MAJOR_CLASSICAL_THEORIES_OF_ECONOMIC_DEVELOPMENT - MAJOR...

This preview shows page 1 - 3 out of 4 pages.

MAJOR CLASSICAL THEORIES OF ECONOMIC DEVELOPMENT Classic Theories of Economic Development: Four Approaches I. The Linear Stage-of-Growth Model Heavily inspired by the Marshall Plan of the United States which was used to rehabilitate Europe’s economy after the Post-World War 2 crisis. It was an attempt by economists to come up with a suitable concept as to how underdeveloped countries of Asia, Africa and Latin America can transform their agrarian economy ingo an industrialized one. Rostow’s Stages of Growth Model Formulated by American economist Walt Whitman Rostow Rostow asserts in his model that the transition into development occurs in a series of stages: 1. The Traditional Society Mostly a backward society with no access to science and technology where most of its resources are dedicated to agricultural use. Agricultural productivity is mostly at subsistence level. 2. Preparatory Stage There is an expansion in output which extends beyond agricultural produce to manufacture goods. There is more knowledge surrounding the use of technology in various sectors of the economy. Lower level of market specialization. 3. Take-off Stage Revolutionary changes occur in both agriculture and industry to attain self-sustaining economic growth. There is greater urbanization and rise in human capital accumulation. 4. Drive to Maturity This stage takes place after a long period of time. The population involved in agriculture Over-all income per capita increases Savings and investments can automatically sustain economic growth. 5. Stage of Mass Consumption
At this stage, a country’s demand shifts from food, clothing and other basic necessities to demand for luxuries To satisfy these needs, new industries involve themselves in mass production to match consumption.

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture