sectors tend to have a rapid growth-phase, early in their life, that makes it possible and useful to regard economic history as a sequence of stages rather than merely as a continuum, within which nature never makes a jump” (Rostow 1960, 14).

The discontinuity was inevitable because modern economic growth is a result of the invention and efficient absorption of increasingly technological changes. Rostow, to better explain the social and economical relationship in historical change, uses two related schemata. The first one is the “dynamic production theory,” in which the leading industrial sector interacts with income elasticities of demand and with the social welfare function. The second is the description of economic growth in five stages. The economic generalization of modern history takes the form of a set of stages that constitute a theory of economic development. The stages “have an analytic bone structure rooted in a dynamic theory of production,” (Rostow 1960, 13) with population, technology, organization, entrepreneurship, and other factors taken as variables rather than as being fixed. Keynesians and neoclassical economists have tended to generate growth models including several variables without in some way catching up to the essence of growth phenomena. Indeed,

As modern economists have sought to merge classical production theory with Keynesian income analysis, they have introduced the dynamic variables: population, technology, entrepreneurship, etc. But they have tended to do so in forms so rigid and general that their models cannot grip the essential phenomena of growth, as they appear to an economic historian. We require a dynamic theory of production which isolates not only the distribution of income between consumption, saving, and investment … but which focuses directly and in some detail on the composition of investment and on developments within particular sectors of the economy. (Rostow 1960, 13)

Rostow did not see the economic system as leading growth theorists have modeled it. Growth theory in the 1960s consisted of highly abstract models focusing on a limited number of variables such as output, the production function, and technology. Most of the growth models were characterized by steady growth paths (a general and static equilibrium), and very often growth theorists simply assumed that each of these models could be applied to all countries, including the underdeveloped ones.

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